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Canada’s main stock exchange opened mostly flat Friday with weakness in cannabis stocks offsetting positive headlines on global trade. On Wall Street, U.S. stocks started higher with President Donald Trump saying a trade agreement with China is “potentially very close” and Chinese President Xi Jinping indicating that he too wants a deal.
At 09:43 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 11.85 points, or 0.07 per cent, at 16,987.34.
Seven of the index’s 11 main sectors were underwater, led by a 4-per-cent drop in health-care stocks. Cannabis producers Hexo Corp. and Cronos Group Inc. saw their shares decline 6.8 per cent and 5.7 per cent, respectively.
In the U.S. , the Dow Jones Industrial Average rose 64.94 points, or 0.23 per cent, at the open to 27,831.23. The S&P 500 opened higher by 7.87 points, or 0.25 per cent, at 3,111.41, while the Nasdaq Composite gained 24.33 points, or 0.29 per cent, to 8,530.54 at the opening bell.
Speaking Friday, the Chinese leader said he has been trying to avert a trade war with the United States but also indicated that Beijing won’t back down if pressed.
“We want to work for a ‘phase one’ agreement on the basis of mutual respect and equality,” he told representatives of an international forum, according to a pool report. “When necessary we will fight back, but we have been working actively to try not to have a trade war. We did not initiate this trade war and this is not something we want.”
The comments come as U.S. President Donald Trump is expected to sign two bills backing protesters in Hong Kong, a move seen as likely to anger Beijing and injected further uncertainty into current trade talks. Speaking with Fox News early Friday, Mr. Trump also said a trade deal is “potentially very close.”
“This morning’s comments from Chinese President Xi suggest that there remains some way to go before we get any indication as to the possible timing of a phase one deal,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“His comments that China wanted to agree a deal but wouldn’t shy away from a continuation of the current standoff was clearly a warning that China would not be brow beaten into signing a deal they weren’t happy with. Furthermore the prospect that President Trump is likely to sign off on the recently passed Hong Kong human rights and democracy act is likely to act as an added complication to the US, China trade narrative."
On the corporate side, shares of retailer Gap Inc. edged higher after the company squeaked past lowered profit forecasts in the latest quarter. Gap also said it was continuing with its plan to separate its Old Navy brand from the rest of its banners. In the most recent quarter, net sales fell 2.2 per cent to US$4-billion in the third quarter ended but still beat the analysts’ average estimate of US$3.96-billion, according to IBES data from Refinitiv. Excluding items, it earned 53 US cents per share, 2 US cents more than expectations.
Wall Street earnings on Friday include Foot Locker and JM Smucker.
On this side of the border, investors got a glimpse of consumer spending in the final month of the third quarter. Statistics Canada said retail sales in September slipped 0.1 per cent, slightly better than economists’ forecasts. However, excluding decline in auto and gasoline station sales, sales were up 0.7 per cent.
RBC economist Josh Nye also noted that retail sales volumes rose 1.9 per cent in the third quarter, the best pace in a year.
“The BoC is keeping its eye on the household sector, with strength there essential to offset headwinds to investment and exports,” he said in a note. “It looks like both consumer spending and housing made solid contributions to growth last quarter.”
Overseas, major European markets were higher. The pan-European STOXX 600 was up 0.59 per cent by afternoon with trade-sensitive resource stocks among the winners. Britain’s FTSE 100 was up more than 1 per cent. Germany’s DAX gained 0.31 per cent. France’s CAC 40 rose 0.41 per cent.
In Asia, stocks finished the week mixed. The Shanghai Composite Index fell 0.63 per cent. Hong Kong’s Hang Seng rose 0.48 per cent. Japan’s Nikkei finished up 0.32 per cent.
Crude prices were slightly lower but still close to the best levels in two months seen during the previous session.
The day range on Brent so far is US$63.48 to US$64.01. The range on West Texas Intermediate is US$58.09 to US$58.51.
Crude prices spiked 2 per cent to two-month highs on Thursday after Reuters, citing OPEC sources, said the group was likely to extend current production cuts through to June when it meets again in early December. However, the report also suggested that deepening current production caps is unlikely for the time being.
“We’ve been quite struck by the resurgence in oil prices over the past two days,” Jasper Lawler, head of research with London Capital Group, said.
“It has been interesting to see oil prices gain while other markets sensitive to the U.S.-China trade war lose out. We are interpreting this pickup in oil prices as a refocus on supply-side issues in the lead up to the OPEC meeting in December,” he added.
Price movements on Friday continued to be tempered by uncertainty over U.S.-China trade talks after the Chinese leader said he wants to see an initial deal but also cautioned that China will retaliate if necessary.
Gold prices, meanwhile, edged higher, benefiting from continued trade uncertainty.
Spot gold was up 0.2 per cent at US$1,467.26 an ounce. U.S. gold futures rose 0.3 per cent to US$1,467.40.
“The market doesn’t have faith in a trade deal, and it doesn’t think the second round of talks will be very successful, as the decisions from the first (round of talks) are yet to be implemented,” Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade, told Reuters.
The Canadian dollar advanced after September retail sales put in a slightly better showing than expected.
