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Equities
U.S. stocks opened higher Friday with the latest round of U.S.-China trade talks striking an optimistic tone and tech shares advancing. Canada’s main stock exchange was mostly flat with declines in financials taking the shine off gains by energy shares and BlackBerry Ltd.
At 9:39 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 3.89 points, or 0.02 per cent, at 16,159.38. The heavily weighted financial sector was off about 0.2 per cent. Energy shares rose 0.9 per cent alongside rising crude prices. Even with Friday’s modest start, the TSX was on track for its best quarterly gain since 2009.
South of the border, the Dow Jones Industrial Average rose 109.85 points, or 0.43 per cent, at the open to 25,827.31. The S&P 500 opened higher by 12.83 points, or 0.46 per cent, at 2,828.27. The S&P 500 is set to post its best quarterly performance in more than nine years. The Nasdaq Composite gained 57.55 points, or 0.75 per cent, to 7,726.71 at the opening bell.
Globally, MSCI’s all-country index was up 0.17 per cent early Friday and looked set to put in its best quarter performance since March 2012.
“It’s been a fairly decent quarter for European equities, and global equities in general, and a welcome respite after the large downdraft that blew through the markets at the end of last year, though we haven’t been able to unwind all of those losses,” Michael Hewson, chief market analyst with CMC Markets UK, said.
“Amongst the drivers behind this rebound is rising optimism about the prospects of a US, China trade deal, but the real game changer appears to have been the change of tack by global central banks at the beginning of the year, started by the U.S. Federal Reserve, which called a halt to a concerted tightening of monetary policy.”
On Friday, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer were in Beijing for talks with Chinese officials.
“@USTradeRep and I concluded constructive trade talks in Beijing,” Mr. Mnuchin said in a tweet.
“I look forward to welcoming China’s Vice Premier Liu He to continue these important discussions in Washington next week.”
Friday's analyst upgrades and downgrades
On the corporate front, investors got BlackBerry Ltd. results ahead of the start of trading. The company reported adjusted earnings of 11 cents a share, ahead of the 6 cents analysts had been forecasting. Net profit was $51-million, or 8 cents a share versus a loss of $10-million or 6 cents a year earlier. BlackBerry’s shares were up 10 per cent in Toronto at the open.
Elsewhere, Hydro One Inc. named BC Hydro’s Mark Poweska as its new president and chief executive officer. The appointment ended an eight-month search for a new leader after former CEO May Schmidt was forced out by Premier Doug Ford, who campaigned against the utility’s compensation scheme ahead of his election.
On Wall Street, shares of Wells Fargo & Co. were down about 1 per cent in early going after the U.S. bank announced that Tim Sloan would be resigning immediately from his post as CEO. Mr. Sloan is the second chief executive to leave the bank in the wake of a sales practices scandal which saw the opening of huge numbers of unauthorized consumer accounts. Wells Fargo shares were higher at the start of trading.
Also Lyft Inc. shares opened at US$87.24, up 21 per cent from its offering price of US$72 The stock’s initial expected range had been US$62 to US$68.
Market movers: Stocks seeing action on Friday - and why
Overseas, major European markets were higher ahead of another Brexit vote. Britain’s Parliament is voting on another version of Prime Minister Theresa May’s exit plan, which has already been defeated twice. Ms. May has said she will resign if the plan passes. However, even if Friday’s vote passes, another will be necessary for Britain to legally exit the EU. The pan-European STOXX 600 was up 0.28 per cent at last check. Britain’s FTSE 100 rose 0.43 per cent. Germany’s DAX gained 0.29 per cent. France’s CAC 40 advanced 0.45 per cent.
In Asia, trade hopes buoyed markets. The Shanghai Composite Index spiked 3.20 per cent. Hong Kong’s Hang Seng rose 0.96 per cent. Japan’s Nikkei ended the week up 0.82 per cent.
Commodities
Crude prices were higher and looked set for their best quarterly gain since 2009 on the back of production cuts by OPEC and its allies and U.S. sanctions on Venezuela and Iran.
The day range on Brent so far is US$67.81 to US$68.27. The range on West Texas Intermediate is US$59.41 to US$59.86.
WTI is on track to mark its fourth straight week of gains and should end the quarter up about 30 per cent. Brent was heading for a weekly gain of 1.5 per cent and a 25-per-cent increase for the quarter. Reuters reports the three-month gains are the best for both since the second quarter of 2009 when each advanced about 40 per cent.
“Oil prices are a little higher on Friday, with positive U.S./China trade headlines certainly supportive,” OANDA analyst Craig Erlam said. “This remains the greatest risk for the global economy so positive headlines are naturally risk positive. It’s certainly helping equity markets.”
However, he noted that inventory figures from earlier in the week – which showed bigger than expected builds – may be holding oil back from rising further.
