Canadian and U.S. markets opened higher Friday as investors await a key trade meeting between U.S. President Donald Trump and Chinese leader Xi Jinping this weekend. A better-than-expected reading on Canada’s economy and steady crude prices also helped bolster sentiment on this side of the border.
Wall Street also big bank stocks gain after clearing the Federal Reserve’s stress test.
At 9:52 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 10.49 points, or 0.06 per cent, at 16,318.22. Six of 11 major sectors were lower with tech shares among the biggest losers.
At 9:50 a.m. ET, the Dow Jones Industrial Average was up 14.91 points, or 0.06 per cent, at 26,541.49 and the S&P 500 was up 5.88 points, or 0.20 per cent, at 2,930.80. The Nasdaq Composite was up 4.34 points, or 0.05 per cent, at 7,972.10.
Banks stocks jumped 2 per cent after the Fed on Thursday approved capital plans of 16 banks, including JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc , in its final stress test hurdle, according to Reuters.
Nervousness has prevailed throughout the markets in recent sessions as the Saturday meeting between the two leaders moves closer. Reports earlier in the week suggested the Chinese leader would give Mr. Trump a set of conditions to be met if a trade deal was to take place, while the U.S. has suggest more tariffs could be in the offing if there is no movement in talks.
“Donald Trump will discuss trade with China’s Xi Jinping tomorrow and that is likely to be the main event of the G20 as far as investors are concerned,” David Madden, market analyst with CMC Markets U.K., said. “A speedy solution to the trade standoff is unlikely in light of how entrenched both sides have become, but the meeting might pave the way for an improvement in the relationship.”
MSCI’s all-country index edged up a modest 0.04 per cent, suggesting trepidation on world markets. Still, that index also looks set to post its best month since the start of the year, gaining about 6 per cent in June on the back of a global equities rally sparked by a move by central banks to easier monetary policy.
On Bay Street, BCE Inc. is in the spotlight with news that long-time chief executive George Cope is stepping down. He plans to leave the post early next year. Mirko Bibic is set to take the top job when Mr. Cope steps down on Jan. 5. BCE stock was down slightly at the opening bell.
Economics will also be front and centre during morning trading. Ahead of the open, Statistics Canada reported that this country’s GDP rose by 0.3 per cent in April, just ahead of the 0.2-per-cent increase most economists had been forecasting. The April gain also follows a surprisingly strong 0.5-per-cent increase in March.
Shortly after the start of trading, the Bank of Canada also released its latest business outlook survey which showed a slight improvement in sentiment. The survey found that businesses see an increase in sales growth over the next year on domestic and foreign demand. Investment spending and hiring was also seen improving in most regions.
In earnings, Constellation Brands reports its latest results.
On Wall Street, Apple Inc. shares were lower in early trading after chief design officer Jony Ive announced he is leaving the company. He is considered a key figure at Apple and is instrumental in the design and feel of most of Apple’s flagship products. Separately, the Wall Street Journal reported that Apple is shifting the manufacturing of its new Mac Pro computer to China from the United States as trade tensions between the two countries escalate. Apple later issued a statement saying the new Mac Pro is designed and engineered in California and has components from several countries.
Overseas, Europe’s key markets were in the black, although caution remained the name of the game ahead of the weekend trade meeting. Britain’s FTSE 100 rose 0.21 per cent in afternoon trading. Germany’s DAX added 0.57 per cent and France’s CAC 40 advanced 0.45 per cent. The pan-European STOXX 600 rose 0.40 per cent.
In Asia, shares fell. Japan’s Nikkei closed down 0.29 per cent. The broader Topix lost 0.14 per cent. On mainland China, the Shanghai Composite Index fell 0.6 per cent. Hong Kong’s Hang Seng ended off 0.28 per cent.
Note: Canadian markets will be closed on Monday for the Canada Day holiday. U.S. markets will be closed Thursday for Independence Day.
Crude prices steadied after a weaker start ahead of the G20 and next week’s OPEC meeting, which is expected to see members and their allies agree to extend current production curbs. Brent crude was moving in a day range of US$66.08 to US$66.70. The range on WTI is US$59 to US$59.58.
Aside from the Trump-Xi trade talks, crude prices are awaiting the outcome of the OPEC meeting, set for July 1 and 2. Since the start of the year, OPEC and its allies have agreed to cut output by 1.2 million barrels a day to shore up prices. Russian President Vladimir Putin told the Financial Times on Thursday that the OPEC-led cuts helped stablize oil markets and the future of the output deal was expected to be on the agenda at the G20 summit.