The loonie moved to the top end of the day range of 75.24 US cents to 75.40 US cents after the release of the latest figures.
Statistics Canada said sales fell 0.1 per cent in September, better than the 0.3-per-cent decline markets had been expecting. Excluding autos and gasoline stations, sales were up 0.7 per cent.
The latest numbers were being closely watched by the markets because they’re one of the last key data points before the Bank of Canada’s Dec. 5 rate announcement. (The other is the Nov. 29 release of third-quarter GDP figures.)
“Canadians shopped with a bit more enthusiasm than expected in September, but this still wasn’t a barnburner month for retailers,” CIBC World Markets chief economist Avery Shenfeld said.
“In terms of the GDP contribution, note that in real terms, volumes were still -0.1 per cent and and have been essentially flat since early 2018. Overall, better than expected, but not a good set of data in absolute terms,” he added.
The Canadian dollar also drew some support from comments Thursday from Bank of Canada Governor Stephen Poloz that monetary policy matches current conditions and that the Canadian economy is essentially doing well.
In other currencies, the U.S. dollar index, which weighs the greenback against a basket of its world counterparts, was down less than 0.1 per cent, ending its three-day streak of gains and heading for its smallest weekly change since the start of August this year, according to Reuters.
The Swiss franc, viewed as a safe-haven currency, fell 0.2 per cent against both the U.S. dollar and the euro. The Japanese yen - also seen as a safe haven - was flat against the U.S. dollar.
The trade-exposed New Zealand dollar and Swedish crown were both up 0.2 per cent against the greenback.
In cryptocurrencies, bitcoin fell to a six month low after China’s central bank launched a new crackdown and warned of the risks associated with issuing and trading digital currencies. Bitcoin, the world’s biggest cryptocurrency, fell 9 per cent to US$6,929 at one point. That was its lowest since May.
In bonds, the yield on the U.S. 10-year note was lower at 1.753 per cent. The yield on the 30-year note was also down at 2.206 per cent.
More company news
Toronto Dominion Bank has been added to a global list of systemic banks that must hold extra capital, while Deutsche Bank has dropped a rank within the list, the Financial Stability Board said. The international body based in Basel, Switzerland, was updating its list of systemic banks, introduced in the aftermath of the global financial crisis a decade ago when taxpayers had to bail out struggling lenders. The addition of Toronto Dominion brings the total number of systemic banks to 30. Systemic banks are slotted into one of five buckets, although the fifth - where banks would be required to hold an extra 3.5 per cent of capital to risk-weighted assets on top of minimum requirements - remains empty. Toronto Dominion has been placed in the first bucket, with a 1-per-cent surcharge.
Nordstrom Inc. shares were up more than 8 per cent in New York after the retailer raised the lower-end of its full-year profit forecast and said the impact of U.S. tariffs on Chinese imports was not expected to be significant for the year. The company expects full-year profit to be in the range of US$3.30 to US$3.50 per share, up from the prior forecast of US$3.25 to US$3.50 per share. Total revenue fell 2 per cent to US$3.67-billion in the third quarter ended Nov.2, in line with the analysts’ average estimate, according to IBES Refinitiv data.
J.M. Smucker Co missed quarterly sales estimates and cut its full-year adjusted profit and net sales forecasts, hurt by weak demand for its premium dog foods. The company said on Friday it now expects to earn between US$8.10 and US$8.30 per share for fiscal 2020, compared with its prior forecast range of US$8.35 to US$8.55. Net sales fell to US$1.96-billion from US$2.02-billion in the second quarter ended Oct. 31. Analysts on average had expected sales of US$1.97-billion, according to IBES data from Refinitiv. Net income rose to US$211.2-million, or US$1.85 per share, from US$188.5-million, or US$1.66 per share, a year earlier.
Tesla Inc. on Thursday unveiled its electric pickup. Starting from US$39,900, the Cybertruck is less expensive than initially flagged but its polarizing design could limit sales in a popular segment symbolic of a rugged, practical American lifestyle. At a launch event in Los Angeles, Tesla Chief Executive Elon Musk said other versions will be priced at $49,900 and $69,900 with the most expensive offering a range of more than 800 kilometres. Production is expected to begin around late 2021. Tesla shares were down more than 5 per cent on the Nasdaq on Friday morning.
A federal judge rejected a U.S. government effort to disqualify a lawyer arguing for 15 states and the District of Columbia in their effort to block T-Mobile US Inc.’s planned US$26.5-billion takeover of Sprint Corp. U.S. Magistrate Judge Robert Lehrburger said the Department of Justice waited too long to intervene in the case to try to disqualify Glenn Pomerantz, who had represented the department in 2011 when it stopped AT&T’s purchase of T-Mobile, and his law firm Munger, Tolles & Olson.
Equinox Gold Corp. says it is moving from the TSX Venture Exchange to the Toronto Stock Exchanges. The company’s stock will start trading on the TSX under the ticker symbol EQX starting on Nov. 25.
Retail sales rose 0.1 per cent in September, Statistics Canada said.
(9:45 a.m. ET) U.S. Markit Manufacturing PMI for November.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for November.
With Reuters and The Canadian Press