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Equities

Canada’s main stock index fell at Friday’s open, weighed down by declines in the energy and materials sectors. On Wall Street, main indexes also pulled back from record highs with shares of Intel and IBM falling on their latest results.

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At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 104.32 points, or 0.58 per cent, at 17,811.88.

In the U.S., the Dow Jones Industrial Average fell 34.4 points, or 0.11 per cent, at the open to 31141.56. The S&P 500 fell 8.8 points, or 0.23 per cent, at the open to 3844.24, while the Nasdaq Composite dropped 56.1 points, or 0.41 per cent, to 13474.805 at the opening bell.

“Once again, it’s the pandemic that is slowing markets down,” Axi market analyst Milan Cutkovic said. “The sluggish progress of the vaccination campaign in Europe is causing frustration and concern.”

“With the vaccines, market participants saw a light at the tunnel appearing,” he said. “ “However, the longer the restrictions remain in place, the more will investors question whether the governments and central bank are doing enough to prevent another, potentially longer-lasting recession.”

On the corporate side, IBM Corp. shares dropped more than 10 per cent in morning trading after the company’s revenue fell short of forecasts in the latest quarter, hit by a slowdown in its software unit. Total revenue fell 6.5 per cent to US$20.37-billion, missing analysts’ average estimate of $20.67-billion, according to IBES data from Refinitiv.

Intel shares, meanwhile, fell more than 5 per cent despite forecasting first-quarter revenue and profit above Wall Street expectations. The declines came after Intel’s incoming chief executive said most of the company’s 2023 products will be made in Intel factories, instead of offering a strong embrace of outsourcing according to a Reuters report.

In this country, investors got a look at retail sales this fall. Statistics Canada said retail sales rose 1.3 per cent in November, better than the flat reading economists had been forecasting. However, an early estimate from the government agency also suggested that sales in December fell 2.6 per cent as many regions sought to curb the rise in COVID-19 cases.

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“Retail volumes were almost just as strong as the headline, up 1.2 per cent in November, and the consumer shift into goods spending remains a broad theme,” BMO senior economist Robert Kavcic said.

“That could leave monthly real GDP growth at a solid +0.4 per cent. But, we’re set for a steep decline in December as lockdown measures spread more widely across major parts of the country, and then extended into January.”

Overseas, major European markets were down with the pan-European STOXX 600 falling nearly 1 per cent. Britain’s FTSE 100 fell 0.58 per cent. Germany’s DAX fell 0.88 per cent. France’s CAC 40 was off 1.15 per cent.

Sentiment took a hit after new figures showed euro zone business activity fell to its lowest level in two months as COVID-19 lockdowns took a toll on the economy, further raising concerns over the possibility of a double-dip recession.

IHS Markit’s flash composite PMI fell further below the 50 mark separating growth from contraction to 47.5 in January from December’s 49.1.

In Asia, Japan’s Nikkei ended down 0.44 per cent. Hong Kong’s Hang Seng lost 1.6 per cent.

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Commodities

Crude prices fell with demand concerns in the wake of increased COVID-19 restrictions around the globe continuing to weigh on sentiment.

The day range on Brent is US$55.03 to US$56.03. The range on West Texas Intermediate is US$52.00 to US$53.16. Both benchmarks were down roughly 2 per cent in the predawn period, pulling back from the 11-month highs seen last week.

“Crude prices can’t shake off rising concerns that the demand outlook might get a big short-term hit if China experiences a debilitating wave of new coronavirus cases,” OANDA senior analyst Jeffrey Halley said.

“COVID vaccine distributions remain a scramble as states can’t wait for the federal government to get vaccine supplies in order. Michigan and New York have reached out to Pfizer for additional doses and until vaccines are distributed smoothly the recent surge in oil prices should be capped.”

Reuters reported that the commercial hub of Shanghai saw its first locally transmitted cases in two months on Thursday, and Beijing is urging people not to travel during the upcoming Lunar New Year holiday, when tens of millions of urban workers typically head back to their villages.

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Mr. Halley said energy traders are now awaiting weekly inventory figures from the U.S. Energy Information Administration. The report, normally released midweek, was delayed as a result of the market holiday on Monday.

“The API data [released earlier in the week] showed a surprise rise in stockpiles of 2.56 million barrels last week, which could signal the first build since early December if the EIA report confirms it,” Mr. Halley said.

Expectations are for the EIA to show crude oil inventories fell 1.7 million barrels, smaller than the 3.25 million decline seen the prior week.

In other commodities, gold fell on Friday as U.S. Treasury yields rose.

Spot gold fell 0.6 per cent to US$1,859.10 per ounce, retreating from a near two-week high hit on Thursday. For the week, gold is up 1.8 per cent - its biggest weekly gain since the week ending Dec. 18.

U.S. gold futures eased 0.3 per cent to US$1,860.90.

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“Gold still remains attractive but that could change if prices can’t rally as the [U.S.] dollar continues to weaken,” Mr. Halley said.

Currencies

The Canadian dollar was lower, trading below 79 US cents, as its U.S. counterpart stabilized against a group of world currencies after three days of declines.

The day range on the loonie is 78.73 US cents to 79.14 US cents.

The loonie was little changed in the immediate wake of the Statscan report showing better-than-expected retail sales in November. The agency said sales rose 1.3 per cent for the month. However, Statscan also forecast a sales decline in December of 2.6 per cent.

On world markets, the U.S. dollar index, which weighs the greenback against a basket of other currencies, was flat at 90.118 as a pullback in equity markets took a toll on risk sentiment. The index is still on track for its biggest weekly decline since mid-December, according to figures from Reuters.

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The Japanese yen was down around 0.1 per cent against the U.S. dollar, at 103.63.

The euro was flat on the day at $1.21725 and set for a 0.8 per cent gain this week.

The Australian dollar was down 0.5 per cent on the day at 0.77285. The New Zealand dollar was down around 0.5 per cent at 0.7184 versus the U.S. dollar.

More company news

Alphabet Inc.’s Google said on Friday it will disable its search function in Australia if the government proceeds with a media code that would force it and Facebook Inc to pay local media companies for sharing their content. Australia is on course to pass laws that would make the Big Tech giants negotiate payments with local publishers and broadcasters for content. If they can’t strike a deal, a government-appointed arbitrator will decide the price.

Amazon will raise fees for Spanish companies using its platform by 3% from April after the government imposed a digital tax, a company document seen by Reuters showed. An Amazon spokesman confirmed the so-called Google tax, which Spain began charging on revenues of large digital companies from Jan. 21, would hit users of its services.

Economic news

(8:30 a.m. ET) Canadian retail sales for November.

(9:45 a.m. ET) U.S. Markit PMIs for January.

(10 a.m. ET) U.S. existing home sales for December.

With Reuters and The Canadian Press

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