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The close: Financial, telecom stocks drag down TSX

Traders and financial professionals work the floor of the New York Stock Exchange (NYSE) ahead of the opening bell, Aug. 11.

Drew Angerer/Getty Images

Canada's main stock index lost ground on Friday, weighed by moves lower in financial stocks and a fall in shares of telecommunications company Telus Corp , which posted lower-than-expected quarterly earnings.

The Toronto Stock Exchange's S&P/TSX composite index was down 40.87 points, or 0.27 per cent, at 15,033.38. Six of the index's 10 main groups were in negative territory

The financials group slipped 0.4 per cent, with Brookfield Asset Management Inc. down 0.8 per cent to $48.53, extending losses after reporting earnings on Thursday, and Bank of Montreal lost1.1 per cent to $92.01.

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Telus was one of the most influential movers on the index, falling 1.4 per cent to $44.90.

Auto parts maker Magna International Inc fell 3.1 per cent to $57.91 despite reporting better-than-forecast quarterly profit and raising its full-year sales forecast for the second time in three months.

Wheaton Precious Metals Corp fell 5.1 per cent to $24.19 after it reported lower-than-expected revenue after the close on Thursday.

The materials group, which includes precious and base metals miners and fertilizer companies, lost 0.6 per cent.

Enerplus Corp jumped 8.3 per cent to $11.65 after the oil and gas company increased its production guidance, while the broader energy group was little changed.

U.S. stocks ended higher on Friday, snapping three days of losses, as investors bet on a slower U.S. rate hikes, but gains were muted by increasingly aggressive exchanges between the United States and North Korea.

Based on the latest available data, the Dow Jones Industrial Average rose 14.31 points, or 0.07 per cent, to 21,858.32, the S&P 500 gained 3.11 points, or 0.13 per cent, to 2,441.32 and the Nasdaq Composite added 39.68 points, or 0.64 per cent, to 6,256.56.

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Wall Street put a floor under global equities on Friday after a weak inflation reading brought investors back into U.S. stocks even as tensions between the United States and North Korea continued to escalate, though the geopolitical fears still drove safe-haven buying of gold and the yen.

A slight rise in a measure of U.S. consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favourable to equity investors.

The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington.

"The data confirms the Fed will have a wait-and-see attitude," said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco. Reuters data show a 28-per-cent chance for a hike after the Fed's December meeting.

Japanese markets were closed for a holiday, but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe was on track to post its largest weekly drop since the week before Donald Trump won the U.S. presidential election in November.

Mr. Trump issued a new warning to Pyongyang on Friday, saying in a tweet: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely."

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North Korea had responded to Trump's previous promise to unleash "fire and fury" with a threat to land a missile near the U.S. Pacific territory of Guam.

It is "a bullish sign that the equity markets are rebounding somewhat on a Friday, in spite of the fact that investors will need to wait for two days to react to any geopolitical news that comes out over the weekend," said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.

"If earnings can stay strong and interest rates remain low investors can look beyond North Korea and continue to rally equities," Mr. Phipps said.

The pan-European FTSEurofirst 300 index lost 1.01 per cent and MSCI's gauge of stocks across the globe shed 0.12 per cent.

Emerging market stocks lost 1.20 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.37 per cent lower.

South Korea's KOSPI fell 1.7 per cent on Friday to its lowest level since May 24, but its losses for the week are a relatively modest 3.2 per cent.

"Pretty remarkable, perhaps even extraordinary, considering," said Tim Ash, strategist at fund manager BlueBay.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalization drop from a record high $61.36-trillion on Monday to $60.43 trillion at the close on Thursday.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea have proved to be the trigger.

The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 per cent, hitting its highest level versus the greenback in almost four months, at 108.73 yen.

The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.

The Korean won continued to fall versus the dollar, down 0.13 per vcent to 1,143.5 on Friday for a 1.6-per-cent decline on the week.

The U.S. dollar was further weighed on Friday by the soft U.S. inflation data.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year," said Sireen Harajli, FX strategist at Mizuho in New York.

The dollar index fell 0.39 per cent, with the euro up 0.48 per cent to $1.1827.

Sterling was last trading at $1.3013, up 0.30 per cent on the day.

The Japanese yen last strengthened 0.16 per cent versus the greenback at 109.05 per dollar

In bond markets, the yield on U.S. Treasuries fell, also pressured by the lowered expectations for a Fed move.

"There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious," TD Securities said in a research note.

Benchmark 10-year notes last rose 7/32 in price to yield 2.1888 per cent, from 2.211 per cent late on Thursday.

The 30-year bond last rose 6/32 in price to yield 2.7847 per cent, from 2.794 per cent late on Thursday.

After touching a more than two-month high, spot gold last added 0.3 per cent to $1,290.00 an ounce. U.S. gold futures gained 0.50 per cent to $1,296.60 an ounce.

Oil prices rose slightly on Friday in volatile trading as the market weighed lower U.S. crude stocks, Nigerian instability and strong global demand growth against a persistently slow rebalancing.

Brent crude settled up 20 cents or 0.39 per cent to $52.10 a barrel.

U.S. West Texas Intermediate crude was up 23 cents or 0.47 per cent to $48.82 a barrel.

U.S. crude was down 1.5 per cent on the week, while Brent was down 0.6 per cent.

The International Energy Agency said it had revised historic demand data for 2015-2016, meaning a lower demand base in 2017-2018 combined with unchanged high supply numbers could lead to lower stock draws than initially anticipated.

On Friday Baker Hughes data showed U.S. drillers added oil rigs for a second time in the last three weeks. However, the pace of additions has slowed in recent months as firms cut spending plans in reaction to declining crude prices.

Drillers added three oil rigs in the week to Aug. 11 bringing the total count to 768, the most since April 2015.

U.S. crude inventories fell 6.5 million barrels last week, according to the Energy Information Administration.

"As long as we continue to see declining inventories the more we'll continue to think the OPEC-led cuts are tightening the supply-demand balance," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Conn.

However market watchers caution that declining inventories for gasoline coincide with seasonal draws.

"We may see some headwinds ahead of us with slowing demand as summer driving comes to an end," said Mark Watkins, regional investment manager at U.S. Bank.

"We're slowly taking supply out of the marketplace. It isn't at an accelerated pace," he said, "This rebalancing is going to take an extremely long time."

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