Equities
U.S. stock futures rose Friday as investors welcomed solid earnings from the big U.S. banks and world markets sped toward gains for the week. On Bay Street, futures were a touch higher as oil held most of its recent advance. Overnight, world shares were in positive territory with MSCI’s All-Country Index edging up 0.1 per cent.
On Bay Street, futures were a touch higher as oil held most of its recent advance. Overnight, world shares were in positive territory with MSCI’s All-Country Index edging up 0.1 per cent.
On Bay Street, futures were a touch higher as oil held most of its recent advance. Overnight, world shares were in positive territory with MSCI’s All-Country Index edging up 0.1 per cent.
That index has now risen about 2 per cent this week, its best showing since last month.
U.S. bank earnings will be key for investors Friday as geopolitical concerns move to the back burner for the time being. JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co. all report results Friday.
CMC Market analyst Michael Hewson said U.S. markets have managed to hold above their 200-day moving average this week, helping underpin global stock prices, aided by a softening of U.S. President Donald Trump’s rhetoric on potential missile strikes on Syria.
“It would be naïve in the extreme to suggest that the events of the last 24 hours means that the threat of an escalation of geopolitical factors has passed, but for now while the background noise is driving the short-term direction as markets gyrate higher and lower, recent price action might suggest that we could look to head towards the upper end of the trading range in the coming days,” he said.
Heading into earnings season, analysts polled by Thomson Reuters I/B/E/S expect S&P 500 companies to post profit increases of about 18.4 per cent from year-earlier levels. That would represent the best showing in seven years.
On Bay Street, results from Cogeco Communications will likely get some attention once trading starts. Cogeco reported a 6.8-per-cent increase in quarterly revenue to $598.9-million, short of the $606-million analysts had been forecasting. Quarterly earnings came in at $2.79 a share.
On Wall Street, JPMorgan kicked off bank earnings, reporting a 35-per-cent increase in quarterly profit. Net income rose to US$8.71-billion or US$2.37 a share, from US$6.45 or US$1.65 a year earlier. Excluding one-time items, the bank reported earnings of US$2.26 a share. The bank also said interest income rose 9 per cent and revenue advanced 10.3 per cent to US$28.52-billion. JPMorgan shares were up more than 1 per cent ahead of the North American open.
Citigroup followed, posting earnings of US$1.68 a share, ahead of the $1.61. analysts had been expecting. Wells Fargo reported earnings per share of US$1.12, compared with estimates of US$1.06. Shares of both banks were higher in the premarket.
Overseas, European markets were slightly higher with the pan-European STOXX 600 rising 0.36 per cent. Britain’s FTSE 100 was just south of break even at last check, slipping 0.05 per cent. France’s CAC 40 rose 0.36 per cent and Germany’s DAX was up 0.68 per cent.
In Asia, markets finished the week mostly higher. Japan’s Nikkei rose 0.55 per cent. The broader Topix ended up 0.63 per cent. Hong Kong’s Hang Seng slid 0.07 per cent and the Shanghai Composite Index ended off 0.65 per cent.
Commodities
Crude prices were steady early Friday and looked set for their biggest weekly gain since last summer on easing concerns over immediate military intervention in Syria and an OPEC report suggesting the global crude overhang is nearly gone.
Brent crude had a day range so far of US$71.74 to US$72.74. West Texas Intermediate has a range for the day so far of US$66.80 to US$67.78.
Both touched their highest levels since 2014 on Wednesday.
On Friday, the markets drew support from an OPEC report the market overhang has nearly disappeared. OPEC also said its collective output fell to 31.96 million barrels per day (bpd) in March, down 201,000 bpd from February.
Right now, OPEC producers have pledged to cut output through this year. OPEC Secretary-General Mohammad Barkindo told Reuters this week that the pact could be extended through 2019 as well.
Meanwhile, the International Energy Agency also indicated Friday the OPEC agreement has been successful in its goal of curbing market oversupply.
“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the IEA said.
In other commodities, gold prices were on track for their second weekly gain in a row as investors sought out safe-haven holdings. At last check, spot gold was higher while gold futures were steady. At this point, spot gold looks set for a weekly gain of about half a percentage point.
Silver prices were also higher.
Currencies and bonds
The Canadian dollar was trading modestly higher early Friday with a range for the day so far of 79.40 US cents to 79.66 US cents. The U.S. dollar was lower against a basket of world currencies also though it managed a six-week high against the Japanese yen on easing concerns over action against Syria and optimisim over corporate earnings. The index was lower at 89.703 at last check. On Thursday, the U.S. dollar index snapped a four-day losing streak, ending that session up 0.2 per cent.
There were no big economic reports for the loonie Friday, aside from home sales numbers which showed a sales gain of 1.3 per cent in March from February, but a decrease of 22.7 per cent from the same month a year earlier. The numbers were published by the Canadian Real Estate Association.
“The US$ is a bit softer, with the loonie gaining more ground and making a run at C$1.25 (80 US cents) as oil prices continue to climb, though there’s still some wood to chop,” BMO economist Benjamin Reitzes said.
Meanwhile, world currency markets have been trying to draw a bead on trade matters after Mr. Trump suggested could get back onboard with the Trans-Pacific Partnership.
“Trump once again floated the idea of rejoining TPP (though tweeting that would only happen ‘if the deal were substantially better than the deal offered to Pres. Obama’),” Elsa Lignos, global head of FX strategy for RBC, said.
