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Equity Markets

U.S. stock futures signalled a positive start Friday after choppy action in the premarket as investors wrestled with results from JPMorgan and Wells Fargo and weighed the latest U.S. inflation data. In Canada, futures also pulled back as the start of trading neared with crude prices lower although still near multiyear highs. World stocks measured by the MSCI's broad gauge of global markets again touched record levels early on and looked set to post its eighth day of gains in nine trading days so far this year. That index is now up more than 3 per cent so far in 2018.

Analysts say, given Friday's movement, it looks like investors have for the most part shrugged off concerns on everything from tighter monetary and a potential breakdown in NAFTA talks to rumoured - and subsequently disputed - changes to China's bond-buying policies as the trading week draws to a close.

"Even bond markets which had been spooked by concerns over a possible buyers strike from China put those worries behind them after two successful auctions this week which showed a strong appetite for U.S. debt, prompting yields to slip back from their weekly highs," CMC Markets U.K. chief market analyst Michael Hewson said.

On Bay Street, Canadian miner First Majestic Silver announced early Friday that it would acquire Primero Mining Corp. for a transaction value of about $320-million. Primero operates the 100-per-cent-owned San Dimas silver-gold mine in Durango, Mexico.

Also on this side of the border, Sun Life Financial shares could see some movement after the insurer said it will take a $200-million hit in the fourth quarter related to changes to the U.S. tax code. Sun Life reports Feb. 14.

On Wall Street, earnings season kicks in. Ahead of the opening bell, BlackRock Inc., the worlds biggest asset manager, reported sharply higher fourth-quarter profit. For the quarter, New York-based BlackRock posted net income of $2.3-billion or $14.07 a share compared with $851-million or $5.13 a year earlier. The most recent quarter included a $1.2-billion gain linked to the enactment of U.S. tax laws. Excluding that gain, BlackRock had earnings per share of $6.24 in the most recent quarter. BlackRock shares were higher in premarket trading.

Key for investors Friday will be results from JPMorgan and Wells Fargo.

JPMorgan posted a 37-per-cent drop in quarterly profit on a $2.4-billion charge linked to the new U.S. tax laws. The bank's profit fell to $4.23-billion or $1.07 a share, from $6.73-billion or $1.71 a share a year earlier. Excluding the charge, profit in the most recent quarter was $1.76 a share. Analysts had been expecting $1.68 a share. JPMorgan stock was little changed in premarket trading.

Wells Fargo posted fourth-quarter profit of $6.2-billion or $1.16 a share, up from $5.3-billion or 96 cents a share a year earlier. The most recent quarter included a $3.35-billion one-time gain from writing down deferred tax liabilities to reflect the new U.S. corporate tax rates.  Wells Fargo also said it expects full-year 2018 expenses of $53.5-billion to $54.5-billion. Wells Fargo shares were down slightly ahead of the opening bell.

In other notable moves, Facebook shares were down 4 per cent in the premarket after the social media giant announced changes to its news feed. The company on Thursday began to change how it filters posts and videos on its news feed in a way that it said would prioritize what friends and family share.

Overseas, MSCI's index of European stocks edged higher as the euro rose to its best level against the U.S. dollar in three years. European markets got a lift from news of a breakthrough in talks to form a coalition government in Germany. German Social Democrat leader Martin Schulz says his party's leaders have unanimously agreed to recommend to delegates that they give a mandate to pursue coalition talks with Angela Merkel's conservatives. Germany's DAX was up 0.24 per cent at last check.

In Britain, the FTSE rose 0.22 per cent in early trading.  Shares in British engineering firm GKN were up 25 per cent in morning trading after the company rejected what it called an "entirely opportunistic" takover offer from turnaround specialist Melrose. GKN makes components used in the Black Hawk helicopter. Elsewhere in Europe, France's CAC 40 rose 0.35 per cent.

