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Equity Markets

Canada's main stock index opened lower on Friday, as investors fled to safety amid global geopolitical uncertainties, with the heavily weighted financial stocks leading broad declines.

The Toronto Stock Exchange's S&P/TSX composite index fell 69.62 points, or 0.46 per cent, to 14,964.02.

Materials was the only group that advanced out of the index's 10 main sectors, as gold mining stocks benefited from higher safe-haven gold prices.

In Canada, the annual inflation rate ticked up to 1.2 per cent in July, but remained well below the Bank of Canada's 2.0 per cent target, as transportation and shelter costs rose, Statistics Canada said on Friday.

U.S. stocks opened little changed on Friday, a day after the S&P posted its biggest one-day percentage loss in about three months amid concerns over President Donald Trump's ability to legislate his pro-growth agenda.

The Dow Jones Industrial Average fell 12.56 points, or 0.06 per cent, to 21,738.17. The S&P 500 lost 2.29 points, or 0.09 per cent, to 2,427.72. The Nasdaq Composite dropped 0.12 points, or -0 per cent, to 6,221.79.

World stocks were set for a second day of losses on Friday after an exodus of U.S. executives from presidential business councils dealt a fresh blow to hopes of tax reform and deadly attacks in Barcelona hit shares in European tourism firms.

Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as U.S. policy uncertainty and fears of more attacks boosted the appeal of such top-notch assets.

Markets have been dismayed by U.S. President Donald Trump's latest controversial comments on violence that flared in Charlottesville, Va., after a white nationalist protest.

Several business leaders have since resigned from his advisory councils and a White House official said plans for a council on infrastructure had been dropped.

These developments have dashed hopes for tax cuts and infrastructure spending, Mr. Trump campaign promises that fuelled much of this year's gains in world stocks, emerging markets and commodities.

"Confidence that Trump's economic agenda will be implemented has waned in recent months. We did not emphasize Trump's declining support as a market factor (so far) because his base held. There are signs of it cracking," Mark Chandler at Brown Brothers Harriman told clients.

World stocks were set for a second day of losses on Friday after an exodus of U.S. executives from presidential business councils dealt a fresh blow to hopes of tax reform and deadly attacks in Barcelona hit shares in European tourism firms.

Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as U.S. policy uncertainty and fears of more attacks boosted the appeal of such top-notch assets.

"Confidence that Trump's economic agenda will be implemented has waned in recent months. We did not emphasize Trump's declining support as a market factor (so far) because his base held. There are signs of it cracking," Mark Chandler at Brown Brothers Harriman told clients.

"Heightened policy uncertainty may not be conducive to the investment climate and the same moment the Fed raises the decibel of its warning about asset prices," mR. Chandler said, referring to recent Federal Reserve comments on U.S. share valuations.

Equities worldwide are still on track to end the week in the black, as fears have ebbed of the standoff between the United States and North Korea leading to war.

The pan-European STOXX 600 index fell 0.9 per cent. Losses were led by travel and leisure as investors reacted to the Barcelona attack by selling shares in airlines such as Ryanair, EasyJet and Spanish airport firm AENA.

Madrid shares fell more than 1 per cent.

Britain's FTSE was off 1.0 per cent, Germany's DAX declined 0.5 per cent and France's CAC dropped 1.0 per cent.

With New York's equity indexes all tumbling on Thursday to multi-week lows, MSCI's index of Asian shares outside Japan fell 0.6 per cent on Friday.

The Nikkei was off 1.2 per cent, and the Hang Seng dropped 1.1 per cent. The Shanhai index edged up 0.02 per cent.

Commodities

Oil prices edged higher on Friday, with investors offered some encouragement from data hinting that oversupply was easing steadily and a weaker dollar.

But prices were still on track to close the week 2 to 3 per cent lower after concerns about weaker Chinese oil demand weighed earlier in the week.

Benchmark Brent crude futures were up 7 cents at $51.10 a barrel on the day but still about 2 per cent lower on the week.

U.S. West Texas Intermediate (WTI) crude futures were up 16 cents at $47.25 a barrel, although they were also set to end the week more than 3 per cent lower.

"Falling U.S. commercial stocks are supportive and I also believe that high U.S. product demand, and gasoline demand in particular, is helping too," Tamas Varga, senior analyst at London brokerage PVM Oil Associates, said of Friday's move up.

He also said a weaker dollar was bullish for oil prices as equity markets piled pressure on the greenback.

Gold was on track for a second consecutive weekly gain on Friday as political uncertainty in the United States and a suspected Islamist attack in Spain boosted bullion's safe-haven appeal.

"There is clearly more for financial markets to be concerned about," Danske Bank analyst Jens Pedersen said, referring to U.S. political uncertainty and the attack in Spain. "That has led to a risk-off environment, and that's supportive for gold."

