Equity Markets
U.S. markets were set for a lower open on Friday, although the Nasdaq was in positive territory, as investors turned their attention to the last batch of data and corporate earnings for the week. On Bay Street, the Toronto Stock Exchange was heading for a positive open as energy prices rose.
World stocks continued to claw back losses on Friday after spending much of the week in the red, boosted by signs of progress in U.S. tax reform and strong corporate results.
The U.S. House of Representatives passed a tax overhaul expected to boost share prices if it becomes law. The legislative battle now shifts to the Senate.
Despite a bounceback, however, global stocks were still on track for their second straight week of losses, their longest weekly losing streak since August.
The MSCI world equity index, which tracks shares in 47 countries was up 0.1 per cent on the day, but was heading for a 0.1 per cent fall on the week.
European shares were sluggish in early deals after the previous session's strong recovery, with the STOXX 600 index falling back 0.3 per cent as disappointing company results and downgrades weighed.
As earnings season drew to a close with 90 per cent of U.S. and European companies having reported, analysts said results were supportive but weaker than the previous quarters.
"While they look good over all, the strong momentum apparent since Q1 is now fading," said Societe Generale analysts, adding that consensus earnings estimates are no longer being raised for U.S. or euro zone stocks.
British stocks fell back into the red on Friday, ending a short-lived recovery rally as takeover interest boosted Sky and construction firm Carillion plummeted after warning it would breach debt covenants.
The FTSE 100 was set for its second week of losses as a worldwide sell-off took the shine off risky assets, and Thursday's bounce proved to have little staying power.
Britain's FTSE was up 0.25 per cent, Germany's DAX gained 0.1 per cent and France's CAC added 0.24 per cent.
Hong Kong stocks followed Asian markets higher on Friday, with sentiment aided by strong Wall Street earnings and a step forward on U.S. tax reform.
The Hang Seng index rose 0.6 per cent, to 29,199.04 points. For the week, Hang Seng gained 0.7 per cent. The Nikkei was up 0.2 per cent and the Shanghai index was off 0.5 per cent.
Commodities
Oil prices rose on Friday but remained en route for their first week of losses in six, as concerns grew over Russia's support for an extension of the crude output cuts that have bolstered prices in recent months.
Benchmark Brent crude oil was up 50 cents at $61.86 a barrel. U.S. light crude was at $55.90 a barrel, up 76 cents.
Friday's slight uptick belied a downturn seen in recent days, with prices set to fall between 2 and 4 per cent for the week as a whole.
"After five days of continuous losses, an upside correction is always on the cards. Such a jump, however will not mean a change of heart," said Tamas Varga, analyst at brokerage PVM Oil Associates.
An agreement by the Organization of the Petroleum Exporting Countries and other producers such as Russia to limit oil production has propped up prices in recent months, with the deal expected to be extended at the group's next meeting on Nov. 30.
But fears of hesitation on Russia's part weighed on prices on Friday.
"Russian support for a formalized extension of production cuts at the (next) OPEC meeting appears questionable, even if only to defer the decision to 1Q18," U.S. investment bank Jefferies said.
Saudi Arabia has signaled a willingness to extend the curbs, which are due to expire in March 2018, with energy minister Khalid al-Falih saying on Thursday that targets to reduce global oil surplus would not be reached in time.
Gold rose on Friday on the back of a softer dollar after a report about a U.S. probe requesting more documents linked to possible Russian interference in the 2016 election.
"The plot seems to thicken day by day and what that does is make less likely political compromise over tax cuts and fiscal stimulus," said Jonathan Butler, commodities analyst at Mitsubishi in London.
Investigators issued a subpoena last month for documents containing specified Russian keywords from more than a dozen officials, the Wall Street Journal reported.
That helped push the dollar index against a basket of six major currencies down 0.2 per cent.
"There's also a lot of concern that the equity market rally is possibly becoming a little exhausted for now, and that should be supportive of gold in the short term," Butler added.
Spot gold was up 0.4 percent at $1,283.36 per ounce at 1115 GMT. It is up about 0.5 per cent for the week, poised to post a second straight weekly gain.
