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Equities
Canada’s main stock index opened lower Friday with weaker crude prices weighing on the energy sector. In the U.S., major indexes were also in the red on heightened U.S.-China tensions and new figures showing a deceleration in job growth in July.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 26.24 points, or 0.16 per cent, at 16,552.86.
On Wall Street, the Dow Jones Industrial Average fell 65.30 points, or 0.24 per cent, at the open to 27,321.68.
The S&P 500 opened lower by 9.11 points, or 0.27 per cent, at 3,340.05. The Nasdaq Composite dropped 35.54 points, or 0.32 per cent, to 11,072.53 at the opening bell.
Statistics Canada said the economy added 419,000 new jobs in July, marking the third month of gains. The jobless rate fell to 10.9 per cent from 12.3 per cent the month before.
Meanwhile, the U.S. Labor Department said nonfarm payrolls increased by 1.763 million jobs last month after a record 4.791 million in June, the Labor Department said on Friday. Economists polled by Reuters had forecast 1.6 million jobs were added in July. The unemployment rate fell to 10.2 per cent from 11.1 per cent in June.
“The [U.S.] non-farm payroll report confirmed economic data is plateauing and that the third-quarter rebound everyone expected is not happening,” OANDA senior analyst Edward Moya said.
“The labor market did not deteriorate and risky assets along with the [U.S.] dollar initially rallied after the upward surprise in payrolls. Many traders were expecting a possible negative print, but that pessimism will only move to next month as that report will include much of the slowdown that stemmed from the virus resurgence in the second-wave states. "
Rising U.S.-China tensions also weighed on sentiment.
On Thursday, U.S. President Donald Trump unveiled sweeping bans on U.S. transactions with China’s ByteDance, owner of video-sharing app TikTok, and Tencent, operator of messenger app WeChat, in a major escalation of tensions with Beijing. Tencent shares sank in Asian trading on the news. The executive orders are set to go into effect in 45 days.
“There are concerns that this is just a taste of what may follow in the months ahead,” AxiCorp market analyst Milan Cutkovic said. “Trump is likely to increase the pressure on Beijing ahead of the U.S. Presidential election.”
On the corporate side, Canadian investors continue to get earnings with auto-parts giant Magna International reporting results before the start of trading.
Magna reported a net loss attributable of US$647-million, or US$2.17 per share, in the second quarter ended June 30, compared with a profit of US$452 million, or US$1.42 per share, a year earlier. Total sales fell about 58% to US$4.29-billion but still came in ahead of analysts’ estimates of US$4.10 billion.
After Thursday’s close, insurer Sun Life Financial Inc topped analyst estimates for second-quarter core earnings, helped by lower claims on some health plans and the positive impact of investing activity. Underlying net income, excluding adjustments and market impacts, was $1.26 a share in the three months ended June 30, compared with $1.24 a year earlier. Analysts had expected $1.13 a share.
Overseas, the pan-European STOXX 600 was down 0.22 per cent in morning trading. Britain’s FTSE 100 fell 0.14 per cent. Germany’s DAX lost 0.06 per cent and France’s CAC 40 slid 0.56 per cent.
In Asia, Hong Kong’s Hang Seng closed down 1.6 per cent. The Shanghai Composite Index fell 0.96 per cent. Japan’s Nikkei dropped 0.62 per cent.
Commodities
Crude prices were down slightly as concerns over rising tensions between the United States and China offset the impact of a pledge from Iraq to further cut output this month.
The day range on Brent is US$44.62 to US$45.30. The range on West Texas Intermediate is US$41.43 to US$42.22. Both benchmarks look set for weekly gains of about 4 per cent.
Iraq said on Thursday it would make an additional cut in its oil production of about 400,000 barrels per day in August to compensate for its overproduction over the past period under the OPEC+ supply cut agreement.
Prices, however, were tempered by heightened tensions between the United States and China after Mr. Trump’s executive order aimed at Chinese apps TikTok and WeChat.