“U.S. oil rig data today will be closely watched as ever, with the trend since November heading in the wrong direction, although with the country pumping at record levels, it’s clearly not having a negative impact yet,” he said. “That can surely only last so long though if the trend continues.”
In other commodities, gold prices were lower and looked set for their worst month since last summer.
Spot gold was down 0.1 per cent at US$1,288.56 per ounce in early going. That decline comes at a 1.5-per-cent decrease on Thursday, the biggest fall in more than seven months.
According to Reuters data, gold looks set for its first fall in four weeks and a decline of about 1.9 per cent for the month. On the quarter, gold prices look set for the second consecutive quarterly increase helped by concerns over the unsteady global economy and dovish central banks.
“Near-term headwinds look likely to remain for the yellow metal which could see recent support around US$1,280 come under pressure,” Mr. Erlam said in a note. “Next support below here could be found around US$1,260 but ultimately, the [U.S.] dollar - and therefore weakness elsewhere - will likely prove decisive on the downside potential here.”
Currencies and bonds
The Canadian dollar jumped Friday morning after Statistics Canada said the country’s economy put in a better-than-expected performance in January. Just after the release of the report, the loonie touched its best level in a week, moving near the top end of the day range of 74.39 US cents to 74.95 US cents.
In its report, Statscan said GDP grew by 0.3 per cent in January, offsetting declines seen in December and November. In total, 18 of 20 sectors showed gains. Economists had been expecting an increase of about 0.1 per cent in January, although some cautioned that another contraction was possible.
“Overall, a better than expected start to Q1 after a near zero growth rate in Q4, and reason enough for the Bank of Canada to hang on to its hopes that the growth stall late last year will prove temporary,” CIBC World Markets chief economist Avery Shenfeld said, calling Friday’s report negative for fixed income but bullish for the dollar.
In other currencies, the U.S. dollar was heading to its strongest gain in five months following a bounce in U.S. bond yields. Against a basket of rival currencies, the U.S. dollare index was up slightly at 97.217.
The euro, meanwhile, was up slightly on the day but down 1.2 per cent for the month on cautious signals from the European Central Bank and overall concern about the world economy. Early this morning, the euro was trading at US$1.1228. With Brexit again in focus, the British pound was down 0.2 per cent at US$1.3013 after falling more than 1 per cent overnight.
In bonds, U.S. Treasury yields were higher with a number of Federal Reserve speakers on tap for the day. The yield on the U.S. 10-year note was higher at 2.423 per cent. The yield on the 30-year note was also higher at 2.421 per cent.
Stocks set to see action
CIBC raised its price target on Canadian miner Ivanhoe Mines to $3.30 from $2.50 citing the miner’s fourth-quarter results and an updated preliminary economic assessment report on its Kamoa-Kakula copper mine in Democratic Republic of Congo. CIBC also reiterated its ‘neutral’ rating. Ivanhoe shares were up about 3 per cent in early trading.
Some 43 per cent of Germans are against a merger between Deutsche Bank and Commerzbank, a survey showed on Friday, while only 17 per cent are in favour. The Insa survey of 2,012 people for Bild newspaper also found that 30 per cent of those polled had no opinion about a merger between Germany’s two largest banks, while 10 percent did not answer the question. When only considering those with an opinion, 71 per cent were against a merger, while 29 per cent were in favour, Bild reported. Older respondents were more likely to disapprove.
The Globe’s Andrew Willis reports that AIG Insurance Co. of Canada is exiting domestic home and auto insurance business, the latest player to quit the domestic market amid a consolidation trend that’s contributing to a rise in insurance rates. The Toronto-based division of American International Group Inc., one of the world’s 20 largest insurers, decided earlier this year to shut down a business that catered to wealthy Canadian clients. Policies will not be renewed as they expire over the next 12 months.
Oreo cookies maker Mondelez International Inc is in advanced talks to buy international brands being sold by U.S. food company Campbell Soup Co, Bloomberg reported late on Thursday. Mondelez is negotiating final terms of a purchase of the business, which includes Australian cookie brand Arnott’s and Danish baked snacks maker Kelsen Group, the report said, citing people familiar with the matter. The parties have been discussing a price of around $2.5 billion for the assets, the report said.
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Economic news
Statistics Canada said GDP grew by 0.3 per cent in January, better than the 0.1-per-cent increase the markets had been expecting. The January gain offsets the declines seen in the two previous months.
Statscan’s Industrial Product Price Index rose 0.3 per cent in February, mostly on higher prices for energy and petroleum products. The Raw Materials Price Index increased 4.6 per cent alongside higher prices for crude energy products.
The U.S. Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 per cent as households cut back on purchases of motor vehicles. Figures for December were revised down to show consumer spending falling 0.6 per cent instead of the previously reported 0.5 per cent.
The U.S. Commerce Department says that new U.S. homes sold at a seasonally adjusted annual rate of 667,000 in February, an increase from an upwardly revised 636,000 in January.
With Reuters and The Canadian Press
Terry Weber