U.S. gold futures for December delivery rose 0.4 per cent to $1,283.30.
"Gold prices will continue a sideways drift in the coming months as rising nominal interest rates in the U.S. keep a lid on investment demand," BMI Research said in a note.
"Prices will grind moderately higher in the longer term as developed market inflation rebounds."
In other precious metals, silver added 0.1 per cent to $17.09 an ounce, lagging gold this year with gains of 7 per cent versus gold's 10 percent. Platinum rose 0.6 per cent to $936.60 and palladium gained 0.8 per cent to $995.
Currencies and bonds
Investors breathed a little easier on Friday, with high yield "junk" bond prices also recovering and market volatility easing.
But it's been a bruising week – the U.S. yield curve flattened for the third week in a row, global high yield bond markets were on course for a second straight week of losses (the last time that happened was a year ago) and Wall Street volatility hit its highest in three months.
On Friday the U.S. yield curve flattened again on expectations the Fed will keep tightening policy, pushing yields on the short end higher. At the same time, U.S. inflation, although trending higher, will likely remain subdued, limiting yields on longer-dated bonds.
The spread between U.S. 2-year and 10-year yields narrowed 1.6 basis points. It was last at 64.34 basis points. The Canada 10-year bond yield was at 1.96 per cent, up marginally. The U.S. 10-year was at 2.36 per cent.
In Europe, German yields steadied but remained on track for their biggest weekly drop since the end-October ECB meeting, as the stock market wobble pushed cash towards safe-haven assets.
"The risk asset recovery and a more negative technical picture have put some pressure on bond markets," Societe Generale strategists wrote, adding, however, that they don't expect a wider sell-off.
The euro also enjoyed gains, up 0.2 per cent against the dollar at $1.1793. Strong euro zone GDP figures helped the single currency recover fully from its end-October drop when the ECB extended its asset purchase program. The Canadian dollar was up.
ECB President Mario Draghi said on Friday the central bank's decision to extend the program until September 2018 was key in pushing market expectations for the first rate hike further into the future.
Meanwhile the U.S. dollar was dented by a report that Special Counsel Robert Mueller's team last month subpoenaed President Donald Trump's campaign for documents containing specified Russian keywords from more than a dozen officials.
The greenback fell 0.3 per cent against a basket of six major currencies.
"The dollar's temporary rally (since September) appears to have ended in early November, and the euro is now receiving broad-based support," wrote Unicredit analysts in a note.
"Investors have probably increased their focus on good euro zone fundamentals, rewarding the common currency across the board. We agree and anticipate further widespread euro gains."
Stocks set to see action
TransCanada Corp. shut part of its Keystone oil pipeline system after a 5,000-barrel leak in South Dakota, the company said on Thursday, four days before neighboring Nebraska was set to decide on the company's long-delayed Keystone XL pipeline. Opponents of TransCanada's proposed Keystone XL pipeline seized on the spill, saying it highlighted the risks posed by the XL project – which has become a symbol for environmentalists of fossil-fuel pollution and global warming. Its shares fell 1.5 per cent in premarket trading.
The stalemate between Canada's largest stock exchange and its biggest publicly listed cannabis company with assets in the United States shows no signs of lifting any time soon. A month ago, the Toronto Stock Exchange (TSX) said it would ban shares of marijuana companies found to be in violation of U.S. federal drug law from its market. It plans to initiate a sector-wide review by the end of the year, but has yet to publicly lay out how it will enforce its policy. Canadian grower Aphria Inc., whose stock is listed on the TSX with a $1.3-billion market cap, has assets in Arizona and Florida, two states that have permitted the use of the drug for medical purposes.
Prominent shareholder activist and investor Bill Ackman has criticized Tim Hortons, part of Restaurant Brands International Inc., and its public spat with its franchisees, which he suggests has hurt the café chain's business. Tim Hortons' battle with its franchisees has helped push down Tim Hortons' sales over recent quarters along with a cool response to its new espresso-based coffee and lunch offerings, says Mr. Ackman, founder of New York hedge fund Pershing Square Capital Management LP and an investor in Restaurant Brands International Inc., which is the parent of Tim Hortons.
