Equity Markets
Canada's main stock index lost ground in early trade on Friday, weighed by losses among its heavyweight energy and materials sectors as oil and gas prices fell.
The Toronto Stock Exchange's S&P/TSX composite index was down 32.38 points, or 0.21 per cent, at 15,179.49 shortly after the open. It is on track for a 0.8-per-cent gain on the week.
U.S. stocks opened higher on Friday after data showed job growth slowed more than expected in August and wage growth remained anemic, which could make the Federal Reserve cautious about raising interest rates again this year.
The Dow Jones Industrial Average rose 35.26 points, or 0.16 per cent, to 21,983.36. The S&P 500 gained 4.77 points, or 0.19 per cent, to 2,476.42. The Nasdaq Composite added 14.93 points, or 0.23 per cent, to 6,443.59
The U.S. economy added 156,000 jobs in August, below the 180,000 expected by economists polled by Reuters.
The unemployment rate edged up to 4.4 per cent from 4.3 per cent, while the average hourly earnings increased 0.1 per cent after rising 0.3 per cent in July.
The sluggish wage growth follows data from Thursday that showed annual inflation in July advanced at its slowest pace in more than 1-1/2 years.
U.S. short-term interest rate futures rose slightly on Friday, reflecting the expectation that the Fed will not raise interest rates before mid-2018.
"It's a little bit of a disappointment," said Scott Anderson, chief economist at Bank of the West.
"The labor market is doing fine but not quite as strong as people thought going into this number ... this probably raises the odds the Fed doesn't go ahead with a December rate hike."
However, August's moderation in employment growth, likely reflects a seasonal quirk and is far more than the 75,000 to 100,000 jobs per month needed to keep up with growth in the working-age population.
"One of these days, all that U.S. job creation is going to spill over into higher wage rates, but those days aren't here yet," CIBC World Markets chief economist Avery Shenfeld said in a note. "There was nothing to sneeze at in 156,000 jobs created in August, even though that is below the recent run rate, and was accompanied by some modest downward revisions to the prior two months."
However, he also noted that closely watched average hourly earnings edged up a slim 0.1 per cent last month, leaving the 12-month pace at 2.5 per cent.
All three major indexes are on track to post gains for the second straight week, though trading volume is expected to remain muted as investors head into the Labor Day weekend.
Wall Street closed higher on Thursday, with the S&P 500 notching five days of gains for the first time in three months, as investors took cautious hope from Washington's latest promises for long-awaited details of a tax reform plan.
U.S. Treasury Secretary Steven Mnuchin said President Donald Trump's administration has a detailed plan on tax reform and is on track to implement it by year-end.
In Canada, B.C.-based yogawear maker Lululemon Athletica stock was up after the retailer topped profit and sales expectations and hiked its outlook. Lululemon said same-store sales rose 7 per cent while online sales surged 30 per cent in the most recent quarter.
"While it is tough to find negatives in the quarter, with the stock trading at 13 times our F17E EBITDA, expectations are high, leaving little room for error," Citigroup analyst Paul Lejuez said in a note.
Overseas, markets in Europe and Asia edged to record highs. Early gains for European shares helped ease worries that stocks were headed for a second down week in a row. Gains by Vivendi and Volvo helped brighten the mood. The latest reading on factory activity across the common-currency zone also helped underpin sentiment. The euro zone PMI rose to 57.4 matched June's strongest reading since April 2011.
In Britain, the FTSE 100 was up 0.15 per cent. Germany's DAX rose 0.95 per cent and France's CAC 40 advanced 0.94 per cent. The pan-European Stoxx 600 was also higher, with most sectors in positive territory.
In Asia, most markets finished higher after a solid reading on Chinese manufacturing activity. The Caixin China Manufacturing PMI for last month recorded a six-month high of 51.6. Analysts surveyed by Reuters had forecast a softer reading.
Japan's Nikkei rose 0.23 per cent. The Shanghai composite index edged up 0.19 per cent while Hong Kong's Hang Seng index was 0.06 per cent lower.
