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Equities

Canada’s main stock index opened up Friday, tracking global markets higher on signs of stabilization in the Chinese economy. U.S. indexes again started in record territory, buoyed by positive economic data at home and abroad.

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At 9:46 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 41.83 points, or 0.24 per cent, at 17,526.6. The index looked set for its second consecutive weekly gain.

In the U.S., the Dow Jones Industrial Average rose 15.67 points, or 0.05 per cent, at the open to 29,313.31.

The S&P 500 opened higher by 6.85 points, or 0.21 per cent, at 3,323.66. The Nasdaq Composite gained 35.24 points, or 0.38 per cent, to 9,392.37 at the opening bell.

New numbers showed that China’s economy grew by 6 per cent in the final quarter of the year, in line with market forecasts. Annual growth came in at 6.1 per cent, the slowest in 29 years but still within government estimates. However, the report also signalled signs of improvement in business confidence, which had suffered during the prolonged trade row with the United States. Earlier this week, the U.S. and China signed a phase-one agreement that was seen as easing the long-simmering tensions between the nations.

Market movers: Stocks seeing action on Friday - and why

China’s yuan touched a six-month high on the figures and optimism spread to Europe, where major markets started the week’s final session in the black. MSCI’s all-country index hit record levels.

“China released some broadly positive economic reports, which has boosted sentiment around the globe,” CMC Markets analyst David Madden said. "The industrial output and fixed asset investment levels were 8 per cent and 5.4 per cent respectively, both showed improvements on the previous reports as well as topping forecasts. Retail sales held steady at 8 per cent, exceeding the consensus estimate.

“The largely positive data ties in nicely with the signing of the U.S.-China trade deal during the week,” he added.

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On Wall Street, shares of retailer Gap Inc. gave up early gains after the company said it was scrapping plans to spin-off Old Navy. Gap said it would instead work to stem falling sales. Gap had unveiled a plan to separate its Old Navy brand in February but weaker sales in subsequent quarters raised questions about the potential success of the proposal. In making the announcement, Gap also said same-store sales for 2019 would be at the higher end of its most recent forecast. Adjusted earnings are also now expected to be slightly above the prior outlook. Gap issued the statement after the close of trading on Thursday.

Investors will also have an eye on tech shares after Google parent Alphabet’s market capitalization topped US$1-trillion for the first time. That makes it the fourth S&P 500 company to cross that mark after Microsoft, Amazon and Apple. Alphabet stock is up about 17 per cent over the past three months. Alphabet shares were higher in morning trading on Friday.

On Bay Street, cannabis company Canopy Growth says it is revising its timeline for its beverage launch. Canopy says it received its licence from Health Canada for its beverage facility in November but the “scaling” process isn’t complete. Canopy said it is extending its to-market date while internal teams complete the final steps. Canopy will provide an update in its third-quarter results. Canopy shares slid 1.8 per cent shortly after the start of trading in Toronto.

In Europe, the pan-European STOXX 600 rose 0.97 per cent by afternoon, touching a record high. Resource stocks were leading the gains. Britain’s FTSE 100 gained 0.96 per cent. Germany’s DAX rose 0.70 per cent and France’s CAC 40 advanced 1.06 per cent.

In Asia, Japan’s Nikkei rose 0.45 to finish at its best level in a month. Hong Kong’s Hang Seng gained 0.60 per cent. The Shanghai Composite Index edged up 0.05 per cent.

Commodities

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Crude prices edged higher in early going, helped by solid economic data out of China and continued optimism in the wake of this week’s signing of the phase-one trade deal between Beijing and Washington.

The day range on Brent is US$64.48 to US$65.13. The range on West Texas Intermediate is US$58.42 to US$58.91. Both benchmarks gained about 1 per cent on Thursday.

“The big mover for oil was the double whammy of positivity from the U.S.-China trade deal and the [U.S.] Senate passing the USMCA, which should provide a significant lift to the U.S. economy and give a boost to oil prices since the U.S. is the largest consumer of oil,” AxiTrader strategist Stephen Innes said.

He said markets also got a lift from a report from the International Energy Agency, which said crude demand in China - the world’s second-biggest oil consumer - could average 14.1 million barrels a day this year, up from 13.5 million last year.

“When you simultaneously get bullish impulses from the two largest buyers of oil on the planet, it does provide an impressive backdrop for oil prices,” Mr. Innes said.

In other commodities, gold prices inched higher but still looked set for their biggest weekly decline in two months.

