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Equities

Stock indexes in Canada and the United States tanked again early Friday as growing concern over the impact of the coronavirus on the global economy continues to drive investors from the equities market.

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At 9:40 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 356.45 points, or 2.15 per cent, at 16,197.54.

Energy stocks sank more than 2 per cent as crude prices spiraled on reports that Russia won’t back deeper OPEC production cuts. Materials stocks were down 1 per cent.

In the U.S., the Dow Jones Industrial Average fell 664.07 points, or 2.54 per cent, at the open to 25,457.21.

Friday’s declines came as countries around the Globe struggle to stem the rising number cases of people infected with the virus. On Thursday, the virus was reported in at least four new U.S. states, according to Reuters.

Central banks in Canada, the U.S. and Australia have all cut interest rates this week in an effort to underpin those economies. The European Central Bank is largely expected to follow suit. But some analysts have suggested those efforts have failed to help ease investors’ fears.

“For risk appetite to return in earnest we need to see a downturn in infection rates,” Chris Beauchamp, chief market analyst with IG, said.

“If the rest of the world is following the China script (perhaps too much to hope for) then the growth in cases might begin to slow next week. But it feels like we have a longer and harder road to travel in Europe and the US, with the latter a particular source of concern.”

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Money markets are already pricing in another move lower on rates by the Fed at its next meeting. The Bank of Canada has also left the door open to another move at its April meeting.

Meanwhile, investors continue to move out of equities and toward safer holdings, pushing U.S. debt prices higher with yields hitting record lows early Friday. The yield on the benchmark U.S. 10-year note fell below 0.8 per cent for the first time. Gold, another safe-haven asset, was on track for its best weekly gain since 2011.

Elsewhere, the Canadian economy generated more jobs than expected last month. Statistics Canada says 30,300 new positions were created in February. Economists had been expecting the number to come in closer to 11,000 new jobs. The jobless rate ticked higher to 5.6 per cent.

South of the border, the U.S. economy saw payrolls increase by 273,000. That increased matched the number seen in January and was the biggest gain since May 2018. Economists had been expecting to see about 175,000 new positions for the month.

In Canada, economists are expecting to see the addition of about 11,000 new jobs when Statistics Canada releases its reading on February employment at 8:30 a.m. The jobless rate is seen edging up to 5.6 per cent.

“Canadian labour market numbers remained broadly solid in February, but that will likely matter little for markets or policymakers given increasingly intense concerns about the spread of the new coronavirus outside of China’s borders,” RBC senior economist Nathan Janzen said.

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In the U.S., markets are looking for that economy to have added about 175,000 new jobs last month, with an unemployment rate of 3.6 per cent.

On the corporate front, shares of Vermilion Energy Inc. dropped 15 per cent after the company reported a fourth-quarter profit of $1.5-million and cut its dividend in half due to weakness in commodity prices and reduced global economic prospects following the outbreak of the novel coronavirus. Calgary-based Vermilion says it will now pay a monthly dividend of 11.5 cents per share, down from its earlier rate of 23 cents per share.

Overseas, major European markets were deep in the red by afternoon. The pan-European STOXX 600 was down 3.77 per cent, with travel and leisure stocks among the hardest hit. Britain’s FTSE 100 fell 3.50 per cent. Germany’s DAX fell 3.58 per cent. France’s CAC 40 lost 4 per cent.

In Asia, Japan’s Nikkei ended down 2.72 per cent, following Wall Street’s weak hand off from Thursday. The Shanghai Composite Index fell 1.21 per cent. Hong Kong’s Hang Seng shed 2.32 per cent.

Commodities

Crude price fell sharply on reports that Russia won’t sign onto a plan by OPEC and its allies to deliver deep production cuts to offset the impact of the spread of the coronavirus on demand.

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The day range on Brent so far is US$48.54 to US$50.45. The range on West Texas Intermediate is US$44.68 to US$46.38. Both benchmarks were down more than 2 per cent in early going Friday.

On Thursday, OPEC members agreed to cut production by 1.5 million barrels a day until the end of the year. The reduction amounts to a about 3.6 per cent of global supplies. However, the reduction was made contingent on Russia participating.

However, a Russian high-level source told Reuters on Friday that Moscow would not back an OPEC call for extra reductions in oil output and would agree only to an extension of existing cuts by OPEC and its allies, a group known as OPEC+.

