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Equities
Canada’s main stock index moved higher Friday with energy shares gaining on higher crude prices in the wake of an OPEC decision to curb production. South of the border, U.S. stocks jumped after the latest reading on the U.S. jobs market came in far better than expected and U.S. Donald Trump indicated that trade talks between Washington and Beijing are progressing.
At 9:40 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 104.94 points, or 0.62 per cent, at 16,959.86.
Energy stocks gained 3 per cent after OPEC and its allies agreed to extend output cuts by 500,000 barrels a day in early next year.
On Wall Street, the Dow Jones Industrial Average rose 161.89 points, or 0.58 per cent, at the open to 27,839.68.
The S&P 500 opened higher by 17.19 points, or 0.55 per cent, at 3,134.62. The Nasdaq Composite gained 63.55 points, or 0.74 per cent, to 8,634.25 at the opening bell.
Markets drew some early support from Mr. Trump’s latest upbeat comments on trade. He told reporters Thursday that trade talks are “moving along very well.” Earlier in the week, Mr. Trump had said there may not be a trade agreement until after the 2020 election, sending markets into a tailspin.
Early Friday, China’s finance ministry also said import tariffs for some pork and soybeans from the United States will be waived, helping underpin markets.
“Market sentiment has improved at the tail end of a topsy-turvy week, with the Chinese decision to drop tariffs on U.S. pork and soybeans providing the first concrete step towards de-escalation seen for quite some time,” Joshua Mahony, senior market analyst at IG, said. “Trump’s claim that talks were ‘moving right along’ did help bolster market gains, yet the for the most part it looked much like the market-moving fluff that has been evident throughout the week.”
In economics, Canada’s job market disappointed in November, shedding 71,200 positions. The unemployment rate rose to 5.9 per cent from 5.5 per cent. Economists had been expecting a gain of about 10,000 jobs with the jobless rate forecast to hold steady.
The Canadian dollar dropped sharply on the report, sinking to the mid-75-US-cent range.
The picture was better south of the border, where the U.S. economy added 266,000 positions last month, well ahead of the 185,000 jobs most economists had expected. The U.S. unemployment rate was 3.5 per cent in November.
“The 266,000 gain in employment was well above consensus expectation and, despite being somewhat flattered by the return of striking auto workers to the count, was fairly broad-based across sectors,” CIBC economist Andrew Grantham said. “With revisions to prior data suggesting that wage growth is a little firmer than it appeared a month ago as well, today’s data reinforce the view that the Fed is done with interest rate cuts at this stage.”
On the corporate side, retailer Roots Inc. cut its full-year sales outlook to below the previously forecast range of $358-million to $375-million and said third-quarter results fell short of expectations. For the quarter, Roots reported earnings per share of 5 cents, down from 7 cents a year earlier. Adjusting for items, earnings per share totalled 10 cents, down from 11 cents last year. Comparable sales grew 3 per cent, although president and CEO Jim Gable noted in a release that the company’s new U.S. stores are performing “well below expectations.” Roots stock was down more than 7 per cent shortly after the start of trading in Toronto.
Overseas, major European markets got a lift for the positive U.S. employment numbers. The pan-European STOXX 600 was up 1.07 per cent with all main sectors in the black. Britain’s FTSE 100 rose 1.26 per cent by afternoon. Germany’s DAX gained 0.87 per cent. France’s CAC 40 rose 1.14 per cent.
In Asia, the Shanghai Composite Index gained 0.43 per cent. Hong Kong’s Hang Seng closed up 1.07 per cent. Japan’s Nikkei advanced 0.23 per cent.
Commodities
Crude prices steadied after wavering in the predawn hours as markets wait for OPEC and its allies to formally agree to further output cuts next year.
The day range on Brent so far is US$63.09 to US$63.90. The range on West Texas Intermediate is US$58.20 to US$58.58. Brent looks set for a weekly gain of 1.5 per cent. WTI appears headed for an increase of 6 per cent on the week, according to Reuters.
Later in the day, OPEC+ members are expected to meet in Vienna to formally agree to increase existing production cuts by another 500,000 barrels per day (bpd) in the first quarter of next year through tighter compliance and some adjustments. OPEC’s current pact is for production cuts of 1.2 million barrels a day.
