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Equities
Canada’s main stock index started lower Friday with weaker crude prices hitting energy shares. South of the border, Wall Street’s key indexes were also down as a U.S. stimulus package remains elusive.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 70.94 points, or 0.4 per cent, at 17,522.4.
In the U.S., the Dow Jones Industrial Average fell 64.77 points, or 0.22 per cent, at 29,934.49 after the market opened.
The S&P 500 dropped 16 points, or 0.44 per cent, to 3,652.10, while the Nasdaq Composite dropped 65.45 points, or 0.53 per cent, to 12.340.35.
“Hopes that the U.S. would implement a stimulus package before year-end have been dashed once again, with Nancy Pelosi stating that talks would likely continue into Christmas,” IG senior market analyst Joshua Mahony said.
“While the ongoing battle again COVID remains on the right track, the inability to strike a deal on either side of the Atlantic could soon undermine hopes that stocks will stage a welcome Santa rally after a difficult year.”
In Europe, failure of Brexit talks to reach a deal heading into the weekend has also rattled investor sentiment.
British Prime Minister Boris Johnston cautioned on Thursday that there was a “strong possibility” that an agreement wouldn’t be reached. European Commission President Ursula von der Leyen told the bloc’s 27 national leaders on Friday Britain is now more likely to leave the European Union on Dec. 31 without a trade deal agreement. Negotiators face a Sunday deadline for a deal.
In this country, investors will get results from Transat A.T., which is now in the process of being taken over by Air Canada. The company’s earnings will be released after the close of trading.
Markets also got a glimpse of the state of Canadians’ finances. Statistics Canada says Canadian households owed an average of $1.71 for every dollar of disposable income in the third quarter. The agency says that household debt as a percentage of disposable income rose to 170.7 per cent in the third quarter, up from 162.8 per cent in the second quarter.
Vancouver’s AbCellera Biologics Inc. is set to start trading on the Nasdaq Exchange Friday as Canada’s most valuable Canadian biotechnology company after hiking the size of its initial public offering for the third time this week. AbCellera said in a filing late Thursday with the U.S. Securities and Exchange Commission it would sell 24.15 million shares at US$20 a share in the offering.
On Wall Street, Costco Wholesale Corp shares were up slightly in early trading after the retailer beat market estimates for first-quarter profit and revenue. Overall online sales jumped about 86 per cent while revenue from memberships, which accounts for most of Costco’s gross margin, rose 7 per cent.
Overseas, major European markets were down in afternoon trading. The pan-European STOXX 600 was off 1.05 per cent with most sectors down. Britain’s FTSE 100 was 0.55 per cent lower. Germany’s DAX fell 1.54 per cent. France’s CAC 40 lost 0.86 per cent.
In Asia, Japan’s Nikkei closed down 0.39 per cent. Hong Kong’s Hang Seng gained 0.36 per cent.
Commodities
Crude prices were slightly weaker in early going but still headed for a sixth consecutive week of gains, buoyed by the rollout of vaccine programs in the fight against COVID-19.
The day range on Brent is US$49.92 to US$50.74. The range on West Texas Intermediate is US$46.56 to US$47.29. On Thursday, Brent cracked US$51 a barrel, its best level since March. WTI added nearly 3 per cent during the previous session.
Investors are increasingly optimistic that the availability of a vaccine will boost demand in the new year.
“I think the recent rally leaves oil very sensitive to profit-taking should we see negative news healthcare or otherwise on vaccines,” Axi chief global markets strategist Stephen Innes said in an early note. " OPEC+ support remains essential as demand returns gradually to normal levels.
“Any news that pushes forward the point at which OPEC+ can step back from a more active role managing supply will provoke a sharp sell-off in Oil.”
He said monthly reports due next week from OPEC, the U.S. Energy Information Administration and the International Energy Agency will offer an important year-end health check as investors considering positioning into 2021.
Gold prices, meanwhile, slid as investors grappled with uncertainty over additional U.S. stimulus package, offsetting support from a weaker U.S. dollar.
Spot gold fell 0.1 per cent to US$1,833.70 per ounce. U.S. gold futures were steady at US$1,837.
Currencies
The Canadian dollar edged lower as its U.S. counterpart steadied but still held near its lowest level in more than two years against a group of world currencies.
The day range on the loonie is 78.30 US cents to 78.61 US cents.
Canadian markets will get third-quarter household debt figures ahead of the North American open.
“The CAD is a little softer on the day, reflecting the weaker risk tone, but maintains a modest gain on the week overall,” Scotiabank chief FX strategist Shaun Osborne said.
On Thursday, Bank of Canada deputy governor Paul Beaudry used a key speech to defend the central bank’s quantitative easing program, seeking to dispel the notion that it is printing money to finance the federal government’s huge deficit.
The Globe’s David Parkinson reports that, in an address via video conference to the Moncton, Fredericton and Saint John chambers of commerce, Mr. Beaudry stressed that the QE program is designed to lower long-term interest rates to stimulate the economy – not to fund government spending. The central bank has purchased more than $180-billion of Government of Canada debt under the program since April.
On global markets, the U.S. dollar index edged up 0.2 per cent, trading at 90.867, but was still just off its weakest level in two-and-a-half years.
The euro was taking a breather, down 0.12 per cent against the U.S. dollar after Thursday’s gains when the ECB announced a new round of stimulus.
Britain’s pound, meanwhile, remained under pressure in early trading, down about 0.75 per cent at US$1.3193 ahead ahead of a Sunday deadline to hammer out a Brexit deal.
The pound has slipped 1.8 per cent this week as British and European leaders have expressed doubts that they will be able to salvage a deal, according to figures from Reuters.
More company news
Lululemon Athletica Inc raised its holiday quarter revenue and profit forecasts on Thursday, as the COVID-19 pandemic induced popularity of home workouts boosted demand for athleisure apparel. Lululemon said it expects fourth-quarter revenue to rise by a mid-to-high teens percentage, compared to its prior forecast of a high single to low double-digit increase. Analysts estimate a 14.4% increase, according to IBES data from Refinitiv.
Inter Pipeline Ltd. says it will shell out $1-billion in capital expenditures in 2021 as it pushes to finish its petrochemical plant. The Calgary-based company says it will spend $800 million next year on the Heartland Petrochemical Complex, which it now expects to start up in early 2022.
A US$18.5-billion class action against Mastercard for allegedly overcharging more than 46 million people in Britain over a 15-year period was on Friday shown the green light by the UK Supreme Court. The judgment, that upholds last year’s Court of Appeal decision, sets the scene for Britain’s first mass consumer claim brought under a new legal regime and offers guidance for a string of other class actions that have been stalled in its wake.
Oracle Corp beat Wall Street estimates for second-quarter profit and revenue, as remote work trends boosted cloud product and software licensing sales. Excluding items, Oracle earned $1.06 per share, topping market expectations of $1 per share, according to IBES data from Refinitiv. Total revenues rose 2 per cent to $9.8-billion. Analyst’s were expecting revenue of $9.79-billion. The results were released after Thursday’s close.
Economic news
(8:30 a.m. ET) Canadian capacity utilization for Q3.
(8:30 a.m. ET) Canada’s national balance sheet accounts for Q3.
(8:30 a.m. ET) U.S. PPI for November.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for December.
With Reuters and The Canadian Press
Terry Weber