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Inside the Market Before the Bell: Wall Street futures weaker as jobs numbers fall short; TSX set for softer start

Equities

U.S. stock futures were weaker early Friday after a somewhat disappointing reading on U.S. employment. On Bay Street, futures were down slightly as oil steadied. Global markets little changed with the MSCI’s world equity index up less than 0.1 per cent in early going. That index now looks set for a 1.2-per-cent decline for the week, marking its biggest weekly loss since March.

The U.S. Labor Department said Friday that the U.S. economy added 164,000 new jobs last month. Economists had been hoping to see a number closer to 193,000. However, figures from March were also revised higher to a gain of 135,000 positions, improving on the initial reading which showed a modest gain of 103,000 new jobs created that month.

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Stock futures were in the red ahead of the report and remained lower as the market digested the numbers. The yield on the U.S. 10-year note fell to a two-week lower after the release of the figures. The closely watched figures also showed that the nation’s jobless rate fell to 3.9 per cent, the first time unemployment has been below 4 per cent since 2000.

“After the highs and lows of the prior two months, payroll growth settled to a more trend-like pace in April,” CIBC World markets economist Andrew Grantham said. “The 164,000 gain in jobs for the month was a little below the consensus, but adding cumulative revisions of 30,000 to the figure puts us broadly in line with expectations.”

In Canada, employment figures for the same month won’t be released until next week.

In the corporate sphere, cannabis stocks will likely continue to be on the minds of investors after grower MedReleaf Corp. confirmed talks with Aurora Cannabis and other rivals on Thursday afternoon. The move comes as the industry faces a period of consolidation with analysts suggesting the sector faces the problem of oversupply in legal cannabis.

AutoCanada Inc. shares could also get some attention after the dealership owner’s latest results fell short of the Street’s forecasts. In the latest quarter, AutoCanada reported earnings per share of 18 cents. Analysts polled by Thomson Reuters I/B/E/S had expected earnings closer to 28 cents a share. Revenue also lagged forecasts, coming in at $620.5-million. Forecasts were for revenue of $641.8-million.

On Wall Street, Twitter shares were down 1.5 per cent in premarket trading after the social media company recommended its more than 300 million users change their passwords after a glitch left some stored as readable text on the company’s internal computer system. The problem was revealed in a blog post Thursday afternoon. Twitter didn’t say how many passwords were affected.

Apple shares were also slightly higher ahead of the open on a CNBC report that Warren Buffett’s Berkshire Hathaway bought a whopping 75 million shares of the tech giant in the first quarter, signalling an increased commitment to the company. Berkshire had initially taken a modest stake in Apple but the latest move boosts its position in the company to 240.3 million shares worth about US$42.5-billion.

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Overseas, the pan-European STOXX 600 was up about a quarter of a percentage point in morning trading with most sectors higher. Basic resources were the top performers. Britain’s FTSE was up 0.50 per cent. Germany’s DAX rose 0.44 per cent. France’s CAC 40 was just a touch south of break even.

In Asia, markets finished the week’s final session down slightly as trade talks between the United States and China concluded in Beijing. China’s state media reported the two sides struck a consensus on some issues but disagreements persist over others. State-run Xinhua, however, reported that the two sides remain committed to resolving their disputes through talks.

Hong Kong’s Hang Seng finished down 1.28 per cent. The Shanghai Composite Index was off 0.32 per cent. Markets in Japan were closed Friday.

Commodities

Oil prices were little changed in early going with geopolitical issues remaining at the forefront. Overnight, Brent crude shifted back and forth across the break even line with a range for the day so far of US$73.24 to US$73.80. West Texas Intermediate also had a choppy predawn period with a range of US$68.12 to $68.66.

The approaching May 12 deadline for a decision by the United States on renewing sanctions against Iran continues to bolster prices. (Brent hit a three-and-a-half year high of US$75.17 on Monday.)

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“Rising geopolitical risks have been a big factor behind oil’s strong rise this year,” ANZ analysts Daniel Hynes and Soni Kumari said in a note.

“The extent of the rally would have been significantly weaker if not for recent tightness in the market. We expect the market to tighten even further in H2 2018.”

Later Friday, markets get the weekly Baker Hughes rig count figures. Concerns about rising U.S. production - the United States now produces more oil than Saudi Arabia - has been an offsetting factor in crude price movements.

Elsewhere, gold prices were higher for a third straight session as the U.S. dollar pulled back from 2018 highs. Spot gold and gold futures for June delivery were both above water at last check. Still, even with Friday’s advance, spot gold prices looked set for a loss on the week resulting in the third consecutive weekly decline for the precious metal.

In other metals, silver prices were also higher.

Currencies and bonds

The Canadian dollar was lower after a steady decline through the early morning hours. The day range on the loonie so far is 77.64 US cents to 77.90 US cents. The loonie has spent most of the last two weeks mired in a fairly narrow trading range against its U.S. counterpart. There were no major Canadian economic releases on the calendar on Friday.