“By the shift in lower oil prices today, it confirms that when it comes to geopolitical risk, Asia oil traders (and most for that fact) have an unfortunate predisposition to heightened US-China tensions,” AxiCorp chief market strategist Stephen Innes said.
In other commodities, gold prices continued to hover near record highs.
Spot gold hit a record high of US$2,072.50 in early trading before slipping 0.1 per cent to US$2,061.41. So far gold has risen more than 4 per cent this week and looks set for its ninth straight weekly gain.
U.S. gold futures rose 0.1 per cent to US$2,070.80.
“It’s difficult to hold anything but a constructive view (on gold),” ING analyst Warren Patterson said. “Whilst the pace of the rally may slow, there certainly does seem to further upside in the near term, and for the remainder of the year.”
Currencies
The Canadian dollar struggled to hold initial gains after Statistics Canada released a better-than-expected reading on hiring in July.
The day range on the loonie is 74.78 US cents to 75.27 US cents.
Statscan said the economy added 419,000 new jobs last month, more than markets had been expecting. The jobless rate fell to 10.9 per cent.
The loonie rallied somewhat on the numbers, moving off earlier lows, but then quickly lost altitude to dip back below the 75-US cent mark.
“Job gains were largely seen in part-time employment, although that’s were much of the destruction occurred early on in the crisis,” CIBC senior economist Royce Mendes said. “The pace of increase in employment slowed in July relative to the prior month, and that’s likely to become a trend as the pace of easing in restrictions also slows down and the number of Canadians on temporary layoff falls.”
" The good news is that with virus cases low in Canada at moment, the country isn’t facing an immediate risk of having to tamp down activity again.”
News of a brewing U.S.-Canada tariff war is also tempering the loonie’s progress after the U.S. said on Thursday that it would reimpose tariffs on most aluminum imports. Canada said it would match the move with its own tariffs.
“In response to the American tariffs announced today, Canada will impose countermeasures that will include dollar-for-dollar retaliatory tariffs,” Prime Minister Justin Trudeau said on Twitter on Thursday evening.
On global markets, the U.S. dollar rebounded while other major currencies weakened in the wake of the latest U.S.-China headlines.
The euro retreated from its highs and last traded down 0.3 per cent at US$1.1845, while the British pound also fell 0.2 per cent to US$1.3115, according to Reuters.
More company news:
Linamar Corp posted a quarterly loss compared with a year-ago profit, as the auto parts maker grapples with a demand fallout from the COVID-19 pandemic. The company’s net loss was $37.9-million, or 58 cents per share, in the second quarter ended June 30, compared to a profit of $150.2-million, or $2.28 per share, a year earlier. Sales dropped 55.7 per cent to $923.6-million.
Goldman Sachs Group Inc lowered its previously stated quarterly net earnings applicable to common shareholders to $197-million from $2.25-billion. The bank said in a filing it had set aside $2.96-billion for potential legal and regulatory costs, up from the $945-million announced on July 15 with its second-quarter earnings. On July 24, the bank agreed to pay the Malaysia government $3.9-billion to settle a criminal probe over its role in the multibillion-dollar 1MDB scandal.
Heroux-Devtek Inc. swung to a net loss in its latest quarter as the landing gear manufacturer felt the impact from severe turbulence to the global aerospace industry caused by the COVID-19 pandemic. The Quebec-based company says it lost $1.3-million or four cents per share in its fiscal first quarter, down from a net profit of $6.4-million or 18 cents per share a year earlier. Adjusted profits were cut in half, reaching $3.38-million or nine cents per share, compared with $6.96-million or 19 cents per share in the prior year.
Revenues for the three months ended June 30 decreased 10.5 per cent to $128.3 million, from $143.4 million in the first quarter of 2019.
Economic news
(8:30 a.m. ET) Canadian employment for July.
(8:30 a.m. ET) U.S. nonfarm payrolls for July.
(10 a.m. ET) Canada's Ivey PMI for July.
(10 a.m. ET) U.S. wholesale inventories for June.
With Reuters and The Canadian Press
Terry Weber