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Equities
Canada’s main stock index opened higher Friday for a sixth straight session as tech and health-care stocks rallied, although losses in the energy sector put a ceiling on gains. On Wall Street, stocks turned lower after U.S. President Donald Trump said he has not agreed to rollback tariffs on Chinese imports.
At 10:03 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 23.42 points, or 0.14%, at 16,829.17. Tech shares were up 1.2 per cent. Energy stocks fell 1.3 per cent.
About half an hour into trading, the Dow Jones Industrial Average was down 45.65 points, or 0.16 per cent, at 27,629.15, the S&P 500 was down 5.72 points, or 0.19 per cent, at 3,079.46.
The Nasdaq Composite was down 16.17 points, or 0.19 per cent, at 8,418.34.
Both the Dow and the S&P 500 finished at record highs Thursday after the United States and China agreed that a first phase of a trade deal would include a rollback of recent tariffs on imports from the two countries. However, by Friday, investors appeared to have some doubts about how quickly a pact will be reached given that a deal had yet to be finalized. Speaking with reporters on Friday, Mr. Trump said he hadn’t agreed to rollback tariffs but Beijing would like him to do that.
“Sometimes we can get so caught up in the trade headlines that we don’t stop to question why everything doesn’t quite add up and align with past behaviour,” OANDA senior analyst Craig Erlam said. “Last month, Trump’s announcement of a phase one deal sounded very one sided for the U.S., begging the question of what exactly China is demanding in exchange, now we know.”
The latest reports, he said, raise similar questions.
“Why would the U.S. give away all the leverage it has built up in exchange for a phase one agreement? I’m not saying an agreement won’t be signed next month but there’s clearly still a number of issues to overcome,” he said, noting the two sides haven’t agreed on a date or a location for a signing ceremony, suggesting talks may not yet be near the finish line.
“And that means there’s still plenty of opportunity for everything to collapse.”
On the corporate side, shares of Walt Disney Co. jumped 5 per cent in early trading after earnings in the latest quarter beat Wall Street forecasts on gains at the company’s theme parks and the success of the remake of The Lion King. The entertainment giant also said it spent less that it projected earlier on its push into the streaming market with the Disney+ service. Excluding certain items, Disney earned US$1.07 a share for the quarter, above average analyst estimates of 95 US cents per share, according to IBES data from Refinitiv.
Shares of retailer Gap Inc. fell more than 4 per cent on the surprise departure of chief executive Art Peck, who held the post since 2015. Mr. Peck’s departure was announced after the close on Thursday. The apparel retailer also cut its full-year earnings forecast.
In this country, investors get earnings from Enbridge Inc., Magna International Inc. and Onex Corp.
In reporting its latest results, Magna cut its full-year outlook, citing the impact of the lengthy U.S. GM workers strike. Magna cut its 2019 sales outlook to between US$38.7-billion and US$39.8-billion, from its previous range of US$38.9-billion to US$41.1-billion. Magna shares were down 3 per cent in Toronto just after the open.
Canadian markets also got a weaker-than-expected reading in employment in October. Statistics Canada said the economy lost 1,800 jobs during the month. Economists had been expecting to see gains of about 15,000 positions. The unemployment rate was steady at 5.5 per cent. Employment in Canada is up by more than 2 per cent so far this year.
Overseas, European markets were in the red. The pan-European STOXX 600 was down 0.30 per cent in afternoon trading. Britain’s FTSE 100 was down 0.49 per cent. Germany’s trade-sensitive DAX slid 0.36 per cent. France’s CAC 40 fell 0.23 per cent.
In Asia, Tokyo’s Nikkei managed gains of 0.3 per cent, while Hong Kong’s Hang Seng lost 0.7 per cent, and the Shanghai Composite shed 0.5 per cent. New figures out of China on Friday showed that country’s exports fell 0.9 per cent in October as the ongoing trade war continues to weigh. Imports fell 6.4 per cent. Despite the declines, both figures were slightly better than markets had been expecting.
Commodities
Crude prices slid in early going as optimism over U.S.-China trade talks dimmed, although both Brent and West Texas Intermediate looked set to post gains on the week.
The day range on Brent crude is US$61.21 to US$62.29. The range on West Texas Intermediate is US$56.09 to US$57.13.
For the week, Brent is heading toward a gain of about 0.4 per cent. WTI looks ready to post a weekly increase of 0.8 per cent.
“What’s good for trade is good for oil prices,” OANDA’s Craig Erlam said. “Brent rallied on Thursday as trade optimism spread but like it’s stock market buddy, it is paring gains already today on the back of those conflicting reports. The rally on Thursday wasn’t particularly strong, which may reflect waning momentum after a strong rebound from the early October lows.”
