Before the Bell: What every Canadian investor needs to know today

Equities

U.S. stock futures were weaker Friday with politics dominating headlines and Tesla shares falling after U.S. securities regulators moved to remove Elon Musk as chief executive over summer tweets about financing to take the company private. Bay Street futures were lower with BlackBerry earnings and July economic activity setting the early tone. Overseas, European markets started the day on the back foot after Italy pushed its budget deficit to 2.4 per cent, a move that could put it at odds with the EU. Asian markets finished the week mostly positive, with Japan’s Nikkei touching its best intraday level since late 1991.

Global oil prices were also steady, holding most of the gains from a rally that saw Brent crude hit its best level in four years earlier in the week.

“Oil will remain in focus across the European session as it is on track for its third weekly gain,” Jasper Lawler, head of research for London Capital Group, said. “Concerns over a tightening in the physical market from Iran’s supply loss and declining Venezuelan output pushed oil to $82.44 overnight. This is just shy of its recent 4 year high. OPEC are showing no immediate rush to boost production, to compensate the tightening in supply.”

On Wall Street, Tesla shares were down about 11 per cent in premarket trading after the U.S. Securities and Exchange Commission Thursday accused Mr. Musk of fraud and sought to remove him from his post as chief executive officer. The SEC is accusing the high-profile CEO of making “false and misleading” tweets this summer about taking the company private. The U.S. Department of Justice has also questioned the company about the tweets, the company has said.

Heading into the North American trading day, U.S. political headlines will continue to dominate. The Senate judiciary committee is expected to vote on Brett Kavanaugh’s nomination to the Supreme Court. That follows a dramatic day of testimony in which Christine Blasey Ford described an alleged assault by Mr. Kavanaugh at a party while they were teenagers. He has denied the accusation.

On Bay Street, BlackBerry said, excluding items, the company earned 4 cents per share, beating analysts’ average estimate of 1 cent, according to Thomson Reuters I/B/E/S. BlackBerry also reaffirmed its 2018 outlook. Total company software and billings growth is expected to be in the double digits. Total software and services revenue growth is expected to be between 8 per cent and 10 per cent year-over-year.

Traders also got the latest reading on gross domestic product. Ahead of the start of trading, Statistics Canada said GDP grew by 0.2 per cent in July, slightly better than economists had expected. Forecasts called for an increase of 0.1 per cent, with some suggesting a flat reading was possible due to production disruptions in the oil sands.

“With both growth and inflation set to outpace the Bank of Canada’s expectations, unless we see a significant setback on NAFTA or a serious deterioration in the business outlook survey, another policy interest rate increase at the Oct. 24 decision remains a safe bet,” TD senior economist Brian DePratto said.

Overseas, the pan-European STOXX 600 was down 0.65 per cent after Italy’s new government announced an increase in public spending that will raise its budget deficit to 2.4 per cent from the 2018 target of 1.6 per cent. The latest estimate remains below the 3-per-cent ceiling set by the European Union, although the EU has been pressing Italy to address its debt.

Britain’s FTSE 100 was down 0.43 per cent in morning trading in London. Germany’s DAX fell 1.34 per cent. France’s CAC 40 was down 0.63 per cent.

Asian markets were mostly positive with Japan’s Nikkei closing up 1.36 per cent after fresh economic reports showed lower unemployment and increased industrial output. During the trading day, the Nikkei hit 24,286.10, its highest intraday level since November 1991.

Hong Kong’s Hang Seng finished up 0.26 per cent. The Shanghai Composite Index gained 1.06 per cent.

Commodities

Crude prices were steady as supply concerns continued to bolster prices ahead of next month’s U.S. sanctions on Iranian exports. Brent crude was trading in the upper half of the day range of US$81.60 to US$82.20 at last check. Brent hit a four-year high of US$82.55 and has risen about 3 per cent since June. West Texas Intermediate was trading just above US$72 in the predawn hours and had a range for the day so far of US$72.03. to US$72.38.

“OPEC [members] are showing no immediate rush to boost production, to compensate the tightening in supply,” Mr. Lawler said. "We see concerns over tightening continuing to grow. This is a complete snub of President [Donald] Trump’s agenda after his repeated attacks on OPEC for the rising price of oil. We expect oil majors to continue to find support from the higher oil prices.

