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Equities
Canada’s main stock index opened lower Friday and looked set for its worst week in months as caution grips global markets. South of the border, Johnson & Johnson shares weighed after the company released its latest COVID-19 vaccine data, adding to volatility sparked be recent speculative trading.
At 09:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 110.52 points, or 0.63%, at 17,546.68.
In the U.S., the Dow Jones Industrial Average fell 49.5 points, or 0.16%, at the open to 30553.91, the S&P 500 fell 9.3 points, or 0.25%, at the open to 3778.05, while the Nasdaq Composite dropped 52.4 points, or 0.39%, to 13284.719 at the opening bell.
Markets have been hit with a wave of volatility as retail traders using online forums have bought into stocks normally shorted, forcing hedge funds to reverse short positions on companies like GameStop and AMC Entertainment.
Online broker Robinhood restricted trading in a number of highly volatile stocks such as GameStop and AMC Entertainment. Early Friday Robinhood said it was not allowing purchases of parts of shares in GameStop and other stocks, a practice that has encouraged smaller investors by reducing the size of the amount they have to bet.
“The GameStop saga will end, leaving a sour taste in policymakers’ mouths,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in an early note.
“So, the story could be a trigger for action that could bring the government and the central bank to revise their ultra-loose policies, that throw liquidity in the middle, and not towards a reasonable target. This gives way to a poor transmission to the real economy, and unjustified valuation in the financial markets.”
Markets came under further pressure Friday after Johnson & Johnson said its single-dose vaccine was 72 per cent effective in preventing COVID-19 in the United States, but a lower rate of 66 per cent was observed globally.
J&J shares were down nearly 4 per cent.
However, shares of U.S. drugmaker Novavax shot up more than 50 per cent in the premarket after researchers behind the development of its new COVID-19 vaccine said it provides strong protection against the British and South African variants of the virus. The Globe’s Paul Waldie reports that Interim results from trials involving 15,000 volunteers in the U.K. showed that the vaccine was 85.6 per cent effective against the British variant. Trials in South Africa involving 4,400 participants showed 60 per cent efficacy.
In Canada, Statistics Canada said this country’s GDP rose 0.7 per cent in November compared with the previous month. Economists had been expecting a smaller gain of 0.4 per cent. The agency also said early estimates of growth in December suggest a rise of 0.3 per cent. Many economists had been forecasting a decline in December.
She said RBC economists expect the December estimate to show that growth fell 0.4 per cent in December as increased restrictions aimed at curbing the spread of COVID-19 took hold.
Overseas, major European markets were down in morning trading. The pan-European STOXX 600 fell about 1 per cent. Germany’s DAX lost 1.02 per cent. Britain’s FTSE 100 was off 0.84 per cent. France’s CAC 40 fell 0.97 per cent.
In Asia, Japan’s Nikkei ended down 1.89 per cent, failing to follow through on Wall Street’s positive handoff. Hong Kong’s Hang Seng lost 0.94 per cent.
Commodities
Crude prices were steady in early going as investors continue to weigh demand concerns amid continued heightened COVID-19 restrictions in some areas.
The day range on Brent is US$55.31 to US$55.84. The range on West Texas Intermediate is US$51.93 to US$52.55.
“In past European COVID flare-ups, the pattern has typically been for the underperformance in oil markets to occur as expectations for lockdowns rise and stabilize once those lockdowns occur,” Axi chief market strategist Stephen Innes said.
“Given the delay in vaccine rollouts, we may be getting the next round of lockdowns very soon, judging by [German chancellor Angela] Merkel’s recent ‘the pandemic has slipped out of control.’ And throw China, LNY (Lunar New Year) mobility clampdown into the mix, things don’t look great.”
Crude prices have drawn some support from supply cuts and bigger-than-forecast declines in U.S. inventories.
Saudi Arabia is set to cut output by 1 million barrels per day (bpd) in February and March, and compliance with output curbs by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, has improved in January, Reuters reports.
However, concerns over COVID-19 vaccine production delays continue to weigh
Europe’s fight to secure vaccines intensified on Thursday when the EU warned drug companies that it would use all legal means or even block exports unless they agreed to deliver doses as promised.
In other commodities, gold prices traded in a tight range on Friday but still looked set for a weekly decline.
Spot gold was up 0.2 per cent at US$1,844.86 per ounce. Prices were down 0.5 per cent for the week and 2.7 per cent for the month. U.S. gold futures rose 0.4 per cent to US$1,847.90.
“Gold is largely going to continue to tread water as it is waiting for a proper catalyst,” Michael McCarthy, chief market strategist at CMC Markets, said.
Currencies
The Canadian dollar recouped early losses despite flagging risk sentiment while the U.S. dollar advanced against a basket of world currencies.
The day range on the loonie is 77.67 to 78.02 US cents.
“Generally firm commodity prices are helping support the CAD despite headwinds from weak risk sentiment,” Shaun Osborne, chief FX strategist with Scotiabank, said.
The loonie added to its early advance after Statscan said the economy grew by a better-than-expected 0.7 per cent in November. The agency also forecast growth of 0.3 per cent in the final month of the year.
In early trading, the dollar index, which measures the U.S. dollar against a basket of currencies, rose 0.2 per cent to 90.739. The index is up half a percent for the week.
The euro dipped 0.1 per cent to US$1.2107. The dollar gained 0.4 per cent versus the Japanese yen to 104.64.
The Swiss franc, another currency that investors often view as a safe-haven holding, was little moved versus the euro at 1.0771.
More company news
French train maker Alstom said on Friday it had completed its previously announced purchase of Bombardier Inc’s rail business, with the reference price of the deal coming at the low end of its guidance. Alstom said the price for the deal was established at 5.5 billion euros (US$6.7-billion), at the bottom of a range of 5.5-5.9 billion euros indicated previously, Reuters reports.
Caterpillar Inc reported lower fourth-quarter earnings, hurt by weak equipment demand amid lingering economic uncertainty caused by the coronavirus pandemic. The heavy equipment maker reported an adjusted profit of $2.12 per share versus $2.71 per share a year earlier. Analysts surveyed by Refinitiv on average expected earnings of $1.49 per share.
Sweden’s H&M, the world’s second-biggest fashion retailer, is bracing for a loss in the first quarter after full-year profits plummeted due to COVID-19. H&M’s pretax profit fell 88% in the 12 months through November to 2.05 billion crowns (US$245-million) despite large cost cuts. In the final quarter, profit fell 32% year-on-year to 3.67 billion as sales shrank 10% in local currencies.
Classic boot brand Dr. Martens kicked off its London IPO in style on Friday, attracting bumper demand in a sale valuing the company at more than $5 billion that is likely to spur other British companies to follow suit. Dr. Martens’ shares were up 16% in their market debut after the company priced the deal at the top of an indicative range at 370 pence, raising nearly 1.3 billion pounds and giving it a market capitalization of 3.7 billion pounds (US$5.07-billion).
Economic news
(8:30 a.m. ET) Canada’s monthly real GDP for November.
(8:30 a.m. ET) Canada’s industrial product price and raw materials price indexes for December.
(8:30 a.m. ET) U.S. personal spending for December.
(8:30 a.m. ET) U.S. personal income for December.
(8:30 a.m. ET) U.S. Core PCE Price Index for December.
(8:30 a.m. ET) U.S. employment cost index for Q4.
(9:45 a.m. ET) U.S. Chicago PMI for January.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for January.
(10 a.m. ET) U.S. pending home sales for December.
With Reuters and The Canadian Press
Terry Weber