Canada’s main stock index rose at opening on Friday, driven by an expectation of another interest hike.
The Toronto Stock Exchange’s S&P/TSX Composite index was up 62.36 points, or 0.4 per cent, at 15,466.49.
Although Canadian inflation and retail sales data came in weaker than expected on Friday, market operators predicted the Bank of Canada still would raise interest rates again next week to keep a booming economy in check.
Statistics Canada said the annual inflation rate in September dipped to 2.2 per cent from 2.8 per cent as price pressures from gas and air travel eased. Analysts in a Reuters poll had forecast an annual rate of 2.7 per cent.
September marked the eighth consecutive month that the overall inflation rate has exceeded the Bank of Canada’s 2.-per-cent target.
The central bank, which predicts inflation should move back down toward 2 per cent by early 2019, will announce its next interest rate decision on Oct. 24 and markets are expecting a hike. The bank has lifted rates four times since July 2017
U.S. stocks opened higher on Friday on upbeat results from major U.S. companies such as P&G and Honeywell.
The Dow Jones Industrial Average rose 41.64 points, or 0.16 per cent, at the open to 25,421.09.
The S&P 500 opened higher by 6.88 points, or 0.25 per cent, at 2,775.66. The Nasdaq Composite gained 45.02 points, or 0.60 per cent, to 7,530.16 at the opening bell.
Consumer goods bellwether Procter & Gamble reported a surprise rise in first-quarter sales, sending its shares 6.2 per cent higher in early trading, while industrial conglomerate Honeywell fell 1.5 per cent despite a bumper sales of warehouse machinery.
Investors shed Italian bonds on Friday, driving their yields to 4-year highs while the euro fell to a 2-month low as the European Union called Rome’s draft budget an “unprecedented” breach of EU fiscal rules.
Late on Thursday, the European Commission told Italy that planned government spending was too high, its structural deficit would rise instead of fall and public debt would not fall in line with EU rules.
Italy is the third-largest economy in the 19-country euro zone, and a crisis there could unsettle the entire bloc.
While it isn’t unusual for the EU to ask member countries for clarification on points of their budget plans, the sending of a formal letter and the tone of the comments were particularly strong, analysts said.
“The letter was more sharply worded than usual. It described the budget as ‘an obvious deviation’ from prior commitments, on an ‘unprecedented’ scale,” Deutsche Bank research strategist Jim Reid said in a note to clients.
Top euro zone officials insisted Italy’s budget plan did not pose a “Greek-like” threat to European financial stability, but the row nonetheless led money market investors to start pushing back expectations for the timing of a European Central Bank rate rise.
Italy’s benchmark 10-year bond yields rose to 3.74 per cent in early trade on Friday, the highest since February 2014. They last traded at 3.71 per cent.
Italian stocks fell 0.7 per cent, while its bank stocks were last down 2.2 per cent.
The budget dispute initially weighed on the euro, which fell to a two-month low, before recovering by afternoon trade in Europe, last up 0.2 per cent on the day.
The closely watched Italian/German bond yield spread hit a fresh 5-1/2 year high of 338 basis points.
Portuguese and Spanish bonds, that have been resilient so far through the Italian budget worries, were also sold, with several analysts suggesting that this was the first sign of contagion from Italy.
Analysts at MUFG said that if BTP (Italian government bond) yields moved notably higher “correlations could well strengthen and this would provide further downside pressure for the euro”.
Stock markets all round were a bit lacklustre: data showing China’s economy growing at its slowest pace since 2009 weighed on shares in Asia, although Chinese shares staged a recovery after the securities regulator announced a series of measures to aid the market.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2 per cent after earlier falling as much as 0.9 percent ahead of the China GDP reading.
Australian shares fell 0.05 per cent and Japan’s Nikkei average ended 0.6 per cent lower for its third straight week of declines.
Stocks in Europe managed a modest rise at the start of trading, but fell back into the red. The pan-European STOXX 600 index was down 0.1 per cent.
The MSCI All-Country World Index, which tracks shares in 47 countries, was down 0.1 per cent on the day. It was set for a fourth weekly loss on the trot, which would make it its longest weekly losing streak since the end of 2015.
1609 out of 2767 stocks on the index are in a bear market (58 percent of the total), up from 1557 last week, Bank of America Merrill Lynch said in a note on Friday.
In currencies, the dollar index, a gauge of the greenback’s value against major peers, was 0.1 percent lower at 95.863.
Meanwhile, the British pound rose after EU negotiator Michel Barnier said a Brexit deal with the United Kingdom was 90 percent done although hurdles remained.
Spot gold gained 0.3 per cent to $1,227.55 per ounce.
Oil prices rose on Friday on signs of surging demand in China, the world’s second-biggest oil consumer, although the market was heading for a second week of losses on rising U.S. inventories and concern that trade wars were curbing economic activity.
Benchmark Brent crude oil jumped $1.14 a barrel, or 1.4 per cent, to a high of $80.43 before easing back to around $80.29, up $1.00. U.S. light crude was 60 cents higher at $69.25.
For the week, Brent crude was 0.2 per cent lower while U.S. crude was down 2.9 per cent, both on track for a second consecutive weekly decline, and down around $7 a barrel from four-year highs reached in early October.
“After two consecutive days of slide the oil market is staging a half-hearted come-back,” said Tamas Varga, analyst at London brokerage PVM Oil. “Maybe it is down to some pre-weekend short-covering.”
Reuters