Commodities
Oil prices were lower Friday after the fallout from deadly storms in the United States continued to slam the energy sector, with roughly a quarter of U.S. refining activity being knocked offline. Both West Texas Intermediate and benchmark Brent crude were lower in early going. Both saw fairly steady declines overnight. Reports have suggested that Harvey shut about 4.4 million barrels a day of refining capacity. The situation had also sparked a surge in gasoline prices, with prices rising above $2 a gallon in the United States, the highest in two years. However, on Friday, the gasoline September futures contract pulled back. Friday marks the last day of trading for the contract. The October contract opened lower at $1.7733 a gallon, Reuters reports.
LCG market analyst Ipek Ozkardeskaya notes that gasoline futures had an aggressive downside correction on Thursday, with futures tanking 17 per cent in a single move, with declines continuing into Friday's trading session.
Meanwhile, WTI had rallied Thursday on news that the U.S. government would supply 1 million barrels from the Strategic Petroleum Reserve, to offset the impact of industry shutdowns related to Harvey.
The WTI crude rallied to 100-day moving average ($47.50 at the time of writing) on Thursday, on the back of news that the US government would supply 1 million barrels from the Strategic Petroleum
"Some traders may want to take a chance on a positive correction due to the widening spread with the Brent crude," she said in a note. "There are talks that the pipelines could start lines over the weekend. Yet, this is a risky bet given that the uncertainties persist. "
In other commodities, gold prices were lower as investors awaited the U.S. employment report. Prices remain at the highest levels in nearly 10 months, though, as uncertainty over the situation on the Korean peninsula keeps safe-have investments in favour.
Silver prices were also down, but on track for a weekly gain of more than 2 per cent. Copper prices firmed on a stronger-than-expected reading on Chinese factory activity.
Currencies and bonds
The Canadian dollar jumped early Friday after disappointing jobs numbers south of the border hit the greenback. The loonie spiked above 81 cents (U.S.) after the U.S. Labor Department said the U.S. economy added 156,000 new jobs last month, fewer than economists had been expecting. The loonie had been trading above 80 cents in the early morning hours, holding the glow from a surprisingly strong reading on Canada's second-quarter economic growth. The day's range so far is 80.06 cents to 81.02 cents, with the dollar sitting near the upper end most recently.
On Thursday, the dollar surged after Statistics Canada said the Canadian economy grew at an annual rate of 4.5 per cent, well ahead of forecasts. The report prompted CIBC to move ahead its rate-hike forecast.
"We're bringing forward our forecast for another quarter point hike by the Bank of Canada this year, as we now see September as a bit more likely than October," CIBC's Mr. Shenfeld said in a note. "The Bank can clearly argue that the economy simply doesn't need rates as low as they have been to generate decent economic growth."
However, he also noted that, if the bank moves on rates at its meeting next week, it will likely be a "dovish hike" meaning the bank would probably then shift back into a holding pattern to offset the threat of the loonie moving too high, putting downward pressure on exports and inflation.
Scotiabank also said it now expects the Bank of Canada to raise interest rates at its policy meeting next week.
"The key for the CAD going forward is how the BoC frames the policy outlook once the 2015 emergency accommodation is fully removed," Scotiabank's Shaun Osborne and Eric Theoret said in the bank's morning FX note. "Leaving the door open to additional tightening in the overnight rate beyond 1 per cent will drive Canadian short-term rates through US and pull the CAD significantly higher still."
In other currencies, the U.S. dollar fell sharply against the euro after the jobs report but quickly recovered much of that lost ground. The euro closed out August higher against the greenback, marking the sixth straight month of gains. Traders are looking ahead to next week's European Central Bank meeting. Traders expected the ECB to address the recent strength of the euro. A Reuters poll also suggests that just 15 out of 79 analysts see the central bank announcing a time line for winding down its massive bond buying program.
In bonds, U.S. Treasury yields bounced on the U.S. employment figures before settling higher. The 10-year note was trading higher at 2.134 per cent just ahead of the opening bell. The 30-year note was modestly higher at 2.745 per cent.