Spot gold rose by 0.6 per cent to $1,295.28 an ounce and is on course to extend last week's gain of 2.5 per cent.

U.S. gold futures for December delivery were up 0.7 per cent at $1,301.

Investors ditched riskier assets while the dollar eased, further supporting gold.

Among other precious metals, silver climbed 1 per cent to $17.15 an ounce, having touched a two-month high of $17.25.

Platinum was up 1.2 per cent at $974.80, on track for a third straight week of gains.

Currencies and bonds

The Canadian dollar rose slightly with gains in oil prices.

Despite a recovery in the last fortnight, the U.S. dollar index that measures its broader strength against a basket of currencies is still just 1 per cent above 13-month lows hit at the start of August.

"With President Trump's support from both within and outside of the White House waning, the uncertain U.S. political environment is likely to keep the dollar pinned down at these low levels," said Viraj Patel, a strategist with ING in London.

"It is difficult to find any other domestic catalyst to more than offset this negative factor and drive the dollar higher in the near term."

The dollar traded briefly below 109 yen per dollar before recovering to 109.13 yen.

U.S. and Canada 10-year bonds were down slightly.

Stocks set to see action

Auto industry stocks could see action as NAFTA talks focus on auto rules of origin. U.S. demands that a new NAFTA deal include stronger rules of origin and a minimum amount of U.S. content in North America-built vehicles could backfire on the United States, auto industry officials and trade experts say.

Swedish prosecutors said on Friday they would charge an employee of Canadian aircraft and train maker Bombardier on suspicion that he and several others at the company had bribed an Azerbaijani official to secure a contract worth around $340-million. Prosecutors in March said a 37-year-old Russian man had been arrested on suspicion of bribery and that several Bombardier employees were suspected of colluding with Azerbaijani officials in a 2013 rail equipment deal. In addition, Brazil will ask the World Trade Organization on Friday to set up a dispute settlement panel to rule on its complaint that Canada has hurt Brazil's commercial jet industry by subsidizing C Series planes made by Bombardier Inc, the foreign ministry said.

An Ontario court has thrown out a lawsuit against the provincial government over the controversial partial sale of Hydro One. The lawsuit filed last December by the Canadian Union of Public Employees alleged the sale of shares in the utility was "motivated by improper and ulterior purposes," namely to reward benefactors of the Ontario Liberal Party. It aimed to stop the sale of any more shares of Hydro One, though the government has since moved forward with its plan.

Canadian retailer Hudson's Bay Co. has named former J.C. Penney Co Inc executive Edward Record as its chief financial officer, effective Aug 28.

Private equity firm Energy Capital Partners and a consortium of investors has struck a deal to buy U.S. power generator Calpine Corp. for $5.6-billion in cash. Calpine investors will get $15.25 a share as part of the deal, the Houston-based company said in a statement. The investor group was led by Access Industries and Canada Pension Plan Investment Board. CPPIB is taking a $750-million (U.S.) ($946-million Canadian) stake in Calpine. Shares in Calpine rose 10 per cent in premarket trading.

Deere & Co. reported a better-than-expected quarterly profit, helped by improving demand for its farm equipment, particularly in South America, and the company raised its full-year sales and profit forecasts for the third time. Net income attributable to Deere jumped 31.3 per cent to $641.8 million, or $1.97 per share. Total sales and revenue rose to $7.81 billion from $6.72 billion. Analysts on average had expected earnings of $1.95 per share and revenue of $6.92 billion, according to Thomson Reuters I/B/E/S. But its shares fell 5 per cent in premarket trading.

Clothing retailer Gap Inc. reported better-than-expected second-quarter results and raised its full-year profit forecast, helped by strong demand for Old Navy products, fewer discounts and better managing inventory. The company's shares rose nearly 6 per cent in premarket trading.

Shares of Estee Lauder were up 4.76 per cent in premarket trading after the cosmetics maker reported a rise in quarterly profit.

Applied Materials was up about 6 per cent after the company's quarterly profit beat estimates, helped by strong growth in its semiconductor and display businesses.

Foot Locker was down more than 15 per cent after reporting lower-than-expected profit and sales.

NYSE-listed shares of Infosys plunged more than 8 per cent in heavy premarket trading after its chief executive, Vishal Sikka, resigned.

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Economic News

Canada's annual inflation rate ticked up to 1.2 per cent in July, but remained well below the Bank of Canada's 2.0 per cent target, as transportation and shelter costs rose, Statistics Canada said on Friday.

The increase in the annual inflation rate from June's 20-month low of 1.0 per cent matched analysts' expectations and likely gives the central bank room to raise interest rates again this fall after a July rate hike.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for August (preliminary) is announced. Consensus is 94.0, up from 934.4 in previous month.

With files from Reuters and Bloomberg