In Asia, most markets managed to finish the week in positive territory. Japan's Nikkei, however, bucked that trend, closing down 0.24 per cent with big auto makers and tech companies weighing on the index. Hong Kong's Hang Seng rose 0.94 per cent and the Shanghai composite index was up 0.12 per cent.

Commodities

Oil prices pulled back in early going but held near three-year highs and looked set to close out the session up for the fourth consecutive week. Brent crude, which cracked $70 (U.S.) a barrel for the first time since late 2014 on Thursday, was trading in a day range of $69.88 to $69.40. West Texas Intermediate, which also saw its best levels since 2014 during the previous session, was also lower heading into North American trading. The range on WTI so far is $63.17 to $63.72.

OPEC's continued production cuts and a pair of reports signalling declining U.S. oil inventories combined to bolster crude prices through the week. Traders said Friday's dip reflected weaker-than-expected data out of China, which showed that country's crude imports fell 9 per cent in December to 33.7 million tonnes.

"It is remarkable to see that most market analysts believe that prices have rallied too far since consensus forecasts is significantly lower than the current spot prices," Hans van Cleef, senior energy economist at ABN Amro, said in a note.

"On the other hand, most investors are still positioned to benefit from further price gains," he said.

In other commodities, gold prices hit four-month highs on Friday and appeared on track for a fifth week of gains. Friday's increase came as the U.S. dollar dipped against the euro. Spot gold prices were higher and sat just below its mid-September high. Gold futures were also higher.

Silver prices rose but was heading for its first weekly loss in five weeks, according to Reuters.

Currencies and bonds

The Canadian dollar was little changed Friday after a rough week. The day range for the loonie is 79.66 cents (U.S.) to 79.94 cents. With trade concerns continuing to weigh, markets are now looking ahead to next week's Bank of Canada decision on interest rates. The bank is widely expected to raise interest rates in its first meeting of the year, but the probability has backed off a bit in the wake of headlines this week questioning the U.S.'s commitment to NAFTA.

"The Bank of Canada is expected to raise the overnight rate by 25 basis points to 1.25 per cent coming out of the January 17th policy meeting," RBC economists said in a note. "This is expected to be the case despite the likelihood that the central bank will revise down its outlook for Q4 GDP growth from the previously estimated 2.5 per cent."

RBC now sees fourth-quarter growth at an annual rate of 1.7 per cent, just ahead of the economy's longer-run potential. RBC also said the bank will likely look to last week's business outlook survey as supporting tightening. The survey confirmed a rebound in employment and investment intentions compared with third-quarter readings.

"Strength in these areas should temper concerns that uncertainty about the outcome of the NAFTA re-negotiations is unduly weighing on business' capital expenditures and hiring," RBC said. "That said, the bank is likely to reiterate concerns about U.S. protectionism given what appear to be rising odds that the U.S. signals its intent to withdraw from NAFTA."

In other currencies, the euro managed its best level against the U.S. dollar in three years drawing support from a break through in talks to form a coalition government in Germany and continued expectations that the European Central Bank will soon move to begin withdrawing stimulus. The central bank said in minutes released Thursday that it could move to change its communication stance early this year, sparking a rally in the single currency.

The euro's gain, meanwhile, held back the U.S. dollar. The U.S. dollar index, which measures the greenback against a group of world currencies, was lower early Friday, touching its worst level in four months.

After a wild week, U.S. bonds continued a retreat started Thursday. The yield on the 10-year note was higher at 2.552 per cent. The yield on the 30-year note was also higher at 2.878 per cent.

Stocks set to see action

JPMorgan Chase & Co, the biggest U.S. bank by assets, reported a 37-per-cent drop in quarterly profit on Friday due to a $2.4-billion charge related to the new federal tax law. The lender's net profit fell to $4.23-billion, or $1.07 per share, in the fourth quarter ended Dec. 31, from $6.73-billion, or $1.71 per share, a year earlier. Excluding the tax law impact and other items, net income was $6.7 billion, or $1.76 per share.