“Four years of production cuts and low prices and the emergence of the U.S. as an oil behemoth and the conclusion of OPEC is that more of the same is needed,” OANDA senior analyst Craig Erlam said, noting Saudi Arabia is likely to shoulder much of the burden for the new cuts in an effort to support the Saudi Aramco IPO with higher crude prices.
“This time it’s different though, it seems, the logic being that the U.S. will not be able to take advantage of higher prices to ramp up more shale production, as it has in the past. Good luck with that. Russia has been skeptical for some time, but appears to be on board. Of course, a signature doesn’t mean compliance but that’s a 2020 problem.”
Gold prices, meanwhile, slid in early going on positive trade headlines.
Spot gold was down 0.2 per cent at US$1,473.16 an ounce. U.S. gold futures fell 0.3 per cent to US$1,478.00.
“It has been an interesting week for gold, rallying in the early stages as stock markets tumbled before running into US$1,480 like a brick wall and stumbling backwards, dazed and confused,” Mr. Erlam said in a note. “The interesting thing with that is that rather than turn south, it has consolidated which suggest bulls may be a little dizzy but they’re not deterred.”
Currencies
The Canadian dollar dropped after Statistics Canada reported a surprise drop in hiring last month, sending the nation’s unemployment rate higher.
The loonie fell to the bottom of the day range of 75.49 US cents to 75.92 US cents after the release of the latest figures.
Statscan said hiring fell by 71,200 jobs in November. Markets had been expecting to see a gain of about 10,000 jobs. The jobless rate jumped to 5.9 per cent. Most economists had been expecting the unemployment rate to hold at 5.5 per cent for the month.
“While roughly 20,000 of that drop was due to a reversal of temporary federal election related hiring, the rest of the weakness was broadly based by industry and by type of employment (both full-time and part-time),” RBC economist Royce Mendes said. “The drop left the unemployment rate rising four ticks to 5.9 per cent, and while wage growth held steady at 4.4 per, that comes as a weak reading fell out of the annual calculation. Overall, a weak set of numbers, something that could have the Bank of Canada rethinking its on-hold stance if it were to continue.”
The new numbers come just days after the Bank of Canada again held interest rates unchanged, citing a stabilizing global economy and continued strength in domestic demand. The central bank also hinted that it wasn’t in a hurry to cut rates in the new year, suggesting economic weakness seen in the third quarter was likely temporary.
On broader currency markets, the U.S. dollar index, which weighs the greenback against a selection of currencies, fell to a one-month low of 97.355. The euro was flat at US$1.1106.
Britain’s pound was off 0.2 per cent at US$1.3132 and 84.58 pence against the euro, but still near a 2-1/2-year high as traders grow more confident the outcome of the upcoming U.K. election will helped end uncertainty over Brexit.
In bonds, the yield on the U.S. 10-year note was slightly lower at 1.791 per cent. The yield on the 30-year note was also down a bit at 2.236 per cent.
More company news
Australia’s Newcrest Mining Ltd said it had raised its stake in Canadian miner Lundin Gold Inc to 32 per cent with an additional $79.6-million investment as it looks to increase its exposure in Ecuador. Newcrest last year paid $250-million for a 27.1-per-cent stake in Lundin, which owns a high-potential gold mine project in Ecuador.
Tesla Inc said its Chinese-built Model 3 cars would receive state subsidies, a move that will help the U.S. electric vehicle maker’s push into the world’s biggest auto market. China’s industry ministry had earlier said Tesla’s Model 3 cars, being built at its US$2-billion factory in Shanghai, were on a list recommended for subsidies for new energy vehicles (NEVs), which include plug-in hybrids, battery-only electric vehicles and those powered by hydrogen fuel cells. Tesla said in a statement the subsidies had been secured.
Economics calendar
(8:30 a.m. ET) Canadian employment report for November.
(8:30 a.m. ET) U.S. employment for November.
(10:00 a.m. ET) U.S. wholesale trade for October.
(10:00 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for December (preliminary).
With Reuters and The Canadian Press
Terry Weber