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Equities
The TSX/S&P Composite Index opened slightly higher with gains by energy stocks helping offset a sharp decline in Gildan Activewear shares in the wake of a profit warning by the company. U.S. stocks edged lower in early going with positive earnings from Coca-Cola helping offset economic worries stemming from weaker-than-expected GDP figures out China.
At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 31.59 points, or 0.19 per cent, at 16,457.89.
On Wall Street, the Dow Jones Industrial Average fell 21.39 points, or 0.08%, at the open to 27,004.49.
The S&P 500 opened lower by 1.11 points, or 0.04%, at 2,996.84. The Nasdaq Composite dropped 7.00 points, or 0.09%, to 8,149.85 at the opening bell.
Figures out of China Friday showed that country’s economy grew by 6 per cent in the third quarter, down from 6.2 per cent and below market expectations. It was the weakest pace of growth in about 27 years. The numbers come as China and the United States try to work toward a phased-in trade agreement aimed at ending the acrimonious feud between the two. On Thursday, China had said it hoped to reach an agreement with Washington as soon as possible.
Concerns about China’s economy took some of the shine off news Thursday that Britain and the EU had struck a new Brexit deal, which prompted a bounce in global markets. However, that deal still needs to make it through Britain’s House of Commons, which is set to vote on the pact on Saturday.
“Markets will likely remain fixated on the next critical face-to-face meeting between Presidents [Donald] Trump and [Chinese leader] XI at the APEC Summit on Nov. 16-17th,” OANDA senior analyst Edward Moya said.
“Stocks will struggle to break out to uncharted territory even if we see better than expected earnings results leading up to the key summit.”
On Bay Street, Gildan Activewear Inc. shares plunged 33 per cent at the open after the company cut its 2019 forecast after warning of lower third-quarter results on weaker demand for imprintable apparel in North America and abroad. Gildan said it expects earnings will decrease about 7 per cent to 51 US cents a share share for the three-months ended Sept. 29 and about 53 cents on an adjusted basis. Sales are expected to fall 2 per cent to about US$740-million. For the year, Gildan is now expecting 2019 sales to be down low single digits from 2018 and diluted earnings per share to be US$1.50 to US$1.55 and adjusted EPS of between US$1.65 and US$1.70 per share. The warning was issued after Thursday’s close.
Corus Entertainment reported net income of $22.9-million or 11 cents a share in the lated quarter, down from $33.7-million or 16 cents in the year-earlier period. On an adjusted basis, Corus earned $27.9-million or 13 cents per share for the quarter, down from an adjusted profit of $39.5-million or 19 cents per share last year. Analysts on average had expected a profit of 12 cents per share for the quarter, according to financial markets data firm Refinitiv. Corus shares were down 8 per cent in early trading.
South of the border, Coca-Cola shares were up about 2 per cent in New York after the drinks giant posted better-than-expected sales in the most recent quarter. Net operating revenue rose 8.3 per cent to US$9.51-billion. Analysts had been expecting a number closer to US$9.43.billion.
Johnson & Johnson said on it would recall a single lot of its baby powder in the United States after the Food and Drug Administration found trace amounts of asbestos in samples taken from a bottle purchased online. The recall is limited to one lot of Johnson’s Baby Powder produced and shipped in the United States in 2018, the company said. Shares were down about 2 per cent.
Overseas, Europe’s major markets were mostly weaker ahead of what is expected to be a close vote on the latest Brexit deal. The pan-European STOXX 600 was off 0.1 per cent in afternoon trading, off session lows. Britain’s FTSE slid 0.15 per cent. Germany’s DAX slid 0.06 per cent and France’s CAC 40 lost 0.57 per cent.
In Asia, Tokyo’s Nikkei rose 0.2 per cent, while Hong Kong’s Hang Seng lost 0.5 per cent, and the Shanghai Composite dropped 1.3 per cent.
Commodities
Crude prices found their footing after early weakness in the way of the disappointing reading on economic growth in China in the third quarter.
Both Brent and West Texas Intermediate were underwater through much of the predawn period but managed to cut the losses as the session progressed. The day range on Brent so far is US$59.52 to US$60. The range on WTI is US$53.73 to US$54.18.
Despite a report showing below-forecast GDP growth in China, Stephen Innes, strategist with AxiTrader, said developments on the trade front are helping underpin crude markets.
“The U.S.-China news flow remains very friendly especially after China’s Commerce Ministry inferred trade talks were entering the phase 2 level, which raises the spectre of a December tariff detente and even a possible rollback in some existing tariffs,” he said. “A meaningful de-escalation in U.S.-China trade frictions would help alleviate some of the markets most bearish concerns, and at a minimum, it could ease the blusteriest headwinds.”
