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Equity Markets

Canada's main stock index gained in early trading Friday, helped by gains for mining stocks including Teck Resources, which will raise $1.2-billion in an asset sale.

The Toronto Stock Exchange's S&P/TSX composite index was up 28.72 points, or 0.18 per cent, at 15,579.27 shortly after the open. Seven of its 10 main groups rose, led by the materials and consumer staples group.

Embattled Home Capital Group Inc. was back at the forefront after the lender said after Thursday's close that recent events have resulted in "material uncertainty" about its future. Oil prices held onto recent gains on expectations that OPEC will extend production cuts, offering some support to the energy sector.

In the U.S., stocks opened slightly lower as gains in technology stocks were offset by declines in financials.

The Dow Jones industrial average was down 34.58 points, or 0.17 per cent, at 20,884.84, the S&P 500 was down 4.0 points, or 0.17 per cent, at 2,390.44 and the Nasdaq composite edged down 3.63 points, or 0.06 per cent, at 6,112.33.

Traders also weighed a batch of fresh U.S. economic data. The U.S. Commerce Department says U.S. retail sales rebounded after a couple of weak months, climbing 0.4 per cent in April. Sales had been up a modest 0.1 per cent in March and lower in February. Friday's report raises hopes that consumer spending could boost overall economic growth in the second quarter after a weak first-quarter showing, although the April number was still short of economists' forecasts. As well, U.S. inflation showed a modest gain for the same month on a rise in energy prices. For the month, consumer prices rose 0.2 per cent after posting the biggest decline in more than two years in March. Core inflation rose 0.1 per cent. Over the last 12 months, U.S. inflation was up 2.2 per cent, according to Friday's numbers. On Thursday, a report showed a rebound in U.S. producer prices, signalling building inflationary pressures. Alongside a tightening tightening labour market, rising inflation is seen as backing expectations that the Fed will hike rates at least twice more this year.

"So long as the economic data continues to co-operate over the next month, the Fed looks set to raise rates another quarter point in June," TD senior economist Leslie Preston said a note following the release of Friday's data.

Overseas, global stocks held close to record highs despite Thursday's dip on Wall Street. Worries over China's banking system following a Reuters report that gave investors reason to lock in profits. The news agency reported China's banking regulator this week launched emergency risk assessments of lenders' new business practices, as Beijing extends its crackdown on shadow banking.

Tokyo's Nikkei slipped 0.4 per cent. Hong Kong's Hang Seng advanced 0.1 per cent, and the Shanghai composite rose 0.7 per cent. In Europe, the Paris CAC 40 was up modestly, while Germany's DAX and London's FTSE 100 were up by between 0.2 and 0.3 per cent early on.

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Commodities

Crude prices were steady with both Brent and West Texas Intermediate futures up by a few pennies in early trading against the familiar backdrop of an expected extension of OPEC production cuts butting up against market overhang. Crude prices now appeared set for their biggest weekly increase in five weeks, with Brent set to gain more than 3 per cent on the week.

Recent figures showed U.S. crude inventories fell by 5.3 million barrels for the week ended May 5, helping hold benchmark Brent above the $50 (U.S.) level. Weekly U.S. rig-count figures are due Friday. Crude production has risen about 10 per cent since the middle of last year. OPEC and other key producers meet later this month and the markets are expecting to see current production cuts extended through the rest of the year.

"The (U.S. crude) inventories turned the heads of market participants towards the more positive side of things," Eugen Weinberg, Commerzbank head of commodities research, told Reuters.

"But nevertheless the problem remains that the oil supplies are still there, the overcapacity is still there, the stocks are still quite high."

Elsewhere, gold prices advanced for the second day with the ongoing row in the United States over U.S. President Donald Trump's firing of FBI chief James Comey adding to political uncertainty.

Spot gold and gold futures were both up modestly in early going. On Thursday, spot gold posted its best single-day increase in a month.

"In the dirt of positive momentum in the U.S. dollar and the U.S. yields, the gold found a window for a short-term recovery," LCG senior market analyst Ipek Ozkardeskaya said in a note. "The ounce traded at $1,227 on Thursday. The current upside move could target $1,233."

Silver prices, meanwhile, were up about half a percentage point early on. Platinum prices were up modestly.

Currencies and bonds

The Canadian dollar was down slightly in early trading, falling below the 73-cent (U.S.) mark after closing Thursday at 72.96 cents. The day's range so far is 72.88 cents to 73.16 cents. The Canadian dollar took a hit earlier in the week after Moody's downgraded its rating on Canada's biggest bank. The currency was already toiling under bearish sentiment thanks to wavering crude prices and worries about future trade policies out of the United States. Oil's more steady showing in the last few days has helped limit the dollar's declines.

Meanwhile, the U.S. dollar was trading off an eight-week high against the yen. So far this week, the U.S. dollar has gained about 0.8 per cent against the safe-haven Japanese currency as risk aversion waned in the days after the election of a centrist leader in the French presidential elections. The greenback was higher against a broad basket of currencies early Friday and was on course for its best weekly showing this year.

The euro was up slightly compared with the greenback. Earlier in the week, the euro-zone currency hit its highest level in half a year in the wake of the French vote. Possibly affecting world currencies will be the outcome of a two-day G7 meeting in Italy, where debt relief for Greece and U.S. trade policies are expected to be on the table.

