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Equities

Canada’s main stock index edged higher at the open Friday helped by steady commodity prices. On Wall Street, the S&P 500 and Nasdaq started up but the Dow slid with shares of American Express weighing.

At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 9.8 points, or 0.05 per cent, at 19,041.44.

In the U.S., the Dow Jones Industrial Average fell 11.4 points, or 0.03 per cent, at the open to 33804.52. The S&P 500 rose 3.8 points, or 0.09 per cent, at the open to 4138.78, while the Nasdaq Composite rose 43.0 points, or 0.31 per cent, to 13861.367 at the opening bell.

Sentiment took a hit Thursday on reports that the Biden administration could seek an increase in the capital gains tax to near 40 per cent for wealthy individuals, almost double the current rate. However, analysts also questioned the likelihood of such a move coming to fruition.

“While one could argue that the prospect of higher taxes is never welcome, and a doubling of a key tax rate even more so, the likelihood of anything of this nature passing through an evenly split Congress, lies somewhere between slim and none,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“However in these highly uncertainty times it doesn’t take much to spook a little bit of profit taking, in what has already been a very choppy week. The reality is taxes may rise but certainly not by as much being touted.”

On the corporate side, American Express shares fell nearly 3 per cent after the credit card company reported profit ahead of analysts’ forecast but a decline in revenue. The company’s total revenue, excluding interest expense, fell 12 per cent to around $9-billion. Travel and entertainment spending on AmEx cards, adjusted for foreign currency exchange fluctuations, fell 50 per cent, reflecting the impact of the pandemic on customers’ spending patterns.

In this country, the war of words between Canada’s two big railways continued with Canadian National Railway Co. accusing Canadian Pacific Railway Ltd. of misleading investors in the takeover battle for a U.S. railway. Both are attempting to buy U.S.-based Kansas City Southern. The Globe’s Eric Atkins reports, in a letter to KCS’c chief executive officer and board of directors, CN CEO JJ Ruest accused CP of not being truthful in its campaign to discredit the Montreal company’s takeover offer.

Overseas, the pan-European STOXX 600 slid 0.40 per cent in early afternoon trading. On Friday new figures showed that the bloc’s service industry moved past renewed lockdowns to post a surprise return to growth in April. IHS Markit’s flash Composite Purchasing Managers’ Index rose to a nine month high of 53.7 from March’s 53.2. Analysts polled by Reuters had expected to see a dip to 52.8. Anything above 50 indicates growth. A PMI for the service industry rose to 50.3 from last month’s 49.6.

Britain’s FTSE 100 traded down 0.55 per cent. Germany’s DAX and France’s CAC 40 were off 0.49 per cent and 0.30 per cent.

In Asia, Japan’s Nikkei closed down 0.57 per cent. Hong Kong’s Hang Seng gained 1.12 per cent.

Commodities

Crude prices gained in early going as positive economic reports helped offset concern about spiking COVID-19 infections in India and other regions.

The day range on Brent is US$65.41 to US$65.94. The range on West Texas Intermediate is US$61.56 to US$62.12. Both are on track for a weekly loss of about 2 per cent.

Positive economic news helped underpin prices, with the U.S. reporting a better-than-expected reading on weekly jobless claims and the euro zone Purchasing Managers Index indicating a stronger-than-expected pandemic recovery in April.

OANDA senior analyst Jeffrey Halley said markets also got a boost from news that Libyan oil production was falling due to cash constraints.

“Energy markets remain in a holding pattern ahead of the next OPEC+joint technical committee [meeting] next week, and with India consumption concerns capping gains,” he said.

Rising COVID-19 infections in India has prompted a number of countries, including Canada, to bar or cut flights from the country. India recorded the world’s highest daily total of COVID-19 infections, according to Reuters.

In other commodities, spot gold was steady at US$1,783.24 per ounce. The metal jumped to its highest since Feb. 25 at $1,797.67 on Thursday and is up about 0.4 per cent on the week so far.

U.S. gold futures rose 0.2 per cent to US$1,785.60 per ounce.

“The knock-on effect from the tax hike (proposal) is attracting bond investors and the yields have dropped, and this is providing a little bit of lift-off for gold,” Axi chief global market strategist Stephen Innes said.

Currencies

The Canadian dollar was trading around 80 US cents while its U.S. counterpart slid against a group of world currencies.

The day range on the loonie is 79.95 US cents to 80.19 US cents.

“The CAD has struggled to build on the gains that developed mid-week around the Bank of Canada decision but there has been no real rebound in the USD to speak of despite the unsettled risk backdrop,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“Firm commodities, supported by the recovering global economy and building momentum in China, and CAD-supportive spreads suggest that the CAD has some solid backing and scope for losses from here still look rather limited.”

Earlier this week, the Bank of Canada became the first Group of Seven central bank to begin dialing back bond purchases as the economy rebounds from the COVID-19 pandemic. The bank also suggested it could start raising interest rates in the second half of next year.

On world markets, the euro gained 0.3 per cent to US$1.2054 while the U.S. dollar index, measured against a basket of currencies, was down 0.3 per cent, according to figures from Reuters.

The Australian and New Zealand dollars firmed on Friday, but traders said risks are pointed to the downside due to the recent weakening in commodity prices.

The pound rose 0.4 per cent to US$1.3890.

More company news

Canadian insurer Sun Life Financial Inc. says it will buy Pinnacle Care International, Inc., a leading U.S. medical intelligence and health-care navigation provider. The purchase price for the transaction is US$85-million. The deal is expected to close later this year.

Intel Corp raised its annual sales outlook on booming demand for personal computers, but its second-quarter profit forecast fell short of analyst expectations as the company spends heavily to get its manufacturing operations back on track and catch up to rivals with faster chips. The company also missed first-quarter expectations in its closely watched data center chip unit. The results were released after Thursday’s close. Shares were down more than 6 per cent in morning trading on Friday.

Snap Inc beat Wall Street estimates for user growth and revenue as the improved Android version of its popular messaging app Snapchat attracted more users outside of the United States. Daily active users (DAUs), a metric closely watched by investors and advertisers, rose 22% year-over-year to 280 million in the first quarter. Analysts had expected 275.3 million, according to IBES data from Refinitiv. The numbers were released after Thursday’s close.

Mattel Inc reported a record 47-per-cent rise in quarterly sales as stimulus money and confidence in the U.S. vaccination program helped drive consumer confidence. California-based Mattel posted net sales of US$874.2-million in the first quarter ended March 31, beating analysts’ average estimate of US$684.2-million, according to IBES data from Refinitiv.

Economic news

830 a.m. (ET) Canadian manufacturing sales and wholesale trade data for March.

945 a.m. (ET) US. Markit PMIs

10 a.m. ET) U.S. new home sales for March.

With Reuters and The Canadian Press

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