Canada’s main stock exchange was hovering just below the break-even mark early Friday with gains in materials stocks on higher gold prices offset by declines in the health-care sector. On Wall Street, the Dow and S&P 500 both touched record highs shortly after the opening bell as optimism over a U.S. rate cut at the end of the month continues to buoy investor sentiment.
At 9:53 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 12.89 points, or 0.08 per cent, at 16,515.01. Health-care stocks were down 2.44 per cent, the biggest declines seen among the index’s six main sectors.
The Dow Jones Industrial Average rose 51.41 points, or 0.19 per cent, at the open to 27,139.49.
The S&P 500 opened higher by 3.45 points, or 0.12 per cent, at 3,003.36. The Nasdaq Composite gained 13.16 points, or 0.16 per cent, to 8,209.20 at the opening bell. Friday’s session marks the third time this week that the S&P has reached record levels.
Comments on Wednesday and Thursday from Federal Reserve chair Jerome Powell fuelled expectations that the powerful central bank would cut rates at its meeting later this month. However, a hotter reading on U.S. core inflation threw cold water on some predictions that a half-point reduction could still be in the offing. The Dow closed above 27,000 for the first time on Thursday while the S&P 500 touched another high as investors welcomed the prospect of lower rates.
"We’re trading in the green again on Friday, with U.S. futures pointing to fresh record highs on Wall Street after a satisfying testimony from Jerome Powell earlier in the week, Craig Erlam, senior market analyst with OANDA, said.
“Powell testified on the semi-annual monetary policy report and Wednesday and Thursday and, safe to say, he passed with flying colors as far as investors are concerned. His downbeat tone when reflecting on the economic outlook and inflation combined with his complete lack of desire to correct market expectations, despite a cut being 100 per cent priced in this month, gave investors exactly what they wanted."
In corporate news, U.S.-traded shares of CannTrust Holdings Inc. were down about 10 per cent in Toronto after the Canadian cannabis company said it has implemented a “voluntary hold on sale and shipment of all cannabis products" while Health Canada investigates its manufacturing facilities. CannTrust has also formed a special committee to investigate after Health Canada launched a probe into illegal growing activities that saw the company cultivate marijuana in uncultivated rooms.
Elsewhere, investors got results from Montreal restaurant company MTY Food Group Inc. The company reported earnings per share of 76 cents, up from 64 cents a year earlier. Second-quarter system sales rose 12 per cent to $832.3-million. Same-store sales were up 0.6 per cent. Canadian same-store sales advanced 1.4 per cent. MTY shares were lower in early trading.
Aritzia Inc. was the biggest percentage gainer on the TSX Friday morning, with shares climbing 7 per cent. The gains came after the Vancouver-based company reported a 32-per-cent increase in profit in the latest quarter. Aritzia also said same-store sales rose 7.9 per cent, marking the nineteenth straight quarter of gains.
Overseas, European markets ticked higher. The pan-European STOXX 600 was up 0.17 per cent with resource stocks among the best performers after new trade figures from China suggested exports fell less than expected in June. The report said exports were down 1.3 per cent. The markets had been expecting a decline of about 2 per cent. Imports fell by 7.3 per cent. Britain’s FTSE 100 was up 0.11 per cent in afternoon trading. France’s CAC 40 gained 0.44 per cent. Germany’s DAX edged up 0.07 per cent.
In Asia, markets closed out the week higher. Japan’s Nikkei added 0.20 per cent. Hong Kong’s Hang Seng gained 0.14 per cent and the Shanghai Composite Index rose 0.44 per cent.
Crude prices looked set for a weekly gain as producers in the Gulf of Mexico cut production amid an intensifying tropical story in the region and tensions surrounding Iran’s nuclear program continued to underpin prices. However, a report from the International Energy Agency released Friday put a ceiling on the day’s advance. That report forecast a global oil surplus.
So far this week, Brent prices have risen more than 4 per cent while West Texas Intermediate has gained more than 5 per cent. Both benchmarks posted losses the previous week.
Both were relatively steady Friday. The range on Brent is US$66.72 to US$67.29. The range on WTI is US$60.29 to US$60.74.
