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Equities
Canada’s main stock index started on the back foot Friday as crude prices fell after Russia said it needs more time to decide whether to back a call for OPEC and its allies to cut production further. On Wall Street, markets were also in the red despite a strong headline number on January hiring, with downward revisions to previous months weighing on sentiment.
At 10:04 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 72.9 points, or 0.41 per cent, at 17,684.59. If Friday’s early losses hold, the index will end a four-day winning streak.
Energy stocks were down 1.5 per cent. Materials shares lost 0.5 per cent.
South of the border, the Dow Jones Industrial Average fell 92.85 points, or 0.32 per cent, at the open to 29,286.92.
The S&P 500 opened lower by 10.24 points, or 0.31 per cent, at 3,335.54 and the Nasdaq Composite dropped 45.51 points, or 0.48 per cent, to 9,526.64 at the opening bell.
Key for the U.S. markets was the release of the payroll figures for January.
The U.S. Department of Labor said the U.S. economy added 225,000 new jobs last month, far better than the 160,000 increase economists had been expecting. Employment was up in construction as well as in the transportation and warehousing industries. However, a revision to earlier numbers showed that the U.S. economy created 514,000 fewer jobs between April 2018 and March 2019 than originally estimated, according to Reuters.
Meanwhile, Statistics Canada reported that the Canadian economy added 34,500 new jobs last month, all in full-time employment. The unemployment rate fell to 5.5 per cent from 5.6 per cent in December. Economists had been expecting a more modest gain of 17,500 positions.
In its monthly report, Statscan said hiring rose in manufacturing, construction and agriculture.
On the corporate side, shares of Canadian pot producer Aurora Cannabis sank 14 per cent in morning trading in Toronto after the company said chief executive Terry Booth is stepping down and the company is cutting 500 full-time jobs as it looks to stabilize its balance sheet. The company also said it expects to take a $740-million to $775-million writedown on goodwill, and an impairment charge of between $190-million and $225-million.
Ahead of the opening bell, luxury-coat company Canada Goose Inc. cut its full-year forecast, citing the impact of the spread of the coronavirus. Canada Goose says it now expects annual revenue growth of between 13.8 per cent and 15 per cent compared with earlier forecasts of 20-per-cent growth. Canada Goose also said it now expects full-year adjusted profit growth to be in a range of 2.2-per-cent decline to 0.7-per-cent rise from a year earlier, compared with a prior forecast of at least 25-per-cent growth. Shares fell 7 per cent in Toronto in early trading.
“The health crisis has resulted in a sharp decline in customer traffic and purchasing activity,” the company said in a statement. “Retail stores and e-commerce across Greater China have and continue to experience significant reductions in revenue. Due to global travel disruptions, retail stores in international shopping destinations in North America and Europe are also affected.” Canada Goose also said no supply chain interruptions have taken place.
On Wall Street, shares of Uber Technologies Inc. were up more than 8 per cent in New York after the ride-sharing company said it expects to see a profit by the final quarter of the year, although it still expects to post a loss for the full-year. Previously, Uber had said it expected to be profitable on an adjusted basis by the end of 2021.
Overseas, major European markets were lower with the pan-European STOXX 600 sliding 0.42 per cent by afternoon. Britain’s FTSE 100 fell 0.61 per cent. Germany’s DAX fell 0.64 per cent and France’s CAC 40 was down 0.45 per cent.
In Asia, the Shanghai Composite Index rose 0.33 per cent. Japan’s Nikkei gave up early gains to finish down 0.19 per cent. Hong Kong’s Hang Seng lost 0.33 per cent.
Commodities
Crude prices wavered in early going as Russia suggested that it needed more time before deciding whether to back an OPEC committee’s recommendation to deepen current production cuts.
The day range on Brent so far is US$54.81 to US$55.40. West Texas Intermediate had a range of US$50.78 to US$51.48.
Both benchmarks are heading toward their fifth straight weekly loss as concerns about the impact of the coronavirus continue to hang over the market. Brent crude is down about 5 per cent on the week.
Prices initially drew some early support from comments from Russian Foreign Minister Sergei Lavrov said that Moscow supported co-operation with other producers. However, Energy Minister Alexander Novak said on Friday that Russia needed a few days to analyse the market and would clarify its position on deeper cuts next week.
A technical OPEC panel said this week that it would recommend that the group and its allies cut production by another 600,000 barrels a day to support the market. That would come on top of the current cuts of 500,000 barrels a day, which kicked in at the start of this year.
“We’ve seen this all before, and at this time, there is little reason for the market to suspect Russia will break from the usual pattern of flip-flopping until the last minute but ultimately agreeing to cut,” AxiTrader strategist Stephen Innes said.
