Equities
U.S. futures were sharply lower early Friday as the Trump administration confirmed 25-per-cent tariffs on Chinese imports and threatened more if the country retaliates. On Bay Street, futures were down with the Canadian dollar hovering near the 76-US-cent mark and oil trading in the red. Overnight, MSCI’s all-country index, which tracks shares in 47 countries, slid 0.2 per cent and appeared headed for a down week.
“Equity markets are mixed today as traders remain concerned about global trade tensions,” David Madden, markets analyst with CMC Markets U.K., said in an early note.
Friday morning, U.S. President Donald Trump confirmed the tariffs on $50-billion in Chinese imports. The U.S. Trade Representative’s office said Friday it will begin collecting 25-per-cent tariffs on $34-billion worth of Chinese goods on July 6 and take steps to start tariffs on 284 new product lines.
Earlier Friday, China pledged to strike back quickly if the U.S. hurt China’s interests. Chinese Foreign Ministry spokesman Geng Shuang said China would “quickly react and take necessary steps to resolutely protect our fair, legitimate rights.”
On Bay Street, telecom stocks could be in focus after Ottawa ordered the country’s telecom regulator to conduct a public probe of high pressure sales practices. The Globe’s Christine Dobby reports that the move comes in response to reports of aggressive practices by internet, television and wireless providers.
Companies in the agriculture sector could also come under pressure following news that Japan had suspended the sale of Canadian wheat after grain containing a genetically modified trait was found last summer in Alberta. Canada is one of the world’s top wheat exporters.
Retailer Canada Goose also reported its latest results ahead of the start of trading. The company posted net income in the fourth quarter of $8.1-million or 7 cents a share diluted compared with a loss of of $23.4-million or 23 cents a year earlier. Canada Goose also announced it will open three new North American stories ahead of the 2018 holiday shopping season. The stores are slated for Montreal, Vancouver and Short Hills, New Jersey. Revenue more than doubled to $124.8-million from $51.1-million. Canada Goose’s U.S.-listed shares were up more than 13 per cent in premarket trading.
On Wall Street, AT&T closed its purchase of Time Warner Inc. after the U.S. government said it wouldn’t apply for a stay of a court ruling approving the deal. The government, however, still has 60 days to appeal the decision. Time Warner and AT&T shares were higher in premarket trading.
Overseas, the pan-European STOXX 600 was down 0.21 per cent. Sectors were mixed with bank shares lower but household goods higher. Shares of retailer H&M were down about 4 per cent following a below-forecast reading on second quarter sales. Britain’s FTSE 100 was down 0.60 per cent. France’s CAC 40 rose 0.36 per cent. Germany’s DAX edged up 0.02 per cent.
In Asia, markets finished mixed on trade worries. Japan’s Nikkei rose 0.5 per cent, clawing back some of the previous session’s losses. Hong Kong’s Hang Seng fell 0.4 per cent and saw its biggest weekly drop in more than two months. For the week, that index was down 2.1 per cent. The Shanghai Composite Index fell 0.70 per cent, although it closed the day off its intraday low.
Commodities
Crude prices were lower in early going as markets turn their attention to a potential production hike at OPEC’s meeting next week in Vienna. Brent crude was down more than 1 per cent at last check and had a day range of US$72.02 to US$76.06. West Texas Intermediate was also in the red and had a range for the day so far of US$66.60 to US$67.09.
Both Brent and WTI touched their best levels in more than three years last month but have since lost altitude as U.S. production increases and some OPEC and non-OPEC producers push to cut current production caps. Reuters reports that Russian Energy Minister Alexander Novak said Thursday after talks with Saudi Energy Minister Khalid al-Falih in Moscow that both nations “in principle” supported a gradual increase in production. Production has been capped for more than a year as the cartel looked to cut the global market overhang.
“The shape of the deal is far from certain yet given the Russians seem to want a more aggressive wind back than most of OPEC,” Greg McKenna, chief market strategist at futures brokerage AxiTrader, said in a note.
“My guess is the increase will be something less than the 1 million bpd (barrels per day) that the U.S. is supposed to have asked the Saudis for.”
OPEC’s meeting is scheduled for June 22-23.
Later Friday, traders will also get weekly U.S. rig count numbers from energy services firm Baker Hughes. In the previous seek, the report saw a modest increase with one rig added for a total of 862.
