Wall Street futures were mixed to slightly lower early Friday while Europe wavered at the open and Asian markets finished higher helped by further indications from the U.S. Federal Reserve that it would exercise patience on further interest rate hikes. On Bay Street, TSX futures were little changed with crude prices climbing in early going. Cannabis shares will also be in the spotlight at the opening bell on news that Aphria Inc.'s CEO will step down when the marijuana producer finds a replacement.
“Needless to say it’s been a very encouraging couple of weeks for investors, full of post-Christmas cheer,” OANDA analyst Craig Erlam said. Wall Street extended its rally to a fifth day as dovish remarks from Fed chair Jerome Powell offset the impact of a weak showing by U.S. retailers.
"We’ve almost halved the deficit in the S&P 500, Dow and NASDAQ, having entered into bear market territory in two of these, and investors have become less gloomy about the outlook. That’s not to say that challenges don’t still exist for the global and domestic economy, or that a slowdown isn’t still expected this year."
However, he said, the improving tone of recent trade talks between the United States and China reduces a major headwind for the markets, as does the Fed’s move to more flexibility on future interest rate hikes.
Earlier this week, mid-level trade talks ended on a positive note. Higher level talks could now follow with U.S. Treasury Secretary Steven Mnuchin saying Chinese Vice Premier Liu He will “most likely” visit Washington later in January for further discussions.
On Bay Street, cannabis shares will be at the forefront when Friday’s trading day starts. The Globe and Mail reports that Aphria CEO Vic Neufeld will step down once the company finds a replacement for him. (Aphria confirmed the news in a press release early Friday.) Aphria has recently faced questions about its deal-making and struggling stock price. Mr. Neufeld has served as chief executive officer since 2014. Aphria also reported its latest quarterly earnings Friday morning.
South of the border, Apple shares were slightly higher early Friday after reports that the company plans to launch three new iPhone models this year. Last week, Apple shares dropped 10 per cent after the company issued its first revenue warning in more than a decade, citing poor demand in China. Separately, Reuters also reported Friday that a number of Chinese electronics retailers have slashed iPhone prices this week to boost sales. The discounts run as deep as US$118 for the recently launched 64 GB iPhone XR.
Overseas, European markets opened higher but lost some ground as trading progressed. The pan-European STOXX 600 was up 0.19 per cent. Britain’s FTSE 100 edged up 0.24 per cent. Germany’s DAX and France’s CAC 40 each slid 0.19 per cent.
In Asia, markets carried through on Wall Street’s positive finish, closing Friday’s session mostly higher. The Shanghai Composite Index ended the week up 0.74 per cent. Hong Kong’s Hang Seng rose 0.55 per cent. Japan’s Nikkei advanced 0.97 per cent.
Crude prices were higher and looked set for solid weekly gains as improved trade relations between the U.S. and China and the impact of OPEC-led production cuts helps bolster market sentiment. Brent crude was positive heading toward the North American open, although off the morning’s highs, and had a range for the day of US$61.05 to US$62.49. West Texas Intermediate was also in the black with a range for the day so far of US$52.14 to US$53.31.
Brent crude looks set for a weekly gain of about 9 per cent while WTI should close out the session with a weekly gain of more than 10 per cent.
OANDA analyst Stephen Innes said markets are also drawing support from reports that Iran will likely see its crude exports lower for a third month in January as it struggles to find buyers in the face of U.S. sanctions. Reuters reports that, when the sanctions kicked in, exports in November fell to below 1 million barrels a day, down form regular sales of 2.5 million barrels.
“Besides the positive impact from the thaw in US-China trade tensions, Federal Reserve Chairman Jerome Powell took the spotlight amid a Fedspeak frenzy echoing his recent comments from last week that the central bank’s commitment was to proceed with caution on the monetary policy,” Mr. Innes said in a morning look at commodity prices. “Which of course was viewed very favourably by oil markets as a Fed pause will be great for risk assets, and favourable market sentiment continues to run uninterrupted.”
In other commodities, gold prices were higher as the U.S. dollar weakened on dovish Fed comments. Gold looks set for a fourth weekly gain. Spot gold rose 0.5 per cent to US$1,292.92 an ounce. U.S. gold futures were up 0.5 per cent at US$1,293.4.
“Gold is pushing higher this morning, supported once again by a weaker dollar,” Mr. Erlam said. “The greenback did pare some of Wednesday’s losses yesterday but that’s all it was, with the break the day before looking quite significant from a technical standpoint and potentially opening up a move back towards the July and September lows.”
