Canada’s main stock index extended its rise on Friday, following a record high hit a day earlier, as oil and gold prices advanced.
In the opening minutes of trade, the Toronto Stock Exchange’s S&P/TSX composite index was up 28.26 points, or 0.15%, at 19,350.18.
The S&P 500 and the Dow hit all-time highs on Friday as Morgan Stanley wrapped up earnings reports from the big U.S. banks with a profit surge, while optimism about a solid economic rebound put the main indexes on course for weekly gains.
The Dow Jones Industrial Average rose 22.17 points, or 0.07%, at the open to 34,058.16. The S&P 500 opened higher by 3.72 points, or 0.09%, at 4,174.14, while the Nasdaq Composite gained 20.35 points, or 0.14%, to 14,059.11 at the opening bell.
In Canada, telecom stocks are a major focus. After a lengthy review, Canada’s telecom regulator announced late Thursday it will force the Big Three national wireless carriers and SaskTel to sell access to their networks to regional competitors who commit to building their own network infrastructure.
The Canadian Radio-television and Telecommunications Commission came to its decision after determining that the three national carriers – BCE Inc.’s Bell Canada, Rogers Communications Inc. and Telus Corp. – together exercise market power in the wireless industry in all provinces except Saskatchewan, where Sasktel has sole market power.
Initial reactions from analysts suggest the decision won’t be overly damaging for the major telecom carriers. And indeed, share prices in major telecoms were largely flat Friday morning - although Shaw Communications saw a healthy rise of 1.6% in early trade.
“Overall, we believe the limited number of companies potentially eligible for MVNO (mobile virtual network operator) access, as well as the mechanism set for determining MVNO rates, should largely protect the incumbents’ wireless return on invested capital,” Desjardins Securities analysts said in a note this morning. “Cogeco Communications and Shaw Communications appear to be initial winners of the decision. However, we highlight that a Cogeco Communications wireless venture would come with significant operational risk under the new regulatory framework.”
Morgan Stanley reported a 150% jump in first-quarter profit on Friday that sailed past expectations, as a global dealmaking boom boosted investment banking and heightened trading activity lifted its institutional securities division.
The Wall Street powerhouse, however, recorded a total one-off loss of over $900 million that it said was related to a credit event and subsequent losses from “a single prime brokerage client.”
Morgan Stanley was one of six banks who had exposure to Archegos Capital Management, a family office fund that defaulted on margin calls late last month and triggered a firesale of stocks across Wall Street.
Shares in Morgan Stanley were down 0.6% in early trading.
Wall Street’s main indexes have bounced this month as solid economic data as well as the Federal Reserve’s pledge to keep interest rates low despite higher inflation boosted demand, particularly for richly valued technology stocks.
The benchmark S&P 500 and the blue-chip Dow are on course for their fourth straight week of gains, while the technology-heavy Nasdaq is less than a percent below its own all-time peak.
Tech behemoths Apple Inc, Amazon.com Inc, Tesla Inc Microsoft Corp, which led Wall Street’s recovery last year from the coronavirus-fueled crash, edged down in premarket trading after leading gains in the previous session.
With the first-quarter corporate earnings season under way, focus will be on results from Morgan Stanley after bumper earnings earlier this week from JPMorgan Chase & Co, Goldman Sachs Group Inc, and Bank of America that reinforced hopes of a swift economic rebound.
Oil lost its earlier gains Friday and was trading modestly lower in mid-morning hours.
China’s gross domestic product jumped 18.3% in the first quarter from a year earlier, official data showed on Friday, but that was little weaker than some market watchers had expected.
On Thursday, figures showed a rise in U.S. retail sales and a drop in unemployment claims.
“Given the improving outlook for the world’s two biggest economies, there is little chance of the market’s feel-good glow being extinguished any time soon,” said Stephen Brennock of oil broker PVM.
Copper, up nearly 4% for the week, is slightly lower this morning. The weaker-than-expected growth in China is weighing on sentiment.
Gold prices scaled a seven-week high on Friday and were set for their best weekly gain since mid-December as a pullback in U.S. Treasury yields and the dollar lifted the metal’s appeal.
Currencies and bonds
The Canadian dollar was up about a third of a cent against the greenback this morning after struggling to make any upward progress on Thursday.
“In the context of the generally positive risk backdrop (firmer stocks, firmer crude) that prevailed yesterday, the pressure on the CAD looked somewhat out of place,” forex analysts from Scotiabank commented this morning. “Gains today are perhaps ‘correcting’ that weakness and bringing spot back a little closer to where we estimate equilibrium (near 1.23 currently - or 81.3 cents US).”
“We still rather expect modest USD gains to draw out better selling pressure and CAD bargain hunters as investors keep an eye next week’s Bank of Canada policy decision,” they added.
Forex and bond investors will be keeping a close eye on Canada as the country releases wholesale trade, housing starts and international securities transactions data later today.
Other corporate news
U.S. railroad operator Kansas City Southern on Friday posted a 3.5% fall in quarterly revenue, in part due to lower volumes compared to levels seen early last year COVID-19-mandated lockdowns impacted railroad volumes in the first half of 2020 due to low demand for consumer products and industrial goods. A recovery in rail volumes has also been adversely impacted by the Texas deep-freeze in February.
Other earnings today include: Bank of NY Mellon; General Electric Co.; Honeywell International Inc.; PNC Financial Services Group Inc.; State Street Corp.
Sales of wholesale products in Canada fell 0.7% in February to $68.8 billion, the second decline in three months. Despite the drop, sales in February were the second highest on record for the sector.
U.S. homebuilding rebounded more than expected in March, but soaring lumber prices amid supply constraints could limit builders’ capacity to boost production and ease a shortage of homes that is threatening to slow housing market momentum. Housing starts surged 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the Commerce Department said on Friday. Economists polled by Reuters had forecast starts would rise to a rate of 1.613 million units in March.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for April.
With files from Reuters