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Equities

Canada’s main stock index fell in morning trading Friday with weaker crude prices weighing on energy stocks. Major U.S. indexes slid in early trading as simmering tensions between the U.S. and China tempered investor sentiment.

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At 9:44 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was down 25.83 points, or 0.17 per cent, at 14,859.02.

Energy shares were down more than 2 per cent on the back of a declines in both Brent and West Texas Intermediate.

In the U.S., the Dow Jones Industrial Average fell 12.14 points, or 0.05 per cent, at the open to 24,461.98.

The S&P 500 opened lower by 0.46 points, or 0.02 per cent, at 2,948.05, while the Nasdaq Composite dropped 6.33 points, or 0.07 per cent, to 9,278.55 at the opening bell.

Asian markets closed down, with Hong Kong’s Hang Seng dropping more than 5 per cent, after China said it is set to impose new national security legislation on Hong Kong. The move drew criticism from U.S. President Donald Trump, who said the U.S. would react “very strongly” against any attempt by China to gain more control.

“Such a move would strengthen Beijing’s control over the territory, which would probably spark protests,” CMC Markets analyst David Madden said.

“Last year, pro-democracy protests were common in Hong Kong, some of which caused major disruption, so traders are now worried the situation will flare up again.”

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Tensions between Washington and Beijing were already heightened over China’s response to the COVID-19 pandemic. Separately, China also dropped its annual growth target for the first time on Friday, stoking economic concerns as economies attempt to reopen after the coronavirus lockdowns.

On the corporate side, Montreal-based flight simulator company CAE Inc. will report results on Friday. Wall Street will get results from heavy equipment giant Deere & Co.

Overseas, major European markets turned mixed by afternoon with the pan-European STOXX 600 little changed. Britain’s FTSE 100 was down 0.33 per cent. Germany’s DAX edged up 0.43 per cent. France’s CAC 40 also rallied from early losses to climb 0.46 per cent.

In Asia, Japan’s Nikkei closed down 0.8 per cent. The Shanghai Composite Index ended down 1.89 per cent.

Commodities

Crude prices sank in early going as renewed U.S.-China tensions hit global sentiment and ongoing demand concerns weighed after a week of gains.

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The day range on Brent so far is US$33.54 to US$36.23. The range on West Texas Intermediate is US$30.72 to US$34. Early in the session, Brent was off by 5 per cent while WTI slid more than 7 per cent.

Despite Friday’s losses, crude prices were still on track for a fourth weekly gain after collapsing in April as the COVID-19 crisis brought global economic activity to a near standstill.

“Oil has moved quickly to the reopening news flows, and while this seems mostly justified, it would be wise to pay close attention to the risks in what remains uncertain,” AxiCorp chief market strategist Stephen Innes said.

“Any sign of a rapid rebound in U.S. production as oil prices recover would derail the recovery,” he said in an early note.

Markets will also be watching the coming Memorial Day weekend in the United States, which typically marks the start of the summer driving season. In recent months, travel was dramatically reduced as people stayed home to help stem the spread of the novel coronavirus.

In other commodities, faltering risk sentiment on the latest U.S.-China headlines helped push gold higher after losses earlier in the week.

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After falling 1.4 per cent during the previous session, spot gold rose 0.5 per cent to US$1,734.27. U.S. gold futures gained 0.9 per cent to US$1,737.

“Neither weak economic data nor ongoing U.S.-Sino tensions over the COVID-19 pandemic could rally gold,” Mr. Innes said of weakness seen this week in bullion prices.

“Perhaps lingering optimism about a vaccine backed by a massive investment in research, including US$1-billion in funding by the U.S. to a U.K. drug maker, raised investor hopes and might have weighed gold.”

Currencies

The Canadian dollar was weaker early Friday as crude prices gave back some of the week’s earlier gains and markets moved away from riskier holdings.

The day range on the loonie so far is 71.26 US cents to 71.73 US cents.

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“[The U.S. dollar] is slightly firmer and markets are generally risk-negative overnight, though moves have generally been small by recent standards,” RBC chief currency strategist Adam Cole said.

Ahead of the open, Canadian markets got a dire reading on retail sales in Canada as the COVID-19 pandemic took hold. Statistics Canada said sales fell 10 per cent to $47.1-billion.

On global markets, the U.S. dollar index, which weighs the currency against a basket of world rivals, was up 0.3 per cent at 99.7. After two weeks of gains, the index looks set to end this week down about 1 per cent.

The euro was down around 0.3 per cent against the dollar, at US$1.092, having hit a three-week high of $1.1008 on Thursday, according to Reuters. The Japanese yen was up around 0.2 per cent against the dollar, at 107.36.

The offshore Chinese yuan hit a two-and-a-half-week low of 7.151 in early London trading, last down around 0.2% on the day.

Commodity-linked currencies like the New Zealand and Australian dollars were down 0.3 per cent and 0.7 per cent, respectively.

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More company news

Lululemon Athletica Inc. says, as of May 21, it has reopened more than 150 stores across North America, Europe, Asia, New Zealand and Australia. The B.C.-based retailer also said it expects about 200 more stores to reopen over the next two weeks.

Deere & Co topped quarterly estimates for profit as demand for farm equipment fell less than feared and the company kept a tight lid on costs. Deere, which gets nearly two-thirds of its revenue from farm and turf machinery, said sales in the unit fell 18% to US$5.97-billion, compared with a 25% decline in construction and forestry equipment sales, which stood at US$2.26-billion. It expects fiscal 2020 profit in a range of US$1.6-billion to US$2-billion.

Britain’s Burberry said the luxury fashion industry would take time to recover from the profound impact of the coronavirus outbreak that lowered its comparable sales by 27% in the final quarter and led it to scrap its final dividend. The company said the dividend cancellation would save about 120 million pounds to help it through the crisis and it would review the payout at the end of its 2021 year.

China’s Alibaba Group Holding Ltd reported a better-than-expected quarterly revenue on Friday, as the COVID-19 lockdowns drove more people to shop online for essentials. Revenue rose to 114.31 billion yuan (US$16.02-billion) in the fourth quarter ended March 31 from about 93.50 billion yuan, a year earlier. Analysts had expected revenue of 107.04 billion yuan, according to IBES data from Refinitiv.

Nissan Motor Co. is considering cutting 20,000 jobs from its global workforce, focusing on Europe and developing countries, Kyodo news reported on Friday, as the Japanese automaker struggles to recover from plunging car sales. The possible cuts come as Nissan prepares to announce its updated mid-term strategy next week. Profits at the automaker have been floundering for the past three years, and the coronavirus pandemic has only piled on urgency and pressure to renew efforts to down size and turnaround the company. Nissan declined to comment on the Kyodo report.

Nvidia Corp forecast second-quarter revenue above analysts’ estimates, as demand surges for its chips used in data centers that power the shift to working remotely due to the coronavirus outbreak. The chipmaker said it expects current-quarter revenue of US$3.65-billion, plus or minus 2%, while analysts on average were expecting US$3.29-billion, according to IBES data from Refinitiv.

Economic news

Canadian retail sales fell a record 10 per cent in March to $47.1-billion as many retailers closed their doors amid the spread of the novel coronavirus.

With Reuters and The Canadian Press

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