“Japanese FinMin Aso summed up the sentiment of many when he said with Trump “there may be a different statement the next day”. It highlights the difficulty for markets in trading trade war fears – nothing has actually happened yet sentiment can swing wildly on comments from a leader apt to say the complete opposite a day later.”
In other currencies, the euro has risen 0.4 per cent against the U.S. dollar this week with comments from European Central Bank officials reinforcing the idea of more normalized monetary policy.
In bonds, U.S. Treasury yields were higher with the yield on the 10-year note sitting at 2.84 per cent and the yield on the 30-year note hitting 3.042 per cent.
Stocks set to see action
Wells Fargo & Co on Friday said first-quarter profit rose 6 per cent, helped by a lower U.S. tax rate. Net income applicable to common stock rose to US$5.53-billion, or US$1.12 per share in the quarter ended March 31, from US$5.23-billion, or $1.03 per share a year ago. Analysts on average were looking for US$1.06 per share, according to Thomson Reuters I/B/E/S.
Citigroup Inc. reported a 13 per cent increase in quarterly profit on Friday, driven by lower taxes and higher consumer banking revenue. The fourth-biggest U.S. bank by assets said net income rose to US$4.62-billion in the first quarter ended March 31, compared with US$4.09-billion a year earlier. Earnings per share rose to US$1.68 from US$1.35. Average shares outstanding declined 7 per cent as the company bought back stock. Analysts on average had expected earnings per share of US$1.61, according to Thomson Reuters I/B/E/S.
JPMorgan Chase & Co’s quarterly profit fell short of Wall Street expectations on Friday as lower revenue from investment banking ate into gains from U.S. corporate tax changes and higher interest rates, Reuters reports. Revenue grew across its businesses as borrowing rose amid strong economic growth. Higher interest rates lifted lending revenue more than the bank’s cost of money and its equity markets business had a strong quarter, which it attributed to derivatives trading and prime services. The bank’s net income rose to US$8.71-billion from US$6.45-billion a year earlier. Excluding items, it earned US$2.26 per share, missing average estimate of US$2.28, according to Thomson Reuters I/B/E/S. Net revenue was US$28.52-billion, beating the average estimate of US$27.68-billion.
General Motors Co’s president said common ground must be reached on a long-term financial restructuring of GM’s South Korean auto unit by next Friday and if there was none, the operation would likely seek bankruptcy protection. GM shocked South Korea in February with plans to close one local plant and leaving the fate of three others unclear. It is seeking government funding and incentives as well as wage concessions to save the unit, which just posted an annual net loss of $1.1-billion, its fourth straight year in the red.
Credit Suisse has raised its price target on Lululemon shares to $105 from $98 after what it called a near-flawless fourth quarter. Lululemon stock has risen about 17 per cent since the fourth-quarter results were issued. The athletic clothing maker has now beaten profit and revenue estimates for the past four quarters.
Microsoft Corp is investigating the methods partner KPMG uses to crack down on the illegal use of its software in India, after a complaint from a senior member of the country’s ruling political party, documents seen by Reuters showed. India is one of the U.S. technology firm’s biggest markets in Asia, yet over half of all software installed on computers in the country is unlicensed, advocacy group Business Software Alliance said in 2016. A pirated compact disc of Microsoft’s Windows 10 can be bought for around $2 in New Delhi, compared with $130 needed to buy the operating system from Microsoft’s online portal.
The London Stock Exchange named Goldman Sachs’ veteran David Schwimmer as chief executive officer on Friday, with an initial challenge of helping the 300-year-old institution to navigate Brexit. Mr. Schwimmer, a 49-year old New Yorker who has been with Goldman for 20 years and most recently served as global head of market structure and global head of metals and mining in investment banking, takes up the role at the start of August.
The European Union is calling on Facebook CEO Mark Zuckerberg to testify at the legislature of the 28-nation bloc about the widening data privacy scandal at his company. EU Justice Commissioner Vera Jourova had a phone exchange with Facebook COO Sheryl Sandberg and said on Friday that Zuckerberg should act on the Parliament’s invitation to come explain the situation. Last week, Facebook acknowledged that up to 2.7 million people in the EU may have been victim of improper data sharing involving political consultancy firm Cambridge Analytica. On Friday, Jourova said that Facebook was “working on an audit of other possibly dangerous apps now.”
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Economic news
The Canadian Real Estate Association says home sales edged up 1.3 per cent in March from February’s levels, although national sales activity for the first quarter slid to its lowest level since the first three months of 2014. Actual (not seasonally adjusted) activity was down 22.7 per cent from record levels seen in the same month a year earlier. It also stood 7 per cent below the 10-year average for the month, CREA said.
(9 a.m. ET) Canadian existing home sales and average prices for March. Estimates are declines of 17.0 per ce(9 a.m. ET) Canada’s MLS Home Price Index for March. Estimate is an increase of 6.0 per cent year over year.
(9 a.m. ET) Canada’s MLS Home Price Index for March. Estimate is an increase of 6.0 per cent year over year.
(10 a.m. ET) U.S. consumer sentiment for April. Consensus is 101.0, down from 101.4 in March.
(10 a.m. ET) U.S. Job Openings and Labor Turnover Survey (JOLTS) for February.
Terry Weber