Equities
U.S. stock futures wavered around break-even early Friday as earnings season shifts focus to industrial stocks with results from General Electric. On Bay Street, futures turned slightly negative as oil prices dipped following comments from U.S. President Donald Trump on OPEC’s role in maintaining prices. World shares dipped overnight with tech stocks in Asia weighing on indexes in that region and mining stocks struggling in Europe.
The MSCI All-Country World Index, which tracks shares in 46 countries, was off 0.3 per cent early on. That index, however, was still on track for a weekly increase of about 1 per cent.
“Investors were also keeping an eye on runaway U.S. Treasury yields, which sparked a correction in the U.S. equity markets just a few months ago,” Jasper Lawler, head of research for London Capital Group, said in a note ahead of the North American open.
“With the 10-year yield once again approaching 2.9 nerves are starting to show, as a higher interest rate environment could dampen the positive outlooks being provided by firms in earnings season so far.”
In Canada, investors will be watching Rogers Communications stock after the company reported far stronger wireless gains in the first quarter of the year. Rogers also holds its annual meeting Friday morning. Rogers said on Thursday after markets closed that it added 95,000 new mobile customers on contract, beating the average estimate of 58,000 that analysts had predicted.
The Globe’s Christine Dobby notes that the latest figures were an improvement from the last quarter of 2017, when the company said it added 72,000 contract subscribers but estimated it lost 35,000 due to a computer glitch that plagued it during a five-day frenzy of wireless deals in December. Rogers shares finished Thursday up 1.24 per cent at $57.95.
Fairfax Financial will also be on the radar following a Globe report that the investment firm is circling the Canadian stores of famed toy retailer Toys “R” Us. The Globe’s Jacqueline Nelson reports that the Canadian unit of Toys “R” Us Inc. entered into a confidentiality agreement with Toronto-based Fairfax on Thursday that could result in a $300-million deal that allows the business to exit bankruptcy protection and separate from its struggling U.S. parent company.
On Wall Street, earnings season continues. General Electric is among the big names reporting. GE shares have been languishing near their 52-week low recently as the company works to executive a new strategic plan following a sharp decline in profit last year.
GE shares were up more than 5 per cent in premarket trading after it said profit from continuing operations tripled on gains in its aviation and health-care businesses. Earnings from continuing operations attributable to GE shareholders rose to US$369-million in the first quarter ended March 31, from US$122-million a year earlier.
Other U.S. companies reporting include Honeywell International, Schlumberger and Baker Hughes.
Overseas, European markets were higher in morning trading. The pan-European STOXX 600 was up 0.08 per cent at last check and looked set for its fourth consecutive week of gains. In terms of individual stocks, shares of Ericsson were up 15 per cent after the tech company reported a smaller-than-forecast loss in the first quarter.
Britain’s FTSE was up 0.53 per cent. France’s CAC 40 rose 0.41 per cent. Germany’s DAX was 0.09 per cent higher.
In Asia, markets finished lower as a weakness in tech stocks carried over from Wall Street’s previous session. Japan’s Nikkei ended down 0.39 per cent with semiconductor companies declining. Hong Kong’s Hang Seng lost 0.94 per cent. The Shanghai Composite Index ended down 1.47 per cent. Tech shares took a hit this week after Taiwan Semiconductor Manufacturing, the world’s biggest contract chip maker, forecast second-quarter revenue below analysts estimates. Analysts suggested the latest guidance was linked to lower orders from Apple for iPhone processors.
Commodities
Crude prices pulled back from their best levels since 2014 after U.S. President Donald Trump suggested OPEC is keeping prices artificially high, offsetting the impact of tighter supplies and an apparent commitment by cartel members to continue supply cuts. The day range on Brent crude so far is US$73.11 to US$74.15. The range on West Texas Intermediate so far is US$67.62 to US$68.62. On Thursday, both Brent and WTI managed their best showing since November 2014, reaching US$74.75 and US$69.56 respectively.
Prices went south ahead of the opening bell after Mr. Trump tweeted that OPEC nations are keeping prices artificially high and suggested the U.S. wouldn’t stand for it.
“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!” Trump wrote in a post on Twitter.
OPEC and non-OPEC producers held a closed meeting in the Saudi city of Jeddah on Friday. Reuters reports that Russian Energy Minister Alexander Novak told his counterparts at that meeting that Moscow was committed to a deal on cutting oil supplies until the end of 2018.
“Oil prices in particular have been on a tear raising concerns that OPEC and Russia may well be overplaying their hand when it comes to pushing prices higher,” CMC chief market analyst Michael Hewson said. “Today’s OPEC meeting could go some way to reinforcing that narrative or oil ministers could decide to let some air out of this particular balloon. If ministers choose to extend the production cuts into 2019 Brent prices could extend to US$80 a barrel.”
In the short term, he said, there may be a brief benefit to higher prices but in doing this oil producers may well be hastening their own demise by increasing the push into renewable energy sources.
“U.S. shale producers will also be more incentivised to ramp up production,” he said. “Since last summer Brent crude prices have risen 57 per cent, and at some point this will start to weigh on the global economy.”
In other commodities, gold prices were lower heading into the North American open as expectations that U.S. interest rate increases lured investors away from safer holdings. Gold looked set for its first weekly decline in three. Spot gold was off slightly at last check. Gold futures were also lower.
Silver prices were also weaker.
Currencies and bonds
The Canadian dollar fell after the latest reading on inflation came in below forecasts. The loonie fell to the bottom end of the day range of 78.76 US cents to 79.15 US cents after Statistics Canada said the annual rate of inflation rose to 2.3 per cent in March. That was up from 2.2 per cent in February but slightly below economists’ forecasts of 2.4 per cent. On a monthly basis, the consumer price index rose 0.1 per cent, short of the 0.4-per-cent increase the market had been expecting.
