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Equities
Canada’s main stock exchange started at a record level Friday buoyed by positive headlines on the U.S.-China trade talks. Wall Street also opened in record territory with strong results from Applied Materials adding to positive sentiment.
At 09:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 13.69 points, or 0.08 per cent, at 16,989.87.
In the U.S., the Dow Jones Industrial Average rose 61.58 points, or 0.22 per cent, at the open to 27,843.54.
The S&P 500 opened higher by 11.29 points, or 0.36%, at 3,107.92. The Nasdaq Composite gained 45.47 points, or 0.54%, to 8,524.48 at the opening bell.
U.S. White House economic adviser Larry Kudlow told an event at the Council on Foreign Relations in Washington on Thursday that the U.S. and China have been in close touch by phone but gave no further details on the timing of a possible deal.
“We’re getting close,” he said. “The mood music is pretty good, and that has not always been so in these things.” Markets have been whipsawed by trade news over the past week. Stocks gained on reports of possible tariff relief for Chinese imports as part of a partial deal but then sold off after U.S. President Donald Trump said no agreement had been reached on duties.
Early Friday, U.S. Commerce Secretary Wilbur Ross told Fox Business News that there would be a call between U.S. and Chinese officials later in the day but also said U.S. tariffs on Chinese imports could still take effect Dec. 15. “We’re down to the last details now,” Mr. Ross said.
Even as the markets welcomed the latest headlines, analysts remained uncertain.
“The actual optimism is again based on unilateral comments from the U.S. officials,” Ipek Ozkardeskaya, senior market analyst with London Capital Group, said. “What’s cooking in the White House may not look as appetizing to Chinese officials, who have made a clear statement this week that they won’t sign off on an explicit amount of farm purchases.”
“The threat of more tariffs is real, on the other hand. The US will likely add 15 per cent tariffs on US$160-billion worth of Chinese imports, if a partial deal is not inked by Dec. 15. With this, there is more clarity on what would happen if the two countries didn’t come to an agreement within a month than what would happen if they did.”
Pot stocks are also again at the forefront on Bay Street.
After the close on Thursday, Aurora Cannabis reported an adjusted EBITDA loss more than tripled quarter-over-quarter to $39.7-million. It also said it is deferring “for the foreseeable future” the completion of a 1.6-million-square-foot growing facility in Medicine Hat and is halting construction work on a greenhouse in Denmark. The company said it expects to save $190-million over the next year by reducing capital expenditures. Shares opened down 13 per cent shortly after the opening bell in Toronto.
Earlier in the day, Canopy Growth reported a 15-per-cent drop in sales in the latest quarter compared to the prior three-month period as the sector continues to struggle a year into legalization.
On Wall Street, Applied Materials shares jumped more than 7 per cent after the semiconductor bellwether topped Wall Street estimates for fourth-quarter revenue. Revenue fell 0.1 per cent to US$3.75-billion for the quarter ended Oct. 27, but still topped analysts’ estimates of US$3.68-billion, according to IBES data from Refinitiv. Net income fell to US$698-million, or 75 US cents per share, from US$757-million, or 77 US cents per share, a year ago.
Shares of retailer JC Penney shot up nearly 11 per cent in early trading after the company reported a narrower quarterly loss and raised its adjusted earnings forecast for the rest of the year. JC Penney’s net loss fell to US$93-million, or 29 US cents per share, in the third quarter ended Nov. 2, from US$151-million, or 48 US cents per share, a year earlier. The company also said it now expects adjusted earnings before interest, tax, depreciation and amortization for the rest of the year to exceed US$475-million, compared with its prior outlook of US$440-million to US$475-million.
Overseas, the pan-European STOXX 600 was up 0.10 per cent as markets turned mixed by afternoon. Britain’s FTSE 100 was fell 0.25 per cent. Germany’s DAX gained 0.20 per cent. France’s CAC 40 rose 0.32 per cent.
In Asia, markets ended the week mostly positive. Japan’s Nikkei gained 0.7 per cent while the broader Topix added 0.73 per cent. Hong Kong’s Hang Seng ended mostly unchanged. The Shanghai Composite Index slid 0.64 per cent.
Commodities
Crude prices edged higher as optimism over U.S.-China trade talks offset concerns about rising non-OPEC production.
The International Energy Agency estimated non-OPEC supply growth would surge to 2.3 million barrels per day (bpd) next year compared to 1.8 million bpd in 2019, citing production from the United States, Brazil, Norway and Guyana. Prices had wavered through the early morning and took a hit on that report before recovering as the session progressed.
The day range on Brent is US$61.70 to US$62.64. The range on West Texas Intermediate is US$56.43 to US$57.12.