In other commodities, gold prices fell from the one-month high seen during the previous session as the U.S. dollar rallied. Spot gold was down after hitting its best level since May 15 of US$1,309.30 on Thursday. U.S. gold futures for August delivery were also lower.
“We saw a little bit of selling early this morning, a little bit of profit-taking ... Gold was unable to hold above this (previous days highs), so again we are sitting back in sort of that $1,290-$1,305 range,” MKS SA senior precious metals dealer Alex Thorndike told Reuters.
Currencies and bonds
The Canadian dollar continued to drift lower and stood just above the 76-US-cent mark as its U.S. counterpart posted its best levels in seven months. At last check, the Canadian dollar was sitting just above 76 US cents after a disappointing reading on factory sales. The day range on the loonie so far is 75.99 US cents to 76.35 US cents.
Recently, the loonie has fallen victim to the combined impact of escalating trade tensions with the U.S. and a rallying greenback. The U.S. dollar index rose as high as 95.131 early Friday. That’s its best level since early November and came after a 1-per-cent rally on Thursday. The index, however, has since pulled back from Friday’s high as market concern over an escalating trade row between the United States and China.
“With all of this week’s central bank event risk out of the way, we now turn to trade wars,” Elsa Lignos, RBC’s global head of FX strategy, said in a note.
Ahead of the open, Statistics Canada’s factory-sales report offered little to bolster the Canadian dollar’s prospects. The agency said manufacturing sales fell 1.3 per cent in April to $56.2-billion. The decline followed two straight months of gains.
The market had been expecting an increase of about 0.6 per cent in the most recent report.
“The concern now will shift to how steel and aluminum tariffs are impacting Canadian factories,” CIBC economist Royce Mendes said. “Today’s report will add to the recent negative sentiment surrounding the loonie, and should also support Canadian fixed income.”
In bonds, the yield on the U.S. 10-year note was lower at 2.921 per cent while the yield on the 30-year note was also lower at 3.045 per cent as trade worries continue to escalate.
Stocks set to see action
European efforts to develop a next-generation military combat jet will end in disaster if individual governments insist on dictating specific suppliers or sites, the chief executive of European aerospace firm Airbus warned on Friday. Airbus CEO Tom Enders told the Frankfurter Allgemeine Zeitung newspaper that a decision by Germany and France to develop a new “Future Combat Air System” was an important step towards expanding European defence co-operation. He said Airbus and Dassault Aviation had come to agreement surprisingly quickly on their respective roles in the fighter jet project, but warned governments against trying to influence the process.
McDonald’s said Friday it will switch to paper straws at all its locations in the United Kingdom and Ireland, and test an alternative to plastic ones in some of its U.S. restaurants later this year. The burger chain and other fast-food companies are facing increasing pressure from customers and environmental activists to stop using plastic straws because they can end up in the ocean and harm sea turtles, birds and other marine life. Paper straws, unlike plastic ones, disintegrate in the environment.
H&M reported flat sales growth for a second straight quarter on Friday as the world’s second-largest fashion retailer grapples with slowing traffic at its core brand stores. Local-currency sales including VAT in the March-May period were unchanged from a year earlier, below the 0.5 percent increase expected by analysts in a Reuters poll. H&M shares fell 3.5 per cent in early trade.
Facebook Inc said on Thursday that Elliot Schrage, who as head of communications and public policy has led the social network’s response to scandals about privacy and election meddling, would step down from the company after a decade. Schrage will stay on as an adviser to Facebook while his successor is chosen and later to assist with special projects, the company said in a statement. He has no immediate plans except to “start a new chapter in his life,” the company said. He is at least the third high-level executive set to leave Facebook this year, upending a period of relative stability in the company’s management.
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Economic news
Canadian manufacturing sales fell 1.3 per cent in April to $56.2-billion. The Street had been forecasting an increase of about 0.6 per cent for the month.
Statistics Canada said foreign investment in Canadian securities totaled $9.1-billion in April, up from $6.4-billion in March. Meanwhile, Canadian investors reduced their holdings of foreign securities by $652-million, on large sales of U.S. shares, the agency said.
(9:15 a.m. ET) U.S. industrial production for May. Consensus is a rise of 0.3 per cent from April.
(10 a.m. ET) U.S. consumer sentiment for June.
With Reuters and The Canadian Press
Terry Weber