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Spot gold rose 0.2 per cent to US$1,555.24 per ounce. The metal looks set for a weekly drop of 0.4 per cent, the biggest since the week of Nov. 8. U.S. gold futures rose 0.3 per cent to US$1,555.40.

In other metals, palladium jumped 2.2 per cent to US$2,362.71 an ounce, after hitting a record high of US$2,395.13 on Thursday, and was set for its biggest weekly gain since March 2016 having risen nearly 12 per cent so far, according to Reuters.

“Palladium (prices are soaring) like a rocket ship. It doesn’t look like there’s more of a story here than the auto-catalytic demand,” Ilya Spivak, a senior currency strategist at DailyFx, said.

Currencies

The Canadian dollar was steady and trading in a day range of 76.61 US cents to 76.72 US cents as crude prices held recent gains and traders start looking ahead to next week’s Bank of Canada rate announcement.

The only economic report on the calendar is November international securities transactions and is unlikely to have a big impact on the Canadian dollar during the trading day. The loonie looked set to end the week little changed.

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“USMCA approval and the federal government’s win in the Trans Mountain pipeline legal battle at the Supreme Court count as modest positives for the CAD in a general sense but the trade deal was widely expected and the Trans Mountain project still has a long way to go before it has any marked impact on the Canadian economic landscape,” Shaun Osborne, chief FX strategist for Scotiabank, said.

“Instead, markets are focused on shorter-term considerations, such as the BoC policy decision next week. Any — remote — thought of a rate cut next week has disappeared but markets may still be concerned that the BoC could slip some dovishness into the outlook.”

The Bank of Canada delivers its policy announcement on Jan. 22.

On world currency markets, the Chinese yuan in the offshore market rose 0.2 per cent to 6.8636 yuan per dollar, its strongest level since July 2019. The currency was supported by solid economic data released Friday.

“Markets are quietly risk-on overnight,” RBC chief currency strategist Adam Cole said, noting data releases for the day are mostly second tier.

The U.S. dollar index was steady at 97.31 and looked likely to post a modest decline for the week. Britain’s pound fell 0.2 per cent to US$1.3050 after weaker-than-forecast December retail sales.

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In bonds, the yield on the U.S. 10-year note was higher at 1.818 per cent. The yield on the 30-year note was also up at 2.283 per cent.

More company news

HSBC is cutting around 100 roles in its equities business with the bulk of the layoffs falling on its continental European trading floors, sources familiar with the matter told Reuters. The cuts are across the bank’s equities research, sales, trading and back office business departments, the sources said, and will include a handful of job losses in Asia.

Automaker Fiat Chrysler plans to set up a joint venture with the parent of iPhone assembler Foxconn to build electric cars and develop internet-connected vehicles in China, as it looks to make up ground in electric mobility. Fiat Chrysler (FCA) - which is set to launch its first full-electric model, the 500 small car, this year - last month reached a binding agreement for a US$50-billion tie-up with France’s PSA to create the world’s No. 4 car maker. FCA confirmed on Friday it was in talks with Foxconn parent Hon Hai on the potential creation of a 50-50 joint venture to develop new generation battery electric vehicles and engage in the IoV, or ‘Internet of Vehicles’, business, with an initial focus on the Chinese market.

British Airways-owner IAG lifted a restriction on non-EU investors’ ability to buy its stock, helping boost its share price by more than 5 per cent. Last February, IAG, which also owns Iberia, Vueling and Aer Lingus, set the maximum level for ownership of its shares by non-Europeans at 47.5 per cent in a bid to maintain its status as a European-owned airline. IAG said on Friday that non-EU ownership had dropped to 39.5% and as such it was removing the cap which had been in effect for 11 months.

Economic news

Statistics Canada says Canadian investment in foreign securities rose to $5.5-billion in November, with Canadian investors resuming their purchase of foreign equities. Foreign investors, meanwhile, cut their holdings of Canadian securities by $1.8-billion. As a result, international transactions in securities generated a net outflow of funds of $7.3-billion from the Canadian economy in November, following three consecutive months of net inflows, Statscan said.

U.S. housing starts rose 16.9 per cent to a seasonally adjusted annual rate of 1.608 million units last month, the highest level since December 2006. U.S. building permits fell 3.9 per cent to a rate of 1.416 million units in December.

The Federal Reserve said manufacturing production rose 0.2 per cent in December after a downwardly revised 1.0-per-cent increase in November. Overall industrial output fell 0.3 per cent in December after a downwardly revised increase of 0.8 per cent in November.

(10 a.m. ET) U.S University of Michigan Consumer Sentiment Index for January.

With Reuters and The Canadian Press

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