“There was talk that Russia are not keen on the cuts,” CMC market analyst David Madden said in a note. “Moscow has form when it comes to resisting reducing output but some sort of cut is likely to happen. Several hours after OPEC revealed the news about cut, oil fell to the session lows. Traders basically took the view that if the supply needs to cut by a sizable amount, things must be bad in regards to future demand.”

The OPEC meeting continues Friday.

Gold prices, meanwhile, were on track for their best weekly showing since late 2011.

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Spot gold was up 0.2 per cent to US$1,674.20 per ounce, after climbing more than 2 per cent on Thursday. U.S. gold futures rose 0.4 per cent to US$1,675.20.

Coronavirus fears have pushed gold up more than 5 per cent already this week.

“Gold looks like one of the most attractive assets in this global environment,” AxiCorp strategist Stephen Innes said.

Currencies

The Canadian dollar was little changed, trading in the mid-74-US-cent range, after a new report showed better-than-forecast job creation in this country last month.

The day range on the loonie so far is 74.52 US cents to 74.74 US cents.

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The loonie took a hit Thursday when Bank of Canada Governor Stephen Poloz said this country’s economic resilience could be “seriously tested” by the coronavirus outbreak, depending on its severity and duration. The remarks were Mr. Poloz’s first since the central bank cut interest rates by a half percentage point on Wednesday.

Elsa Lignos, global head of FX strategy for RBC, described the tone of Mr. Poloz’s remarks as leaning dovish.

“The speech itself was similar to [Wednesday’s] statement with a bit more detail,” she said.

“Poloz said the BoC [was] leaning towards a cut even before the virus. They think they have done a lot this week to cushion against a blow, but they don’t know how big that blow will be.”

On the jobs front, Statscan said the economy created 30,300 new positions in February, more than the 11,000 economists had been forecasting. The dollar held relatively steady after the release of the figure.

In other currencies, the U.S. dollar fell further against the yen and the euro as U.S. Treasury yields slid.

The euro last stood at US$1.1234, after hitting US$1.1249, its best level since August. The U.S. dollar index was down at 96.438, near its weakest this year, according to Reuters.

Against the yen, the dollar dropped 0.3 per cent to 105.82 yen .

More company news

The Globe’s Susan Krashinsky Robertson reports Tim Hortons, owned by Restaurant Brands International, is suspending a plan to give away 1.8-million reusable cups as part of its Roll Up the Rim to Win promotion, and will not serve beverages in reusable containers that guests bring themselves, amid concerns about the coronavirus.

Tesla Inc has secured Chinese government approval to sell longer-range China-made model 3 vehicles in China, the Ministry of Industry and Information Technology said on Friday. The vehicles will have a driving range of more than 600 kilometres before they need to be recharged, the ministry said in a statement, while the current China-made Model 3 has a standard driving range of more than 400 kilometres.

Enbridge Inc. said Friday it has hired companies to design and build a disputed oil pipeline tunnel beneath the channel linking Lakes Huron and Michigan, despite pending legal challenges, according to The Associated Press. The company is forging ahead with plans to begin construction work next year on the tunnel, which would replace twin pipes that have lain across the bottom of the Straits of Mackinac in northern Michigan since 1953. State Attorney General Dana Nessel is appealing a Michigan Court of Claims ruling last October that upheld an agreement between Enbridge and former Republican Gov. Rick Snyder’s administration to drill the tunnel through bedrock beneath the straits.

Costco Wholesale Corp said concerns over the coronavirus outbreak have prompted customers to stock up on essentials, including disinfectants, forcing the warehouse operator to replenish certain items frequently. The company has lately been seeing a surge in footfall as customers queue up at its U.S. stores, similar to the holiday season, which has forced it to place quantity limits on some products.

Economic news

Statistics Canada said the Canadian economy added 30,300 jobs in February. The unemployment rate was 5.6 per cent, up from 5.5 per cent in January.

The U.S. Labor Department reported that the U.S. economy generated 273,000 new positions last month, better than the 175,000 economists had been expecting. The jobless rate fell to 3.5 per cent.

Canada’s trade deficit widened to $1.5-billion in January, from $732-million the month before. Exports fell 2 per cent while imports were down 0.5 per cent, Statscan said.

The U.S. Commerce Department said that country’s trade deficit dropped 6.7 per cent to US$45.3-billion in January.

(10 a.m. ET) Canada’s Ivey PMI for February

With Reuters and The Canadian Press

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