Still, markets drew some support from positive trade comments from White House adviser Larry Kudlow and increasing market expectations that OPEC+ would maintain its current production caps to help curb oversupply. OPEC meets again next month. Current production cuts are set to run until March 2020.
OANDA senior analyst Craig Erlam said in an early note that crude prices have steadied following a drop of more than 1 per cent during the previous session after the U.S. Energy Information reported a surprise 2.2 million barrel increase in inventories.
“Crude prices are still lingering around their highs, though, although the rally has certainly stalled,” he said. “Perhaps this is now looking a little more prone to a correction than it has in recent weeks, especially having run into an area that was previously significant support and resistance.”
Meanwhile, rising risk appetite in the wake of the latest trade headlines weighed on gold prices.
Spot gold was down 0.5 per cent at US$1,464.17 per ounce, but still looked set to rise about 0.4 per cent on the week.
U.S. gold futures were down 0.6 per cent at US$1,464.30 per ounce.
“Gold’s sensitivity to incremental trade updates is unreal,” OANDA senior analyst Edward Moya said. “Kudlow’s comment helped snap a modest 3-day rally for the precious metal. Gold bulls want the phase-one deal to be finalized so they can buy the dip.”
Currencies
The Canadian dollar was little changed and had a day range of 75.46 US cents to 75.64 US cents with rising risk sentiment on positive trade news bolstering the loonie.
There was little on the economic calendar to provide immediate direction for the currency.
Bank of Canada deputy governor Timothy Lane was scheduled to speak on digital currencies at a conference in Philadelphia and Statistics Canada releases figures on international securities transactions. Analysts weren’t expecting either to have a big impact on the loonie during Friday’s session.
On global markets, trade-sensitive currencies like the Australian and New Zealand dollars firmed slightly against their U.S. counterpart on positive headlines about talks between Beijing and Washington. Previously, the Australian dollar had been sitting near its lowest level in four weeks.
“Risk sentiment was supported by White House economic adviser Larry Kudlow stating that ‘we are coming down to the short strokes’ and ‘we’re getting close’ in regards to the phase one trade deal,” Daria Parkhomenko, RBC FX strategy associate, said.
The U.S. dollar rose 0.1 per cent against both the yen and Swiss franc.
In bonds, the yield on the U.S. 10-year was higher at 1.836 per cent. The yield on the 30-year note was also higher at 2.313 per cent.
More company news
Nvidia Corp joined rival Intel Corp to predict strong demand for chips used in data centers after its third-quarter revenue and profit beat market expectations. Total revenue fell 5 per cent to US$3.01-billion, but was above expectation of US$2.91-billion. Excluding items, it earned US$1.78 per share, above estimates of US$1.57. The company expects fourth-quarter revenue of US$2.95-billion, plus or minus 2 per cent, while analysts on average were expecting US$3.06-billion, according to IBES data from Refinitiv. Shares were up slightly on the Nasdaq.
JD.com Inc beat analysts’ estimates for quarterly revenue, boosted by stronger sales in its core e-commerce business. The company’s total net revenue rose 28.7 per cent to 134.8 billion yuan (US$19.27-billion) in the third quarter ended Sept. 30. Analysts were expecting revenue of 128.6 billion yuan, according to IBES data from Refinitiv.
Axios reports that Apple Inc. is removing all 181 vaping-related apps from its App Store on Friday. The move comes amid rising controversy following reports of vaping-related illnesses. “We take great care to curate the App Store as a trusted place for customers, particularly youth, to download apps. We’re constantly evaluating apps, and consulting the latest evidence, to determine risks to users’ health and well-being," Apple said in a statement to Axios.
Warren Buffett’s Berkshire Hathaway Inc said it has begun investing in RH, the furniture chain once known as Restoration Hardware. Berkshire owned about 1.21 million RH shares worth US$206.3-million as of Sept. 30, according to a regulatory filing detailing Berkshire’s U.S.-listed stocks as of that date.
Economic news
Statistics Canada says foreign investors acquired $4.8-billion of Canadian securities in September, all corporate securities. Canadian investors, meanwhile, cut their holdings of foreign securities by $2.4-billion. As a result, international transactions in securities generated a net inflow of funds in the Canadian economy of $7.2-billion in September, the government agency said.
The U.S. Commerce Department said U.S. retail sales rose 0.3 per cent in October, helped by motor vehicle purchases and gasoline prices. The gain reversed September’s 0.3 per cent decline. Economists had been expecting an increase of about 0.2 per cent in the most recent report.
The Canadian Real Estate Association says home sales were steady on a monthly basis in October. Actual activity was up 12.9 per cent year-over-year. Home prices were up 1.8 per cent from the same month a year earlier.
With Reuters and The Canadian Press
Terry Weber