Canadian Solar shares were down 2 per cent in premarket trading at the company cut its fourth-quarter and full-year forecasts to reflect the time of certain solar project saless. The company now sees fourth-quarter revenue of $1.04-billion to $1.08-billion, compared with its previous outlook of $1.77-billion to $1.81-billion. Full-year revenue is expected to be in the range of $3.33-billion to $3.37-billion. Earlier guidance had put annual revenue in the rate of $4.05-billion to $4.09-billion.

Wells Fargo & Co posted an 18 per cent rise in fourth-quarter profit, driven by a one-time tax benefit related to President Donald Trump's new tax laws. Net income applicable to shareholders rose to $5.74-billion, or $1.16 per share on GAAP basis, in the quarter ended Dec. 31, from $4.87-billion or 96 cents per share a year ago. Analysts on average were looking for $1.07 per share, according to Thomson Reuters I/B/E/S. It was not immediately clear if the reported figures were comparable. The quarter included a $3.35-billion one-time after-tax boost from writing down its deferred tax liabilities to reflect the new U.S. corporate tax rates.

BlackRock Inc on Friday reported a better-than-expected quarterly profit, as the world's biggest asset manager pulled in more money to its exchange-traded funds. BlackRock's profit was boosted by a $1.2-billion gain related to the recent enactment of the U.S. tax laws, and the company also raised its quarterly cash dividend by 15 per cent.

GKN has rejected as "entirely opportunistic" a takeover offer from turnaround specialist Melrose and set out plans to split its business to boost profitability, sending shares in the British engineering firm up 25 per cent. The maker of components used in the Black Hawk helicopter and by automakers such as Volkswagen and Ford cut its profit outlook in October, hurt by a writedown at its U.S. aerospace division. It later warned the writedown would be bigger than expected and announced the departure of CEO-designate Kevin Cummings, the head of the aerospace division who had been set to take over the top job this month.

Sun Life Financial said it expects to take a charge of about $200-million related to U.S. tax reforms in its fourth-quarter results.

General Motors says it is making the first mass-production autonomous car without a steering wheel or pedals, according to The Associated Press. The company says it has filed a petition with the federal government seeking permission to put the vehicles on the road sometime next year with no human backup drivers. GM's Cruise Automation unit has announced plans to carry passengers in self-driving cars that won't have a backup driver in 2019. The location of the service has not been revealed.

Newstrike Resources Ltd. says the Tragically Hip is backing the company's deal to be acquired by CanniMed Therapeutics Inc, The Canadian Press reports. The band is a creative partner and shareholder in Newstrike, the company says. In a statement on behalf of the band, guitarist Rob Baker says the combination "will create shareholder value and a formidable force in the Canadian cannabis market for many decades to come." CanniMed struck an friendly deal in November to acquire Newstrike in an all-stock transaction. CanniMed shareholders would own approximately 65 per cent of the combined company, while Newstrike shareholders would hold the remaining 35 per cent. However, Aurora Cannabis Inc. is looking to stop the deal as part of its own hostile offer to buy CanniMed.

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Economic News

Underlying U.S. consumer prices recorded their largest increase in 11 months in December, Reuters reports. The U.S. Labor Department said its Consumer Price Index excluding the volatile food and energy components rose 0.3 per cent last month also as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased. Core CPI increased 1.8 per cent in the 12 months through December, up from 1.7 per cent in November. The headline rate of inflation in December was 2.1 per cent, unchanged from a year earlier.

The U.S. Commerce Department says retail sales rose 0.4 per cent last month. Figures for November were revised to show sales gaining 0.9 per cent instead of the previously reported 0.8 per cent increase.

(10 a.m.ET) U.S. reports November business inventories. Consensus is for an increase of 0.3 per cent.

With files from Reuters and The Canadian Press

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