He said that means the US$1,300 resistance level for gold “is looking very vulnerable and could be a case of when, rather than if, it breaks."
“Risk aversion has been supportive for gold but as we’re seeing now, it’s primary driver is the dollar. And the dollar softening as trade relations between the U.S. and China improves should continue to lift gold,” he said.
The Canadian dollar was higher in early going helped by rising crude prices and a weaker greenback. The day range on the loonie so far is 75.50 US cents to 75.85 US cents.
There were no major Canadian economic releases due Friday, meaning the loonie will likely move alongside shifts in broader currency markets. U.S. inflation figures for December will likely be the key release for exchange markets ahead of the North American open. The figures showed that the core rate of inflation held relatively steady at 2.2 per cent. On a monthly basis, core consumer prices rose 0.2 per cent. The broader consumer price index fell to an annual rate of 1.9 per cent. From November levels, consumer prices were down 0.1 per cent in December.
“With little indication here that the acceleration in wage pressures or tariffs are causing any pickup in inflation, the Fed can take a pause in [the first quarter] on raising rates to assess the health of growth indicators,” CIBC economist Katherine Judge said in a note after the report’s release. “As such, we continue to expect only one hike in 2019, materializing in [the second quarter.]”
The U.S. dollar index was down 0.2 per cent at 95.32 early Friday. On Thursday' the Fed chair said he favoured “patience” when looking at future interest rate hikes, weighing on the greenback. He also said he was concerned about rising debt levels in the United States. The U.S. dollar index, which weighs the greenback against a basket of currencies, is down more than 2 per cent since the middle of last month.
In bonds, Treasury yields slid in the wake of Mr. Powell’s comments. The yield on the 10-year note was lower at 2.717 per cent. The yield on the 30-year note was also lower at 3.047 per cent.
Stocks set to see action
Corus Entertainment Inc’s quarterly profit missed analyst estimates on Friday due higher costs related to acquisitions and restructuring. The Toronto-based company’s net income attributable to shareholders fell to $60.4-million, or 28 cents per share, in the quarter ended Nov.30, from $77.7-million, or 38 cents per share, a year ago. Excluding items, Corus earned 33 cents per share, but missed the analyst average estimate of 40 cents per share, according to IBES data from Refinitiv.
General Motors Co said it expects 2018 earnings per share to exceed its prior estimates, and forecast 2019 adjusted earnings per share above Wall Street expectations. GM said in October it expected adjusted 2018 earnings of US$5.80-US$6.20. The United States largest carmaker said 2019 earnings per share will be in the range of US$6.50 to US$7.00, above the US$5.86 expected by analysts, according to IBES data from Refinitiv. GM shares were up 6 per cent in premarket trading on the news.
Newmont Mining Corp, the world’s No. 2 gold producer, is cutting 120 jobs at its Carlin mining operation in Nevada after deciding to reduce the life span of one mine and suspending part of another due to a wall slide, a spokesman said on Thursday. The company announced the cuts to its work force and union on Jan. 7 and is in the process of informing affected employees, Newmont spokesman Omar Jabara said. Newmont said in its third-quarter results announcement in October that it was taking a write-down due to a change to the mine plan of the Emigrant open-pit mine at Carlin that would reduce its life span, originally set at 14 years.
Reuters reports that two shareholder lawsuits filed this week accused the board of Google parent Alphabet Inc of playing a direct role in covering up sexual misconduct claims against two former executives over the last five years. The company declined to comment, according to the wire service. Both of the lawsuits seek to force Google to change its governance and oversight to stop future workplace conduct issues. They also call for Alphabet directors to pay damages to Alphabet for allegedly breaching their fiduciary duties and engaging in corporate waste.
Medical cannabis company Tilray Inc.'s shares were up more than 18 per cent in premarket trading after major shareholder Privateer Holdings Inc. said it doesn’t have plans to sell any shares when a lock-up period ends next week. “When we decide to distribute shares, we will do so in an orderly and deliberate manner to maximize tax-efficiency considerations for Privateer investors, while also taking into consideration potential impacts on Tilray’s public float,” Michael Blue, Managing Partner of Privateer, said.
The U.S. annual rate of inflation cooled to 1.9 per cent in December. On a monthly basis, consumer prices fell 0.1 per cent, in line with forecasts. Excluding food and energy, the core consumer price index rose 2.2 per cent from a year earlier and rose 0.2 per cent for the month.
(2 p.m. ET) U.S. reports federal budget balance for December.
With Reuters and The Canadian Press
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