Stocks set to see action
Canadian yoga and leisure apparel maker Lululemon Athletica Inc. reported quarterly profit and sales on Thursday that topped expectations as online sales surged 30 per cent thanks to an effort to beef up its e-commerce strategy, and the company raised its outlook. The results helped ease concerns the "athleisure" trend popularized by Lululemon may be cooling. Shares, which closed at $57.55 ahead of the results, rose in premarket trading. Executives told analysts results were strong across all key markets and product categories, and that more customers also shopped at its bricks and mortar stores. Lululemon shares rose 7 per cent in premarket trading.
The Quebec-based company that makes Ski-Doo snowmobiles had a big increase in revenue and a $100-million profit during its second quarter. BRP Inc. of Valcourt, Que., had $1.03-billion of revenue, up 20 per cent from last year's second quarter. Its net income amounted to 89 cents per share, compared with last year's loss of $68.8 million or 61 cents per share, The Canadian Press reports. BRP's normalized earnings improved to 18 cents per share from one cent per share last year. The company — formerly a division of Bombardier Inc.; makes a wide range of products for a global market.
German car maker Volkswagen is launching a scrappage scheme for older diesel vehicles in Great Britain, the company said on Friday. Through a new scheme designed to get older polluting cars off the road, potential buyers can get incentives of between 1,800 and 6,000 pounds for a new Volkswagen if they trade in an older vehicle. For vehicles that are seven years old, or fitted with an engine conforming to the Euro 5 emissions standard, Volkswagen is offering up to 4,000 pounds off a VW Golf, or up to 10,000 pounds off an electric Golf when combined with a British government grant.
The U.S. agency in charge of enforcing labour law on Thursday filed a complaint against electric car maker Tesla Inc., saying it found merit to workers' complaints about unfair labour practices. According to the National Labor Relations Board complaint, Tesla violated workers' rights by requiring them to sign a confidentiality agreement that could bar them from talking about their working conditions and safety issues at the company's facility in Fremont, California. The agency also investigated charges by the workers that Tesla intimidated and harassed them and violated workers' rights under federal labour law. Tesla has denied the allegations.
Dow Chemical Co. and DuPont said on Friday the companies had successfully completed their planned $130-billion merger to form DowDuPont. Shares of DuPont and Dow stopped trading at the close of Aug. 31 and will now trade on the New York Stock Exchange under the ticker symbol "DWDP." Dow and DuPont announced the merger in December, 2015. "The true value of this merger lies in the intended creation of three industry powerhouses that will define their markets," Andrew Liveris, executive chairman of DowDuPont, said in a statement on Friday. Post-merger, Dow and DuPont are expected to break up into three independent, publicly traded units.
Shares of Palo Alto Networks jumped 7.8 per cent in premarket trading after the cybersecurity firm reported profit and revenue above expectations.
Ambarella was up significantly after the video processing chip maker reported late Thursday better-than-expected profit and revenue but then its shares fell 15 per cent in premarket trading.
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Economic News
U.S. job growth slowed in August and the country's unemployment rate rose to 4.4 per cent after two straight months of strong gains. Consensus was for a net increase in jobs of 180,000, with the unemployment rate holding steady at 4.3 per cent. However, the pace of increase should be more than sufficient for the Federal Reserve to announce a plan to start trimming its massive bond portfolio. Anemic wage gain could, however, make the U.S. central bank cautious about raising interest rates gain this year. The Labor Department said on Friday that nonfarm payrolls increased by 156,000 last month after rising 189,000 in July. Average hourly earnings rose three cents or 0.1 per cent after advancing 0.3 per cent in July, keeping the year-on-year gain in wages at 2.5 per cent for a fifth consecutive month.
U.S. construction spending unexpectedly fell in July, hitting a nine-month low amid a steep decline in investment in private structures. The Commerce Department said on Friday that construction spending decreased 0.6 percent to $1.21-trillion also as investment on public sector projects fell. That was the lowest level since October 2016 and followed a downwardly revised 1.4 percent tumble in June.
The Institute for Supply Management's ISM came in at 58.8. Analysts were expecting a reading of 56.5.
Round 2 of NAFTA renegotiations scheduled to take place in Mexico City until Sept. 5.
With files from Reuters