“Another large inventory drawdown this week has propelled WTI back above $60, before finding some resistance around US$61, which has been a notable level this year," Mr. Erlam said. "If it can break above here then it would be a very bullish signal, with the next notable level being around US$63.50-US$64.”
In other commodities, a weaker U.S. dollar helped bolster gold prices and put bullion on track for a second consecutive weekly gain.
Spot gold was up 0.2 per cent at US$1,406.80 per ounce. Gold has risen about 0.5 per cent so far this week. U.S. gold futures rose 0.1 per cent to US$1,407.60 an ounce.
“We have (China’s) trade data out this morning which disappointed mainly on the import side, suggesting the Chinese economy is still struggling,” Julius Baer analyst Carsten Menke, told Reuters.
“This provided fuel to the growth worries, so that’s why gold as a safe haven is benefiting.”
The Canadian dollar was trading at its best levels in nearly nine months early Friday as its U.S. counterpart put in a weaker showing on global markets as investors anticipate lower interest rates south of the border later this month.
The loonie was trading in a day range so far of 76.47 US cents to 76.82 US cents. The upper end of that range marks the loonie’s highest since last October. The dollar has been bolstered this week by diverging policy positions by the Bank of Canada and the U.S. Federal Reserve, which is now expected to cut U.S. rates later this month. On Wednesday, the Bank of Canada held rates steady and gave no indication that easier monetary policy was in the immediate future.
The loonie was on track to rise 0.4 per cent for the week. It has climbed 4.7 per cent since the start of the 2019, the best performance among G10 currencies, according to Reutes.
On world markets, the U.S. dollar slipped for the third day on the week’s central bank news. Against a basket of other currencies, the dollar fell 0.1 per cent to 96.94 and was on track for its biggest weekly drop in three weeks.
“USD has drifted lower overnight, but remains off the post-FOMC lows against most currencies,” RBC chief currency strategist Adam Cole said.
“The commodity currencies are the main exception with another rally in risk pushing AUD (Australian dollar), NZD (New Zeland dollar) and CAD (Canadian dollar) higher. A deluge of Fed-speak late yesterday has not really moved the needle on US rate expectations.”
In bonds, U.S. Treasury yields ticked higher with the yield on the 10-year note up at 2.125 per cent. The yield on the 30-year note was also higher at 2.654 per cent.
More company news:
Luxury car maker Daimler cut its profit forecast for the fourth time in 13 months on Friday, as it set aside more money to cover a regulatory crackdown on diesel emissions and vehicle recalls related to Takata airbags. The German maker of Mercedes-Benz cars said it would make a second-quarter operating loss and that 2019 results would be “significantly” lower than last year, compared with its previous forecast for a broadly unchanged performance. It also blamed lower-than-predicted growth in automotive markets, as well as slower product ramp-ups that have affected availability this year.
WPP is selling a 60-per-cent stake in Kantar to private equity firm Bain Capital, valuing the data analytics business at about $4 billion and giving the British owner of agencies including Ogilvy and Wunderman Thompson funds to cut debt and rebuild. WPP is restructuring following several profit warnings and the abrupt departure of its founder and former chief executive Martin Sorrell over alleged misconduct, which he denies.
Campbell Soup Co said it would sell its Danish unit Kelsen Group to an affiliate of Nutella maker Ferrero SpA for US$300-million. Belgian holding company CTH Invest, a Ferrero affiliate, said it would take over Kelsen’s two production facilities in Denmark and add fine biscuits assortments to its portfolio with the deal.
Colgate-Palmolive Co said on Thursday it would buy the skin care unit of France’s Laboratoires Filorga Cosmétiques for US$1.69-billion, as the consumer goods company bolsters its personal care business.
The U.S. Labor Department says its producer price index for final demand edged up 0.1 per cent last month after a similar gain in May. In the 12 months through June, the PPI rose 1.7 per cent, the smallest gain since January 2017, slowing further from a 1.8 per cent increase in May. Economists polled by Reuters had forecast the PPI unchanged in June and increasing 1.6 per cent on a year-on-year basis.
With Reuters and The Canadian Press
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