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Equities

Canada’s main stock index gained early Friday on strength in mining stocks but still looked set for its worst weekly decline in months. On Wall Street, key indexes gained, helped by a rise in Merck shares after positive news on its COVID-19 treatment.

At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 21.52 points, or 0.11%, at 20,091.77.

In the U.S., the Dow Jones Industrial Average rose 86.78 points, or 0.26%, at the open to 33,930.70.

The S&P 500 opened higher by 9.62 points, or 0.22 per cent, at 4,317.16, while the Nasdaq Composite gained 46.35 points, or 0.32 per cent, to 14,494.93 at the opening bell.

“As we head into the final quarter of 2021 the gains year to date are still pretty decent, which raises the question, how much more is left in the tank, and whether this October will live up to the reputation of Octobers past, and deliver a huge curveball, as well as giving investors an anxiety attack,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“There’s certainly plenty to be concerned about from surging energy prices, supply chain disruptions, and concerns about more persistent inflation.”

Sentiment was helped by easing bond yields and premarket gains in Merck shares after the company says its experimental COVID-19 pill reduced hospitalizations and deaths by half in people recently infected with the coronavirus. The study results were released by the company and have not been peer reviewed. An independent group of medical advisers monitoring the trial recommended stopping it early because the interim results were so strong, according to a report from The Associated Press. Merck shares were up 8 per cent in morning trading in Toronto.

Ahead of the start of trading, Wall Street got a key reading on inflation. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.3 per cent in August, mirroring July’s increase. In the 12 months through August, the so-called core PCE price index, a closely watched measure of inflation for Federal Reserve, increased 3.6 per cent, matching July’s gain.

Canadian investors, meanwhile, got a better-than-expected reading on this country’s broad economic performance this summer. Statistics Canada said GDP contracted by 0.1 per cent in July. Economists were expecting a 0.2-per-cent contraction. Early estimates from the government agency had pegged the decline closer to 0.4 per cent. As well, Statscan is now forecasting growth of 0.7 per cent in August, better than economists had been predicting.

“It appears the Canadian economy ended the summer on a high note, but the fall season could lower the octave,” TD senior economist Sri Thanabalasingam said.

“Cooling weather and the resurgence of the pandemic (already occurring in Alberta and Saskatchewan) could dampen enthusiasm for recreational activities. At the same time, Canadians are likely to not redirect spending toward goods, an area which they had indulged during most of the pandemic.”

Overseas, the pan-European STOXX 600 fell 0.32 per cent by afternoon. Britain’s FTSE 100 was down 0.60 per cent. Germany’s DAX and France’s CAC 40 fell 0.26 per cent and 0.01 per cent, respectively. New figures released Friday showed euro zone inflation hit its highest level in 13 years last month. Consumer price inflation in the bloc accelerated to 3.4 per cent year-on-year in September from 3 per cent a month earlier, the highest reading since September 2008.

In Asia, Japan’s Nikkei closed down 2.31 per cent. Markets in China and Hong Kong are closed.

Commodities

Crude prices fell on reports that OPEC and its allies are considering further output hikes to offset supply concerns.

The day range on Brent is US$77.55 to US$78.87. The range on West Texas Intermediate is US$74.23 to US$75.57. Brent was heading for a weekly decline after three weeks of gains. West Texas Intermediate looked set for its sixth straight weekly rise.

The OPEC+ group is scheduled to meet on Monday. A Reuters report, citing OPEC sources, said the group was weighing adding more crude than planned.

At the moment, OPEC+ is easing production curbs at a rate of 400,000 barrels per day a month.

“Although speculative oil futures markets could see some sharp intraday moves lower, as occurred yesterday on OPEC+ hopes, they are likely to rebound just as quickly, inevitably meeting a wall of buyers on the dips,” OANDA senior analyst Jeffrey Halley said, noting crude markets saw volatile trading overnight.

“The scramble for pre-winter energy supplies from the northern hemisphere heavyweights is not something that can be magically alleviated by physical markets in the short term.”

In other commodities, gold prices eased as the U.S. dollar held near its highest level in a year.

Spot gold fell 0.3 per cent to US$1,751.95 per ounce. U.S. gold futures eased 0.2 per cent to $1,752.60.

Currencies

The Canadian dollar was weaker as its U.S. counterpart held near its best levels in year and looked set to record its strongest weekly showing since June.

The day range on the loonie is 78.50 US cents to 78.89 US cents.

“The Canadian dollar broadly followed the moves seen in its commodity peers against the [U.S.] dollar overnight while underperforming among the majors with a 0.2-per-cent drop,” Shaun Osborne, chief FX strategist with Scotiabank, said in a note.

“Its 0.4-per-cent drop since last Friday nevertheless places it among the top currencies versus the dollar this week thanks to stronger WTI oil prices and changes in Government of Canada yields that tracked or surpassed the increase seen in Treasurys.”

Canadian investors will get July GDP figures ahead of the market open.

On world markets, U.S. dollar index stood at 94.313, having gained 1.1 per cent so far this week, the largest weekly rise since late June, according to figures from Reuters.

The euro was steady on Friday at US$1.1582, but has fallen about 1.3 per cent during the week.

The yen bounced from a 19-month low overnight but has lost 0.6 per cent for the week.

Britain’s pound slid 0.2 per cent to trade just above a 9-month low at US$1.3452.

In bonds, the yield on the U.S. 10-year now was lower at 1.491 per cent ahead of the start of trading in North America.

More company news

Merck & Co Inc’s experimental oral drug for COVID-19, molnupiravir, reduced by around 50% the chance of hospitalization or death for patients at risk of severe disease, according to interim clinical trial results announced on Friday. Merck and partner Ridgeback Biotherapeutics plan to seek U.S. emergency use authorization for the pill as soon as possible, and to submit applications to regulatory agencies worldwide. Due to the positive results, the Phase 3 trial is being stopped early at the recommendation of outside monitors.

Zoom Video Communications Inc’s $14.7-billion deal to buy cloud-based call center operator Five9 Inc has been mutually terminated, the companies said on Thursday, scuttling the video conferencing platform’s largest-ever acquisition. The development comes after proxy advisory firm Institutional Shareholder Services earlier this month recommended Five9 shareholders vote against the deal, citing growth concerns. “The agreement did not receive the requisite number of votes from Five9 shareholders to approve the merger with Zoom,” San Ramon, California-based Five9 said.

Economic news

8:30 a.m. ET) Canada’s monthly real GDP for July.

(8:30 a.m. ET) U.S. personal spending and income for August.

(8:30 a.m. ET) U.S. Core PCE Price Index for August.

(9:30 a.m. ET) Canada’s Markit manufacturing PMI for September.

(10 a.m. ET) U.S. ISM Manufacturing PMI for September.

(10 a.m. ET) U.S. construction spending for August.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for September.

With Reuters and The Canadian Press

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