Tesla Inc. on Thursday unveiled a prototype electric big-rig truck, throwing itself into a new market even as it struggles to roll out an affordable sedan on which the company's future depends. Chief Executive Elon Musk unveiled the big rig, dubbed the Tesla Semi, by riding the truck into an airport hangar near Los Angeles in front of an invited crowd of what Tesla said were potential truck buyers and Tesla car owners. Its shares jumped 3.8 per cent after trucker JB Hunt reserved multiple Tesla Semi tractor trailers.
Abercrombie & Fitch Co. topped estimates with third-quarter same-store sales on Friday and forecast robust sales for the holiday quarter as its California-themed surfwear brand Hollister helped revive the previously struggling retailer. Shares of the company, which also beat its third-quarter headline sales and profit estimates, jumped 20 per cent to $15.10 in premarket trading on Friday. However, they are still down 23 percent in the past 12 months. Excluding one-time items, the company, which earned 30 cents per share, beating estimates of 22 cents per share. Net revenue rose nearly 5 percent to $859.11 million, beating analysts' average estimate of $818.9 million, according to Thomson Reuters I/B/E/S.
Gap Inc. rose about 7 per cent in premarket trading after the apparel retailer reported results that beat estimates and raised 2017 earnings and same-store sales forecasts.
Foot Locker rose 9.45 per cent ahead of its results, and Shoe Carnival surged 16 percent after the company raised full-year earnings forecasts.
Data analytics software maker Splunk gained 14 per cent after strong results and forecast.
Shares of Twenty-First Century Fox jumped 7 per cent after sources said that Comcast and Verizon had expressed interest in acquiring a significant part of the company's assets.
Applied Materials Inc. reported better-than-expected quarterly results and gave a strong current-quarter forecast as the world's largest supplier of tools to make semiconductors enjoys strong demand in its chip and display businesses. Its shares rose 3.9 per cent in premarket trading.
Square Inc. was upgraded to "outperform" by Evercore ISI, which also boosted its target price on the mobile payment company's stock to $51 from $25. Its shares rose 1.7 per cent in premarket trading.
The federal government says Toronto-based holding company Fairfax Financial Holdings Inc. is interested in becoming a new partner in a possible deal for a takeover of the broken rail line that runs to Churchill in northern Manitoba. Natural Resources Minister Jim Carr says Fairfax Financial has expressed interest in the Hudson Bay Rail line, the Port of Churchill and other associated assets. Carr says Fairfax is considering partnering with Missinippi Rail and One North to acquire the line from Omnitrax.
Online clothing retailer Stitch Fix priced its IPO of 8 million shares at $15, which was below expectations of $18-$20. It raised $120-million. It begins trading Friday on the Nasdaq stock market, under the ticker "SFIX".
More reading: Friday's Insider Report: Companies insiders are buying and selling
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Economic News
Canada's annual inflation rate cooled in October as energy prices weakened and clothing costs fell, taking inflation further from the Bank of Canada's target, data from Statistics Canada showed on Friday. The annual inflation rate decreased to 1.4 per cent last month from 1.6 per cent in September, in line with economists' forecasts.
U.S. homebuilding jumped to a one-year high in October likely as disruptions caused by recent hurricanes in the South faded and communities in the region started replacing houses damaged by flooding. Housing starts surged 13.7 percent to a seasonally adjusted annual rate of 1.29 million units, the Commerce Department said on Friday. That was the highest level since October 2016. September's sales pace was revised up to 1.135 million units from the previously reported 1.127 million units. Groundbreaking activity in the South, which accounts for almost half of U.S. residential construction, plummeted in the aftermath of Hurricanes Harvey and Irma. The storms slammed Texas and Florida in late August and early September. Economists polled by Reuters had forecast housing starts rising to a pace of 1.185 million units last month.
With files from Reuters and Bloomberg