Canada’s main stock index opened up Friday with higher crude prices underpinning energy shares. On Wall Street, key indexes also saw early gains with the focus on comments from Federal Reserve chair Jerome Powell due later in the morning.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 82.58 points, or 0.42 per cent, at 19,858.41. The index was down 0.32 per cent later for the week heading into Friday’s session.
In the U.S., the Dow Jones Industrial Average rose 117.64 points, or 0.34 per cent, at the open to 34,217.06.
The S&P 500 opened higher by 13.07 points, or 0.30 per cent, at 4,389.38, while the Nasdaq Composite gained 50.40 points, or 0.37 per cent, to 13,514.37 at the opening bell.
“When Powell spoke last year, he made it plain that there was more pain ahead for U.S. households and that this wouldn’t deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“While Powell is unlikely to be anywhere near as hawkish, as he was last year, he won’t want to declare victory either. As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it’s unlikely he will deliver any dovish surprises.”
The Fed raised interest rates again at its most recent meeting. The next policy decision is scheduled for Sept. 20 and markets are largely split on whether the central bank will raise rates again in coming months.
“The swaps market is pricing in a slightly more-than-even chance of another Fed hike by the November FOMC, and this probability has been climbing incrementally through the week,” Alvin Tan, Asia FX strategist with RBC, said in an early note. “Our U.S. rates strategist thinks that Fed Chair Powell’s much-anticipated speech will be a damp squib. Even if Powell discusses [rates], or the neutral rate of interest, he is unlikely to suggest any direct implication for near-term policy direction.”
Mr. Powell is scheduled to speak shortly after the North American opening bell. Later in the day, the symposium will also hear from ECB chief Christine Lagarde.
Elsewhere, The Globe’s Stefanie Marotta reports Toronto-Dominion Bank expects to face fines or other penalties stemming from probes by regulators and law enforcement agencies, including a U.S. federal department, related to its anti-money laundering practices, the financial institution has disclosed. In its fiscal third-quarter earnings report released Thursday, TD said that the inquiries were “both generally and in connection with specific clients, counterparties or incidents in the U.S.” It also said that some of the concerns are related to an investigation by the United States Department of Justice – a rare occurrence for a Canadian bank.
On Thursday, TD reported lower third-quarter profit that fell short of analysts’ forecasts. RBC, meanwhile, posted a higher profit that topped market expectations but also said it expects to trim its workforce. The rest of Canada’s banks report next week.
Overseas, the pan-European STOXX 600 was up 0.44 per cent by midday. Britain’s FTSE 100 added 0.56 per cent. Germany’s DAX gained 0.48 per cent while France’s CAC 40 was up 0.70 per cent.
In Asia, Japan’s Nikkei dropped 2.06 per cent after a weak handoff from Wall Street, ending a four-day winning streak. Hong Kong’s Hang Seng slid 0.51 per cent.
Crude prices were firmer in early trading but looked set for a second weekly decline amid continued U.S. dollar strength and demand worries on the back of disappointing global economic data.
The day range on Brent was US$83.15 to US$84.43 in the early premarket period. The range on West Texas Intermediate was US$78.85 to US$80.08. Prices are down for the week, which would mark the second consecutive weekly decline.
“The economy is steadily cooling and that could get a lot worse if Fed Chair Powell sticks to the hawkish script at Jackson Hole,” OANDA senior analyst Ed Moya said.
“Oil is going to waver until we find out whether Powell is ready to signal that the end of tightening is likely very close.”
Crude prices have been hit recently by weak global economic data, including disappointing industrial output and retail sales figures from China and a soft reading of business activity in the euro zone.
Sentiment has also been tempered by a strong U.S. dollar. The U.S. dollar index is up more than 2 per cent in August so far and touched its best level since early June on Friday morning.
In other commodities, spot gold was down 0.2 per cent at US$1,914.50 per ounce by early Friday morning, while U.S. gold futures shed 0.2 per cent to US$1,943.10.
Gold has risen about 1.3 per cent so far in the week.
The Canadian dollar was steady while its U.S. counterpart managed its best level since June against a group of currencies as traders await Fed comments later in the morning.
The day range on the loonie was 73.60 US cents to 73.65 US cents in the predawn period. The loonie is down more than 2 per cent against the greenback over the past month.
“With no domestic data on tap and attention focused squarely on Fed Chairman Powell’s comments, the CAD remains at the mercy of external drivers—the overall USD tone and risk sentiment in the short run,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.
The U.S. dollar index, which measures the U.S. currency against six others, rose to 104.25, the highest since June 7. The index is up more than 2 per cent in August and set to snap its two-month losing streak, according to Reuters.
The euro, meanwhile, touched is lowest level since mid-June of US$1.0766 following a Reuters report that the European Central Bank could be nearing a pause on rates amid growth concerns. The euro was down 0.3 per cent ahead of the North American opening bell.
In bonds, the yield on the U.S. 10-year note was slightly higher at 4.247 per cent early Friday morning.
Gap Inc forecast a steeper-than-expected decline in current-quarter sales hit by slowing demand for its accessories and apparel, and warned it was losing market share to rivals including Shein, Amazon and T.J. Maxx. Gap missed revenue expectations for the second quarter, echoing weak trends from companies such as Macy’s and Foot Locker, in fresh signs U.S. consumers may be spending less on discretionary items in a uncertain economy. “Some of the brands that are really winning with our consumer are T.J. Maxx, Amazon, Shein. We are definitely seeing those businesses gaining share,” finance chief Katrina O’Connell said on a conference call, responding to an analyst’s question on how Gap’s cheaper-priced brand Old Navy was faring against competition. -Reuters
(10 a.m. ET) U.S. University of Michigan consumer sentiment for August.
(10:05 a.m. ET) U.S. Fed chair Jerome Powell speaks on the economic outlook at the Jackson Hole conference.
Also: Ottawa’s budget balance for June.
With Reuters and The Canadian Press