European government bond yields steadied on Friday after solid German growth numbers and comments from European Central Bank officials did little to fuel expectations for a reining in of the bank's ultra-loose monetary policy soon, Reuters reported.

Early on, the benchmark 10-year German government yield inched down just over 1 basis point on the day to 0.414 percent. U.S. government debt prices rose early Friday ahead of the release of U.S. inflation and retail sales reports. The yield on the 10-year U.S. Treasury note was lower at about 2.373 per cent. U.S. Treasury yields extended the decline after the release of Friday's U.S. retail sales and inflation figures.

Stocks set to see action

Canadian Imperial Bank of Commerce's U.S. expansion plans got a shot in the arm Friday after shareholders of PrivateBancorp Inc. voted to approve its $4.9-billion (U.S.) takeover. The banks said they expect the transaction to close in June.

Home Capital Group Inc. reported a decline in first-quarter profit on Thursday and said the damage to its reputation that the business has sustained in recent weeks had resulted in "material uncertainty" about its ability to secure funding in the future. The alternative mortgage lender's profit fell to $58-million, or 90 cents a share, in the first three months of the year. That was down from $64.2-million, or 92 cents a share one year earlier. The company had delayed releasing its earnings by more than a week and said results were prepared on a "going-concern basis," but added that issues such as regulatory proceedings, credit-rating downgrades and vacancies in the roles of CEO and CFO had "understandably shaken the confidence of the company's stakeholders."

Amaya Inc., the owner of online gambling sites PokerStars and Full Tilt, reported an 18.5-per-cent increase in quarterly profit, as it attracted more customers. The company's net income rose to $65.8-million, or 33 cents per share in the first quarter ended March 31, from $55.5-million, or 28 cents per share, a year earlier. Revenue rose 10 per cent to $317.3-million. Its shares rose 6.7 per cent in premarket trading.

Canada's biggest real estate investment trust, RioCan REIT, will release its latest quarter on Friday. The Street is looking for funds from operations to rise 0.6 per cent from a year earlier to $1.69 a share, on revenue of $1.17-billion. Those betting on a jump in their unit price Friday can take comfort in the fact the REIT has beaten earnings expectations in seven of the past eight quarters.

Department store operator J.C. Penney Co Inc.'s quarterly loss more than doubled, hurt by weak sales in February and higher costs related to store closures and employee severance packages. Net loss widened to $180-million (U.S.), or 58 cents per share, in the first quarter, from $68-million, or 22 cents per share, a year earlier. Sales at stores open more than a year fell 3.5 per cent.

Nordstrom Inc. reported weaker-than-expected quarterly same-store sales after the close on Thursday, adding its name to the growing list of U.S. retailers posting disappointing results. Nordstrom reported a 0.8-per-cent drop in icomparable-store sales for the first quarter, compared with flat sales expected by analysts polled by research firm Consensus Metrix. Its shares fell 5 per cent in premarket trading.

Hudson's Bay Co. on Thursday reported a 2.9-per-cent decline in quarterly sales, saying fewer customers shopped in its stores, which include Saks Fifth Avenue and Lord & Taylor, amid a continuing shift toward online shopping. The Toronto-based retailer said same-store sales fell 2.4 per cent at its department store group, which includes Lord & Taylor, while comparable sales at Saks declined 4.8 per cent. Its discount banners, which include Saks Off 5th, fell 6.8 per cent. Comparable sales were flat in Europe. The figures are for the quarter ended April 29, on a constant currency basis.

Canadian utility Fortis Inc. said it would will buy Teck Resources Ltd.'s two-thirds stake in the Waneta dam in British Columbia as well as any related transmission assets for $1.2-billion in cash. A Teck unit will then get a 20-year lease to use the assets to produce power for its Trail Operations, the company's zinc and lead smelting and refining complex in southeastern British Columbia, the companies said in a joint statement.

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Economic News

The U.S. Labor Department says consumer prices rose 0.2 per cent after a 0.3 per cent drop in March, which was the biggest fall in more than two years. Energy prices rose 1.1 per cent after tumbling 3.2 per cent the previous month. Core inflation, which excludes the volatile food and energy categories, rose 0.1 per cent. Over the past 12 months, inflation is up 2.2 per cent. Core prices have risen 1.9 per cent.

The Commerce Department says retail sales increased 0.4 per cent in April from March. Sales ticked up just 0.1 per cent in March and fell in February. The increase suggests that consumers may spur faster growth in the April-June quarter after the economy barely expanded in the first three months of the year.

The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed Canadian prices rose 1.2 per cent last month, making for the fifteenth consecutive month national prices have increased. In the Toronto market, which some economists have called a bubble, prices climbed 2.6 per cent, while nearby Hamilton was up 2.1 per cent. Indexes for both cities were at record highs.

The German economy defied increased political risks and picked up speed in the first quarter of 2017 as companies invested more, consumers and the state continued to spend and exports soared despite the threat of rising protectionism. Europe's biggest economy grew by 0.6 per cent in the quarter from the quarter before, when it expanded 0.4 per cent, the Federal Statistics Office said on Friday. That was the strongest quarterly growth rate since the first quarter of 2016, when the economy grew 0.7 per cent. It was in line with the consensus forecast in a Reuters poll.

With files from Reuters and The Associated Press