The dollar was already struggling this week after the Bank of Canada held interest rates steady and offered a cautious statement on future hikes. Friday’s below-forecast reading on inflation could also give the bank room to hold off raising borrowing costs.
“All of the BoC’s core measures also undershot consensus expectations by a tick,” CIBC economist Royce Mendes said. “The underwhelming readings on prices will delay calls for an acceleration in Bank of Canada rate hikes, and should put pressure on the Canadian dollar today. Short-end yields could similarly decline as expectations are pared back.”
February retail sales, meanwhile, rose 0.4 per cent on the back of gains in autos and general merchandise. Sales were up in four of 11 subsectors, Statscan said.
In other currencies, the U.S. dollar index was up slightly at 90.140. That index measures the greenback against a selection of its world counterparts. The dollar’s gains were helped by higher U.S. Treasury yields. Ten-year yields held at 2.91 per cent. The yield on the 30-year note was also higher at 3.107 per cent.
The euro, meanwhile, weakened below US$1.23 and is poised for its biggest weekly drop in two months as investors trimmed bets before a European Central Bank meeting next week where policy makers are largely expected to stand pat.
Stocks set to see action
Honeywell International Inc reported a higher-than-expected profit for the first quarter on Friday and lifted its full-year earnings forecast for the second time this year, citing higher sales in its aerospace business. Industrial conglomerate Honeywell, which makes everything from jet engines to thermostats, said it now expects 2018 profit of US$7.85 to US$8.05 per share, compared with previous forecast of US$7.75-US$8.00. The company also raised its full-year sales forecast range to US$42.7-billion-$43.5 billion, from US$41.8-billion-$42.5 billion.
The Globe’s banking reporter James Bradshaw reports that Canadian Imperial Bank of Commerce has abandoned plans to list its Caribbean business on U.S. stock markets, putting the brakes on a process that had been seen as a possible precursor to leaving the region. Barbados-based FirstCaribbean International Bank, a CIBC subsidiary, had filed a prospectus with the U.S. Securities and Exchange Commission, aiming to raise as much as US$240-million by offering 9.6 million shares for $22 to $25 on the New York Stock Exchange. The bank currently trades on three Caribbean markets.
Oilfield services provider Schlumberger NV scraped past first-quarter profit estimates on Friday as higher costs weighed on a strong performance in its North America business. Shares of Schlumberger, considered a bellwether for the oilfield services and drilling industries, were down 1.3 per cent in premarket trading as part of a broader decline in oil stocks and prices. Net profit attributable to Schlumberger rose to US$525-million, or 38 cents per share, in the first quarter ended March 31, from US$279-million, or 20 cents per share, a year earlier. Excluding items, the company earned 38 cents per share, beating analysts’ estimate of 37 cents per share, according to Thomson Reuters I/B/E/S.
The chairman of Italy’s Salvatore Ferragamo said on Friday he hoped the luxury group’s new chief executive will come from within the company, as it presses ahead with an ambitious industrial plan. The group, based in Florence, launched a major revamp of its strategy and products early last year, seeking to attract younger customers and reverse falling sales and profitability. But the family-owned firm, famous for shoes worn by celebrities such as Audrey Hepburn, struggled to keep pace with its targets and issued a profit warning in December. In March, CEO Eraldo Poletto unexpectedly left the company.
JPMorgan Chase & Co has tested a new blockchain platform for issuing financial instruments with the National Bank of Canada and other large firms, they said on Friday, seeking to streamline origination, settlement, interest rate payments and other processes. The test on Wednesday mirrored the Canadian bank’s $150-million offering on the same day of a one-year floating-rate Yankee certificate of deposit, they said in a statement. The platform was built over more than a year using Quorum, a type of open-source blockchain that JPMorgan has developed in-house and is in discussions to spin off.
Canadian Pacific Railway Ltd. says it has begun shutting down its domestic rail network and told shippers it will not handle any Canadian goods as of early Saturday morning, ahead of a possible weekend strike by two of its unionized work forces.
Internet users with Rogers e-mail addresses are raising concerns about new terms of service that allow their communications to be monitored for advertising purposes. Toronto-based Rogers Communications Inc. has outsourced the e-mail service it offers to internet customers (giving them addresses that end in “@rogers.com”) to Yahoo for several years. U.S. telecom giant Verizon Communications Inc. acquired Yahoo last year and has since merged it with AOL to create a digital and media brand called Oath.
Ericsson beat quarterly profit expectations on Friday as savings started to kick in, fuelling hopes for a recovery at the struggling mobile equipment maker and sending its shares up 15 per cent. The Swedish company, which is restructuring and has replaced much of its top management, has struggled with falling spending on networks by telecoms operators and weak emerging markets demand. Its first-quarter loss shrank to 0.3 billion crowns ($35.6-million) from a 11.3 billion loss a year earlier and beat a mean forecast for a 2.4 billion loss in a Reuters poll of analysts.
More reading:
Friday’s small-cap stocks to watch
Friday’s analyst upgrades and downgrades
Economic news
Statistics Canada says the annual rate of inflation rose to 2.3 per cent in March from 2.2 per cent the month before. Economists had expected the March reading to come in around 2.4 per cent. On a monthly basis, the consumer price index was up 0.1 per cent in March.
Canadian retail sales rose 0.4 per cent in February to $49.8-billion. Higher auto-sector and general merchandise sales were the main drivers. Overall, sales were up in four of 11 categories.
With Reuters and The Canadian Press
Terry Weber