Mr. Innes also said current market reaction also reflects the fact that the 600,000 barrel cut being proposed is above the low end of the range mentioned in recent press reports but also well below the upper end, which had indicated that a cut of as much as 1 million barrels a day was possible.
“[The] price action is enough to tell you the market is disappointed,” he said.
Gold prices steadied as world equity markets pulled back. Spot gold was little changed at US$1,566.33 per ounce. Spot gold is down more than 1 per cent on the week. U.S. gold futures were unchanged at US$1,569.30 per ounce.
“The focus is on whether we are going to get a strong enough economic shock (from the virus) that would get central banks to cut rates further,” Ilya Spivak, a senior currency strategist at DailyFx, told Reuters.
“There is an underlying anxiety and ... clearly markets are very sensitive, which is why gold doesn’t want to fall because there is anticipation that no central bank is going to be raising rates in this environment for a long time.”
Currencies
The Canadian dollar bounced off early lows after Statscan reported better-than-expected job creation in this country last month.
The day range on the loonie so far is 75.12 US cents to 75.28 US cents. Shortly after the release of the jobs numbers, the loonie shifted from the lower end of the range to close to the top end.
Statscan said the Canadian economy added 34,500 new jobs last month, all in full-time work. Economists had been expecting a more modest increase. The jobless rate also slid to 5.5 per cent from 5.6 per cent in December.
“We always caution investors to take any individual Labour Force reading with a grain of salt, but the continuation of job creation is putting some of that prior weakness further in the rear view mirror,” CIBC economist Royce Mendes said. “The data should be negative for fixed income today, although the exchange rate might see less of a move with the US payrolls data also showing a heady advance.”
In global currencies, the U.S. dollar index, which weighs the greenback against a basket of rivals, rose 0.1 per cent to 98.557, near its strongest since mid-October.
Britain’s pound traded near a six-week low against the dollar and fell against the euro. It was headed for its worst week since the aftermath of the December general election, dogged by persistent worries about negotiations between Britain and the European Union for a post-Brexit trade deal, according to Reuters. The pound was lower at US$1.2923 at last check.
More company news
Montreal-based CAE Inc, the world’s largest civil aviation training company, reported a better-than-expected profit, driven by strength in its commercial pilot training and simulators business. CAE said net income attributable to shareholders rose 26 per cent to $97.7-million, or 37 cents per share, in the quarter. Revenue rose 13 per cent to $923.5 million.
Ford Motor Co executive Jim Farley will assume the position of chief operating officer on Friday, positioning him as potential heir to Chief Executive Jim Hackett, a source familiar with the matter told Reuters. Farley, president of new businesses, technology and strategy, has been viewed as one of the potential successors to Hackett, who took over in 2017.
Credit Suisse Chief Executive Tidjane Thiam has quit after a power struggle with Chairman Urs Rohner at Switzerland’s second-biggest bank over a damaging spying scandal. The Zurich-based lender said on Friday that Mr. Thiam would be replaced by Thomas Gottstein, who is head of the Swiss business at Credit Suisse. The departure ends a conflict between Mr. Thiam and Mr. Rohner after revelations the bank had snooped on former executives triggered questions over its culture and management.
Technology firm Lightspeed POS Inc. missed earnings expectations despite cutting its net loss in the third quarter as its revenues surged 60 per cent. The Montreal-based company, which reports in U.S. dollars, says it lost US$15.8-million or 18 cents per share, compared with a loss of US$71.1-million of US$2.37 per share a year ago. Revenue for the quarter ended Dec. 31 grew to US$32.3-million from US$20.1-million in the third quarter of 2018. Recurring software and payments revenue in the quarter increased 58 per cent to US$28.4-million.
Indigo Books & Music Inc. reported revenue for the third quarter ended Dec. 28 of $383.7-million compared with revenue of $426-million for the same period last year. Net earnings of $25.8-million or 94 cents per share compared to net earnings of $21.5-million or 80 cents in the year-earlier period.
Spirit AeroSystems Inc, Boeing Co’s largest supplier, said on Friday it would slash its quarterly dividend to just 1 US cent per share as it grapples with the grounding of the planemaker’s 737 MAX jets. “The Company’s Board will consider further action with respect to the dividend in the future, upon the MAX’s return to service and further production stabilization,” Spirit Chief Executive Officer Tom Gentile said in a statement. Spirit last paid a dividend of 12 US cents per share.
Economic news
Statscan says the Canadian economy added 34,500 new jobs last month. Economists had been expecting 17,500.
The U.S. economy generated 225,000 new jobs in January, beating market forecasts which had called for a number closer to 160,000.
Canadian economic activity expanded at a faster pace in January as supplier deliveries climbed, according to Ivey Purchasing Managers Index (PMI) data released on Friday. The seasonally adjusted index rose to 57.3 from 51.9 in December.
With Reuters and The Canadian Press
Terry Weber