“OPEC+ will assuredly find a satisfactory compromise to extend supply discipline for another six months officially, while G-20 will most likely end in a handshake,” Stephen Innes, managing partner at Vanguard Markets, said in a note.
He noted continued Middle East tensions and optimism over U.S.-China trade talks continue to support prices. “But from my seat, the primary narratives remain unchanged as the thoughts of protracted U.S.-China trade war compete for air time with the all-out war in Iran which should continue to tug and tow markets in every direction for the foreseeable future,” he said.
Elsewhere, nervousness in the market is translating into gains for gold. Spot gold was up 0.3 per cent at US$1,413.67 per ounce. Gold has risen nearly 8.3 per cent so far this month, on track for its biggest monthly percentage gain since June 2016. So far this week, gold has advanced 1.2 per cent and looks headed to its sixth straight weekly gain.
Currencies and bonds
The Canadian dollar held around its best level in five months after Statistics Canada reported slightly stronger-than-expected economic growth in April. The agency said GDP grew by 0.3 per cent that month. Economists had been forecasting a gain of 0.2 per cent.
The loonie was near the top of the day range of 76.32 US cents to 76.47 US cents.
“Canada is back in gear in terms of monthly growth, but the healthy gain in GDP in April merely gets the economy back on a mediocre growth trend after a stall in the fall and winter,” Avery Shenfeld, chief economist for CIBC World Markets, said, noting second-quarter growth looks headed for solid gains. That, he said, is likely enough to keep the Bank of Canada on its “stand-pat message" for the time being.
On Thursday, the Canadian dollar hit a five-month high as U.S. the gap between the yield on Canada’s two-year bond yield and its U.S. counterpart narrowed to the smallest differential since early 2018. The loonie looks headed to a gain of more than 3 per cent in June and has advanced more than 4 per cent since the start of the year, ranking it among the best performers in the G10.
The Bank of Canada’s latest business outlook survey also lent support to the loonie, showing an uptick in sentiment after a decline earlier in the year. The Canadian dollar was trading near the high end of the day range following the release of the report.
On world exchange markets, the U.S. dollar index sat at 96.217, unchanged on the week. The euro was steady but on track for its best monthly gain in 17 months as attention turns to the European Central Bank and efforts to bolster the economy.
“The elbow-room for the ECB to ease policy is far more limited than the (U.S.) Fed and that is weighing on the euro,” Esther Reichelt, FX strategist at Commerzbank told Reuters.
More company news
Tesla Inc said a single battery module caused a car to catch fire in Shanghai and it had revised its vehicle settings to further protect its batteries following an investigation into the incident. The company said in a statement posted on its Weibo social media account that the joint investigation team had conducted an investigation and analysis of the battery, software, manufacturing data and vehicle history.
Constellation Brands Inc beat analysts’ estimates for quarterly revenue on Friday, driven by strong sales of its beers including the Modelo brand, sending its shares up more than 5 per cent in morning trading. Net sales rose 2.5 per cent to US$2.10-billion in the first quarter ended May 31. Analysts had expected net sales of US$2.07-billion, according to Refinitiv IBES data. Constellation reported net loss attributable to the company of US$245.4-million, or US$1.30 per Class A share, compared with a profit of US$743.8-million, or US$3.77 per share, a year earlier. The decline was a result of equity losses in marijuana maker Canopy Growth, which is partly owned by Constellation.
Nike Inc. missed analysts’ estimates for quarterly profit, as the world’s largest sportswear maker spent more on marketing and new product launches. The results were released after the close on Thursday. To generate more demand Nike has collaborated with more celebrities, sped up product development in its popular Jordan sneaker brand and ramped up marketing around major sporting events. However, the initiatives have not come cheap with the company’s costs rising 10 per cent to US$12.7-billion in the past 12 months. Nike’s net income fell to US$989-million, or 62 US cents per share, in the fourth quarter ended May 31, from US$1.14-billion, or 69 UScents per share, a year earlier. Analysts on average had expected earnings of 66 US cents per share, according to IBES data from Refinitiv. Shares were lower in the premarket but opened up modestly.
Canada’s economy grew by 0.3 per cent in April, ahead of the 0.2-per-cent increase economists has been forecasting.
U.S. consumer spending increased 0.4 per cent in May, up slightly from the month before. The Commerce Department said Friday that incomes rose 0.5 per cent and inflation remained in check, increasing 1.5 per cent in the past year.
(10 a.m. ET) Bank of Canada Business Outlook Survey and Senior Loan Officer Survey for Q2.
With Reuters and the Canadian Press
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