The currency markets were mostly focused early Friday on the latest U.S. jobs figures. The number of new jobs in the U.S. rose by a weaker-than-expected 164,000 positions, although the March number was revised higher and the unemployment rate notched lower to 3.9 per cent.

The U.S. dollar index, which weighs the greenback against a selection of world currencies, remained higher after the release of the report, but off the best levels of the week. Shortly after the release of the report, the index was higher at 94.550. The index hit a high for the year so far of 92.83 on Wednesday.

In an early note, Societe Generale’s Kit Juckes noted that currencies like the loonie and the Australian dollar offer some interest to markets in current conditions.

“If EUR/USD is about European rather than the U.S., then it follows that it isn’t the most interesting cross out there, and the fact that it is barely changed from either last night or from this time yesterday rather supports that view,” he said in a note.

“Where we may get movement is from CAD and AUD, both of which I like more if [U.S. 1--year Treasury yields] can’t get through 3.05 or wherever the magic level is. Oil is perky, industrial metals prices look well supported and investors still need yield. “

In bonds, the yield on the U.S. 10-year note dipped to 2.922 per cent after the release of the latest U.S. employment figures. The yield on the 30-year note was also lower at 3.10 per cent.

Stocks set to see action

The U.S. government has fined Enbridge Inc. more than $1.8 million after accusing the Canadian oil transport company of missing deadlines for pipeline inspections following a gigantic oil spill in southwestern Michigan, The Associated Press reports. A federal court deal this week ended the latest legal skirmish resulting from what the Environmental Protection Agency describes as the costliest inland oil spill in U.S. history — and one of the largest. Heavy crude from a ruptured pipe oozed into a creek feeding the Kalamazoo River in July 2010.

Celgene Corp’s shares were up 2 per cent in premarket trading after the biotech company reported a better-than-expected quarterly profit, helped by higher demand for blockbuster multiple myeloma drug Revlimid and psoriasis drug Otezla. Sales of Revlimid rose about 19 per cent to US$2.23-billion, above analysts’ estimates of US$2.21-billion, according to Thomson Reuters I/B/E/S. Otezla sales rose 46 percent to US$353-million, topping estimates of $343.2-million.

Caterpillar Inc named Andrew Bonfield chief financial officer, replacing Brad Halverson. Mr. Bonfield, who will take over on Sept. 1, is currently group CFO and board member of National Grid plc, a British multinational electricity and gas utility company.

Xerox Corp said its board and management team will stay after an agreement it had reached with dissenting shareholders to oust them expired, adding another twist to a lengthy dispute over Fujifilm taking control of the U.S. company. The activists, Darwin Deason and Carl Icahn, confirmed that the agreement had expired, blamed Xerox for letting it dissolve and said they would continue to fight the company.

Crescent Point Energy Corp. is adjusting its executive pay criteria, cutting $25-million from 2018 capital spending and announcing an asset sale to pay down debt as it faces a showdown with a dissident shareholder at its annual meeting on Friday. It reported a surprise net loss of $91-million, or 17 cents a share, for the three months ended March 31, compared with a net profit of $119million in the year-earlier period. Analysts had expected a profit of seven cents, according to Thomson Reuters. The company has been roundly criticized by Cation Capital Inc., which attributes its poor share performance to unwise spending decisions and overly generous executive compensation.

Newell Brands Inc. said on Friday it would sell Waddington Group to Novolex Holdings, a company owned by buyout firm Carlyle Group LP, for about US$2.3-billion. The sale of Waddington, which makes disposable cutlery and drinkware for the food service sector, would be the first major divestiture by Newell since it said in January it would explore options for several of its business lines, including Rubbermaid Commercial Products and Mapa.

Hong Kong’s stock index compiler said on Friday that personal computer maker Lenovo Group Ltd will be removed from the benchmark Hang Seng Index. The Hang Seng Indexes Company said it has decided to remove Lenovo from the blue-chip index after reviewing the Hang Seng Family of Indexes for the quarter ended March 30 this year. CSPC Pharmaceutical Group Ltd, a pharmaceutical group in China, will become a new component of the benchmark index.

British Airways-owner IAG said it had been unable to reach agreement on a possible takeover offer for Norwegian after holding talks with the struggling airline’s board, putting a dampener for now on M&A in the European airline market. “IAG is currently considering its options in relation to Norwegian,” IAG said in slides for a presentation on Friday. It bought a 4.6 percent stake in Norwegian in April with a view to starting takeover discussions. Norwegian said in response it had received two proposals on a full takeover from IAG but had rejected them as undervaluing the company.

More reading:

Friday’s analyst upgrades and downgrades

Friday’s small-cap stocks to watch

Friday’s Insider Report: Companies insiders are buying and selling

Economic news

The U.S. economy added 164,000 new jobs last month while the jobless rate dipped to 3.9 per cent. Economists had been expecting to see the creation of about 193,000 new jobs.

With Reuters and The Canadian Press



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