AxiTrader strategist Stephen Innes also noted that traders in Asia are on the sidelines waiting for the next trade headlines.
“It’s been dead in Asia as traders, for the most part, remained sidelined waiting for the next trade headline,” he said. “In the meantime look for oIl markets to follow the general trade talk mood music and overall risk sentiment.”
Mr. Innes also said markets are also being tempered by weekly figures showing a rise in U.S. inventories and comments from OPEC appearing to downplay the need for deeper production cuts. This week, OPEC Secretary-General Mohammad Barkindo said that he was more optimistic about the outlook for 2020 because of potentially positive developments on trade disputes, suggesting deeper cuts may not be necessary.
Current output cuts by OPEC and its allies are set to run through to March. Markets have been expecting members to discuss bigger reductions when they meet again next month.
Meanwhile, renewed uncertainty in the trade talks played in gold’s favour. Spot gold rose 0.3 per cent to US$1,472.08 per ounce. However, spot gold also looked set for a weekly decline of 3 per cent. That would be the biggest weekly drop since May 2017, according to Reuters. On Thursday, prices slid 2 per cent.
U.S. gold futures rose 0.4 per cent at US$1,472.1 per ounce.
“Gold is struggling although finding some support from profit-taking and possible weekend hedges and as U.S. bond yields come off their overnight highs in Asia,” Mr. Innes said.
Currencies
The Canadian dollar fell after Statistics Canada reported a slight decrease in employment in this country last month.
The agency said the economy lost about 1,800 job during the month. Economists had been expecting an increase of about 15,000 positions. The jobless rate was unchanged at 5.5 per cent. Hiring was down in construction and manufacturing.
Immediately after the release of the figures, the loonie fell to the bottom end of the day range of 75.58 US cents to 75.91 US cents.
“After a couple of months of outsized gains, Canada’s labour market didn’t get the job done in October,” CIBC economist Royce Mendes said, noting that full-time employment fell by 16,000 jobs.
“An increase of 20,000 public administration jobs, likely tied to the election, saved the headline from falling further into negative territory,” he said.
Mr. Mendes said, while employment is up 2.4 per cent this year, numbers on GDP and hours worked have been coming in softer.
“We continue to see a convergence coming from a further slowdown in employment, eventually leading the Bank of Canada to trim rates, and today’s data could be the first step in that direction,” he said.
In world currencies, the euro was little changed against the U.S. dollar at US$1.10495, close to the three-week low of US$1.10355 seen Thursday. The Japanese yen was near a five-month low against the greenback. Britain’s pound traded at US$1.2816, close to the lowest since Oct. 24.
More company news:
Pipeline company Enbridge Inc. reported a quarterly adjusted profit on Friday, as it moved more oil. Net income attributable to common shareholders was $949-million, or 47 cents per share, in the third quarter ended Sept 30, compared with a loss of $90-million, or 5 cents per share, a year earlier. The loss last year was due to some charges, including a non-cash charge of $1.02-billion. Enbridge shares gained 1 per cent in early trading in Toronto.
The Globe’s Susan Krashinsky Robertson reports that The Second Cup Ltd. is getting a corporate makeover. The Canadian coffee chain announces Friday that it is changing its parent company’s name to Aegis Brands Inc. as it seeks a fresh start and hopes to make acquisitions to bolster its café business.
Shares in luxury goods group Richemont fell over 5 per cent on Friday after it said political protests in Hong Kong weighed on first half sales and reported higher than expected losses at recently-acquired online distributors. The maker of Cartier jewelry had been benefiting from its fast-growing jewelry business, but a slight slowdown in the division, weak watch sales and operating losses at online distributors Yoox Net-a-Porter and Watchfinder worried investors. Hong Kong retail sales of jewelry, watches, clocks and valuable gifts dropped 47.1 per cent in August and 40.8 per cent in September, data showed last week.
Amazon Canada announced plans to open its first fulfillment centre in Quebec. The new site will be located in Montreal and will create more than 300 full-time jobs. Amazon says the new site will launch in time for the 2020 holiday shopping season.
Economic news
The Canadian economy lost 1,800 jobs last month. Economists had been looking for a gain of 15,000 positions. The unemployment rate was unchanged at 5.5 per cent.
The value of Canadian building permits fell by a 6.5 per cent in September to $8.3-billion due declines in the residential sector, Statistics Canada said. Analysts in a Reuters poll had predicted a decline of 2 per cent.
(10 am ET) U.S. wholesale inventories for September.
(10 am ET) U.S. university of Michigan consumer sentiment.
With Reuters and The Canadian Press
Terry Weber