He also noted that U.S. government crude inventory figures released Thursday also helped bolster the market, despite a build in oil stocks. He said huge draws in gasoline were “very supportive” although “short-term volatile nature of the inventory data may only provide a temporary band-aid as worries about where global oil demand will pan out for the rest of 2020 ultimately sets in again.”
Gold prices, meanwhile, were slightly lower early Friday as profit taking added downward pressure although uncertainty about the Brexit deal and U.S.-China trade helped stem the losses.
Spot gold edged down by 0.1 per cent to US$1,490.05 an ounce. U.S. gold futures fell 0.4 per cent to US$1,493.
“Gold will be range-bound until and unless we have some clarity on Brexit and other geopolitical risks,” Brian Lan, of Singapore dealer GoldSilver Central, told Reuters, adding that he expects gold to trade around US$1,475 to US$1,503 per ounce over the short term.
Currencies
The Canadian dollar held most of its recent gains to trade at its best levels in two months against its U.S. counterpart as this week’s Brexit deal helps bolster risk sentiment in the market.
At last check, the loonie was sitting near the upper end of the day range of 76.08 US cents to 76.15 US cents. There were no fresh economic reports due Friday to offer direction for the currency aside Bank of Canada Governor Timothy Lane participating in an afternoon panel discussion. (Mr. Lane is due to speak in Washington on ‘the future of money.’ There is no press conference scheduled for after the event and the remarks won’t be posted to the bank’s website.) On Thursday, the dollar got a boost when Statistics Canada reported that factory sales rose 0.8 per cent in August after two months of declines.
Monday’s federal election will be the next major test for the loonie.
“With three days to go until Canada’s general election, polls still point to a minority government as the most likely outcome,” Elsa Lignos, global head of FX strategy for RBC, said in an early note. “Canada is used to those ( about 25 per cent of the time for the last 50 years).”
“It will make a difference to policy at the margin – as incumbent, [Liberal leader Justin] Trudeau would have the first shot at forming a government (with the NDP as natural partners). But we expect the impact on the Canadian dollar to be short-lived (and not until late on Monday).”
In other currencies, Brexit developments kept the euro near its best levels in seven weeks against the U.S. dollar. The euro was last trading little changed at US$1.1122, but not far from US$1.1140. That’s its highest level since Aug. 26. Britain’s pound was slightly weaker, down 0.2 per cent at US$1.2865, but still near a five-month high.
The U.S. dollar index, which weighs the greenback against a basket of world currencies, was little changed at 97.581. The greenback looks set for its worst weekly slide since June, hit by a disappointing reading this week on retail sales which renewed talk of further interest rate cuts.
In bonds, the yield on the U.S. 10-year note was slightly higher at 1.768 per cent. The yield on the 30-year note was also up at 2.254 per cent.
More company news
American Express Co. reported a 6-per-cent rise in third-quarter profit, as more people used cards to shop, pay bills and make big ticket purchases. Net income rose to US$1.76-billion, or $2.08 US per share, in the quarter ended Sept. 30, from US$1.65-billion, or US$1.88 per share, a year earlier, the company said. Total revenue, excluding interest expense, rose 8 per cent to US$11-billion.
Renault shares slumped on Friday after the French car maker cut its revenue guidance for 2019 and lowered its profitability forecast. Renault shares were down 11 per cent in early trading. After the market closed on Thursday, Renault said sales were likely to drop between 3 per cent and 4 per cent this year. The company also said its operating margin was set to come in at 5 per cent, versus a previous 6-per-cent goal.
Nissan Motor Co.’s incoming chief executive Makoto Uchida told employees in a video message on its internal website on Friday that his mission is to “restore business performance and regain trust in Nissan,” according to a transcript of the message viewed by Reuters. “Nissan is on the right path for recovery... although it might be a gradual process,” Mr. Uchida said. Named CEO earlier this month, Mr. Uchida is expected to formally take up the post by Jan. 1, 2020.
Danone cut its 2019 sales growth outlook after missing third-quarter sales expectations, sending shares in the French food group down 7 per cent. The world’s biggest yogurt maker said cool weather in August had hit sales of water in Europe, while yogurt sales were weak in the United States and Russia, taking the shine off strong baby food sales in China.
Schlumberger NV beat Wall Street estimates for quarterly profit on Friday, as higher drilling activity in international markets boosted demand for its equipment and services and offset weakness in North America. Excluding the charge and other items, the company earned 43 US cents per share, beating estimates of 40 US cents, according Refinitiv IBES data.
Economic news
(10 a.m. ET) U.S. leading indicator for September. Consensus is an increase of 0.1 per cent from August.
With Reuters and The Canadian Press
Terry Weber