U.S. sanctions against Iran, OPEC’s third biggest producer, kick in on Nov. 4. The U.S. has been pressuring countries to curb crude purchases ahead of that date. Mr. Trump has also been critical of OPEC recently for not increasing production to keep prices down. At a weekend meeting in Alergia, OPEC and non-OPEC producers ended the session with no change to output.

However, Reuters also reports Friday that two sources familiar with OPEC policy told the news agency that Saudi Arabia and other producers had discussed a possible production increase of about 500,000 barrels per day (bpd) among OPEC and non-OPEC producers. However, analysts also question whether increasing production would be able to offset the loss of Iranian oil, which at its 2018 peak accounted for about 3 per cent of global consumption.

In other commodities, gold prices hit a six-week low as the U.S. dollar firmed following a positive assessment of the U.S. economy earlier this week by the U.S. Federal Reserve.

Spot gold little changed at US$1,182.48 in morning trading. Gold touched its weakest level since Aug. 17 at US$1,180.34 an ounce earlier in the session. Spot gold was down 1.6 per cent in September, marking its sixth straight month of declines. U.S. gold futures eased 0.1 per cent at US$1,186.20 an ounce.

Currencies

The Canadian dollar built on early gains after a report on July GDP showed slightly better-than-expected growth. After the release of the latest reading, the loonie pushed to the top end of the day range of 76.64 US cents to 77.09 US cents.

Statscan said monthly growth came in at 0.2 per cent in July after a flat reading in June. Economists had forecast July growth of 0.1 per cent.

Ahead of the report, the loonie had been pushing higher following a Thursday speech from Bank of Canada Governor Stephen Poloz indicating that the central bank will continue to raise interest rates gradually to keep inflation in check.

The Bank of Canada held interest rates steady earlier this month but the markets are expecting a quarter point increase at the bank’s Oct. 24 policy meeting.

“The bank will continue to follow a gradual approach to raising interest rates, and remain dependent on incoming data and other sources of information to guide our decisions,” Mr. Poloz said in a speech in Moncton.

In other currencies, the U.S. dollar was higher early Friday. The U.S. dollar index rose to 95.239, its best level since Sept. 12. The dollar index, which weighs the greenback against six of its global counterparts, has risen about 1 per cent this week.

“The broad rally by the [U.S.] dollar has also been helped by seasonal factors, as it has coincided with U.S. investors bringing funds back home for the month’s end,” Daiwa Securities senior forex strategist Yukio Ishizuki told Reuters.

Stocks set to see action

At least five insurers, including Britain’s Prudential and Canada’s Sun Life , have bid for Commonwealth Bank of Australia’s (CBA) majority stake in an Indonesian insurance venture, people with knowledge of the process said. The stake sale, which could value the venture at between $250-million and $300-million, has also received second-round bids from insurer FWD Group, Singapore-listed Great Eastern Holdings, and Indonesia’s Sequis Life, three people said. Australia’s biggest lender is selling its 80 per cent stake in PT Commonwealth Life, which has a presence in 20 Indonesian cities with more than 500,000 individual and group customers, Reuters reported in January.

Shopify Inc. says it will invest as much as half-a-billion dollars into its forthcoming Toronto office, in a large downtown development where it plans to house thousands of new employees.

The Globe’s Daniel Leblanc reports that Netflix says it expects to go beyond its initial promise to spend $500-million on Canadian productions as the company’s growing presence in the country is being welcomed by some in a once-skeptical industry. Netflix says in a blog post to be published on Friday that it is “on track to exceed” the planned spending outlined in a five-year deal made with the federal government, which also included $25-million to develop new talents in Canada, especially among francophone and other minority groups.

More reading:

Friday’s analyst upgrades and downgrades

Friday’s small-cap stocks to watch

Economic news

GDP grew by 0.2 per cent in July after a flat reading the month before. Economists had been expecting an increase closer to 0.1 per cent in the most recent report.

Canadian producer prices fell 0.5 per cent in August, pulled down by lower prices for primary non-ferrous metal products. Economists had expected a 0.3-per-cent decrease.

The U.S. Commerce Department says consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 per cent last month after an unrevised 0.4-per-cent gain in July.

(9:45 a.m. ET) U.S. Chicago PMI for September.

(10 a.m. ET) U.S. University of Michigan consumer sentiment for September. Consensus is 100.5, up from 96.2 in August.

With Reuters and The Canadian Press