Equities
U.S. stock futures were mixed Friday heading into the final trading day of a week that has seen bond yields jump, Brent crude crack US$80 a barrel and trade talks return to the forefront. On Bay Street, futures were just below break even as crude prices held gains but gold looked set for its worst weekly showing since December.
Overseas, European stocks were mixed while Asian markets were mostly higher.
As trade talks continue between the United States and China, Beijing Friday denied reports that it had proposed raising Chinese purchases of American goods by US$200-billion in a bid to cut the trade imbalance between the counties.
On Thursday afternoon, U.S. President Donald Trump had said China had “ripped off” the United States in trade matters for too long and that “other countries have become very spoiled because they always got 100 per cent of whatever they wanted from the United States.”
“This could be a ploy by the U.S. President to lower expectations at home, and he may not get as good as a deal that he wants,” CMC markets analyst David Madden said. “The reaction from traders wasn’t enormous and this suggests that dealers aren’t too concerned yet.”
In corporate news, shares of U.S. retailer Nordstrom were more than 7 per cent lower in premarket trading after it reported better-than-expected profit but modest same-store sales gains. Nordstrom posted earnings per share of 51 US cents, ahead of the 42 US cents economists had been forecasting. However, sales at established stores rose 0.6 per cent, missing analysts’ estimates which called for a 1.13 per cent increase.
Elsewhere, equipment maker Deere & Co. posted a quarterly profit of US$3.67 a share. up from US$2.50 a share a year earlier. However, the company’s adjusted profit came in at US$3.14 a share, below the $3.30 analysts had been expecting.
On Bay Street, Kinder Morgan’s Trans Mountain pipeline extension remained in the headlines after Finance Minister Bill Morneau said a guarantee by Ottawa against financial loss if B.C. government delayed or obstructed the project would likely come at no cost to Canadian taxpayers. Last month, Kinder Morgan halted all non-essential spending on the project amid opposition from the B.C. government and gave Ottawa until May 31 to meet a number of conditions for it to move ahead.
Overseas, the pan-European STOXX 600 was down about 0.10 per cent in morning trading. Britain’s FTSE was off 0.17 per cent. Germany’s DAX was up 0.03 per cent and France’s CAC 40 was 0.10 per cent higher.
In Asia, markets finished the week mostly higher. Japan’s Nikkei gained 0.4 per cent while the broader Topix added 0.38 per cent. The mining and oil subindexes were among the best performers. The Hong Kong Hang Seng was up 0.34 per cent. The Shanghai Composite Index gained 1.23 per cent.
Commodities
Crude prices were higher early on but below the week’s multiyear highs as rising U.S. crude production caps recent gains. Brent crude, which touched US$80 a barrel for the first time since 2014, was trading higher at last check and had a range for the day of US$79.39 to US$79.87. West Texas Intermediate was also slightly higher and had a range of US$71.50 to US$71.75.
“The rally in oil has been relentless over the past two weeks, surging over 10 per cent, before striking US$80 per barrel; a 260-per-cent rally from its nadir back in 2016,” Jasper Lawler, head of research at LCG, said in a note.
“.With supply shortages from crisis hit Venezuela only likely to worsen, Iran sanctions just kicking in and U.S. oil supplies drastically lower, this rally has potential to go higher.”
The only major constraint on prices right now, he said, is U.S. production.
“ After last week’s Baker Hughes report saw 10 new rigs added taking the total to the highest level since 2015, traders will be watching today’s rig count carefully to assess whether the recent steeper rise in price is translating into a ramping up of domestic output,” Mr. Lawler said.
The latest Baker Hughes report is due Friday afternoon.
Gold prices, meanwhile, were lower heading into the North American open. Spot gold was modestly weaker after hitting US$1,285.41. That was its lowest level since late December. U.S. gold futures for June delivery were also in the red. Gold now looks set for its biggest weekly decline since early December. Gold prices have struggled this week as rising U.S. bond yields put the U.S. dollar on firmer footing, making the precious metal more expensive in other currencies.
In other metals, silver prices were little changed.
Currencies and bonds
The Canadian dollar fell after a Statistics Canada report showed inflation cooled in April. The loonie was lower in the wake of the report falling to the low end of the day range of 77.80 US cents to 78.18 US cents.
Statscan said the annual rate of inflation eased to 2.2 per cent last month, from 2.3 per cent in March. Economists had been expecting the rate to stay steady. Lower prices for travel services and a moderation in gasoline prices were behind at least part of the dip.
A separate report showed retail sales rose 0.6 per cent in March, ahead of the 0.3-per-cent increase economists had been forecasting. The March increase marked the third straight month of gains in the retail sector. Sales were up in six of 11 subsectors during the month.
“With a relatively benign inflation outlook, the Bank of Canada will remain focused on the risks to the Canadian economy, namely headwinds to growth from a slowing housing market and uncertainty around NAFTA, which, as of today, looks to remain a thorn in the side of policy makers for some time to come,” TD senior economist James Marple said in a note.
In other currencies, the U.S. dollar index was higher at 93.603 as the yield on U.S. 10-year bonds held above 3.1 per cent. The index has risen about 1 per cent this week as yields on the U.S. 10-year note hit their highest level in seven years.
The euro was a touch higher against the greenback but still down more than 1 per cent on the week. The euro now looks set for its fifth straight weekly drop against the U.S. dollar. The euro hasn’t seen a run of losses that long since 2015, according to Reuters.
In bonds, the U.S. 10-year note was lower at last check but still above 3.1 per cent at 3.106 per cent. The yield on the U.S. 30-year note was higher at 3.247 per cent.
Stocks set to see action
Campbell Soup Co. said Friday CEO Denise Morrison will retire effective today. Board member Keith R. McLoughlin has been appointed interim CEO, the company said in a statement. The company also cut its full-year earnings forecast on acquisition costs. Campbell Soup shares were down 4 per cent in premarket trading.
PayPal Holdings Inc has agreed to buy Swedish financial technology startup iZettle for US$2.2-billion in the U.S. online payments provider’s biggest ever acquisition. The deal will allow the Californian company to expand into the retail payment terminals business in international markets, where it will compete with Silicon Valley firm Square Inc founded by Twitter CEO Jack Dorsey. Stockholm-based iZettle, which had advanced plans to go public, offers small businesses a miniature credit card reader that turns smartphones or tablets into payment registers.
Fujifilm Holdings Corp is planning to sue Xerox Corp soon deeming that the U.S. photocopier company has no legal right to unilaterally scrap their $6.1-billion merger, a senior Fujifilm executive said on Friday. “We are currently in talks with lawyers on the schedule for filing the lawsuit and plan to go to court as soon as possible,” Chief Operating Officer Kenji Sukeno said at an earnings briefing. In January, Fujifilm and Xerox agreed to a complex deal to merge Xerox into their 56-year-old Asia joint venture Fuji Xerox and give Fujifilm control.
Hilton Worldwide Holdings Inc said on private equity firm Blackstone Group LP has decided to exit the hotel chain operator by selling about 5.8 per cent, or 15.8 million shares, of its shares. Hilton said it will not receive any proceeds from the sale. Blackstone took the company public in December 2013, about six years after taking it private in a US$26-billion leveraged buyout.
Further reading:
Friday’s small-cap stocks to watch
Economic news
The annual rate of inflation eased to 2.2 per cent in April from March’s 2.3 per cent. Economists had expected a reading of 2.3 per cent in the latest month.
March retail sales advanced 0.6 per cent, ahead of the 0.3-per-cent increase the markets had been expecting.
With Reuters and The Canadian Press
Terry Weber