Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Equities
Canada’s TSX/S&P Composite Index opened at a record high Friday with rising oil prices driving energy shares up amid a broad rally. U.S. stocks posted modest gains as recent moves by central banks to bolster growth helped eased investor concerns about an economic slowdown.
At 9:45 a.m. ET, the TSX was up 80.84 points, or 0.48 per cent, at 16,939.19. Shortly after the open, the index touched a record high of 16,947.23 points.
The index’s energy sector was up 1.2 per cent with crude prices heading toward their best weekly showing in months. Materials stocks rose 0.5 per cent while financials and industrials were both up 0.4 per cent.
On Wall Street, the Dow Jones Industrial Average rose 7.39 points, or 0.03 per cent,, at the open to 27,102.18.
The S&P 500 opened higher by 1.63 points, or 0.05 per cent, at 3,008.42. The Nasdaq Composite gained 2.00 points, or 0.02 per cent, to 8,184.88 at the opening bell.
MSCI’s all-country index was up 0.1 per cent and looked set for a fourth straight day of modest gains although the index was likely heading for a loss on the week.
In an early note, Michael Hewson, chief market strategist for CMC Markets U.K., said markets are set for a cautious close to a choppy week which saw crude prices make huge swings in the wake of attacks on production facilities in Saudi Arabia last week.
Friday’s analyst upgrades and downgrades
“The lack of any escalation so far appears to have tempered a good proportion of this week’s surge higher, in the oil price, prompting equity markets to recover from their lows, nonetheless there remains a significant amount of unease as to what might unfold over the course of the next few days and weeks,” he said.
"As a result of this uncertainty equity markets have struggled to push on significantly from the gains, we’ve seen over the course of the previous three weeks, with U.S. markets struggling to push on beyond their previous record highs from July. "
Central banks, he added, have also helped temper investor unease with the U.S. Federal Reserve again cutting borrowing costs and the People’s Bank of China modestly trimming its one-year loan rate early Friday morning. The week also saw Swiss National Bank, Bank of Japan and the Bank of England all leave policy unchanged.
On the corporate front, Apple Inc.'s iPhone 11 and 11 Pro go on sale around the world on Friday. Apple unveiled the phones at a presentation earlier this month. The new version of the iPhone features upgraded cameras, faster processors and longer battery life. Early lineups were reported Friday for the devices in places like Sydney and Singapore although more modest lines were seen in Shanghai and Beijing. Apple shares were up in early trading.
In Canada, investors got a reading on consumer spending this morning when Statistics Canada released its reading on July retail sales. Sales rose 04 per cent to $51.5-billion. It marked the first gain in three months, although price changes accounted for most of the increase. Economists had been expecting an increase of about 0.6 per cent.
“July isn't shaping up to be a great month for the Canadian economy, with a modestly disappointing retail report joining earlier data on manufacturing in painting a less bright picture for the start of the third quarter,” said CIBC World Markets chief economist Avery Shenfeld, referring to the flat volumes.
“This extends a trend of lacklustre results for retailers, since volumes have seen no growth over the past 12 months,” he added.
Market movers: Stocks seeing action on Friday - and why
“That leaves the Canadian economy more dependent on trade and capital spending, with both seen as vulnerable to a global slowdown. Downside risks to Q3 and second half growth are why we see a Bank of Canada rate cut as likely by December.”
Shares of Vancouver-based miner First Quantum Minerals Ltd. opened up 6 per cent after Bloomberg reported that the company is drawing preliminary takeover interest. First Quantum, which is the owner of Africa’s biggest copper mine, is working with defense advisers to examine options, the report said, citing people with knowledge of the matter, although no formal offers had been received yet.
Overseas, Tokyo’s Nikkei and the Shanghai Composite each gained 0.2 per cent, while Hong Kong’s Hang Seng lost 0.1 per cent.
In Europe, the pan-European STOXX 600 was up 0.05 per cent in morning trading. London’s FTSE 100 was down by 0.29 per cent. France’s CAC 40 fell 0.12 per cent. Germany’s DAX slid 0.28 per cent.
Commodities
Crude prices looked set to end a volatile week up 7 per cent, marking the best showing in months.
So far, both Brent and West Texas Intermediate were both higher in early going on Friday. The day range on Brent so far is US$64.40 to US$65.05. The range on West Texas Intermediate is US$58.46 to US$58.90.
Brent looks set for a weekly rise of about 7.7 per cent while WTI is heading for a gain of 7.1 per cent. If those hold through the day, the gain for Brent would be the best since January while WTI’s advance would be the best since June.
Weekend attacks in Saudi Arabia, which initially knocked out 5 per cent of the world’s crude supply, sent prices surging on Monday, although the gains came off the boil later in the as the kingdom assured markets that output would be back to normal within weeks. Still, continuing tensions in the region are bolstering prices.
“Tensions in the Middle East are probably here to stay,” Ipek Ozkardeskaya, senior market analyst with London Capital Group, said. “Hence, oil prices will continue swinging higher with the mounting risk of further supply-side disruptions due to geopolitical tensions, and lower with the fears of a deepening global slowdown. But overall, oil prices are expected to settle above the pre-attack levels.”
In other commodities, gold prices inched above the key US$1,500 an ounce mark, supported by a weaker U.S. dollar, concern about U.S.-China trade amid earkt talks in Washington and heightened Middle East tensions.
Spot gold was up 0.3 per cent at US$1,503.36 per ounce, up about 1 per cent this week. U.S. gold futures were up 0.5 per cent at US$1,513.5 per ounce.
“Investors seem to be in a wait and see mode to see how the low-level U.S.-China meetings go after all if they good sideways at this level what hope is there for Trump and Xi to put pen to paper on an interim deal,” Stephen Innes, market strategist with AxiTrader, said. “However, there’s a definitive sense of trader fatigue setting in as traders appear to be doing little more than putting through whatever client order hit the cue while keeping risk as tidy as can be.”
In other metals, silver and platinum prices were higher. Palladium rose 1 per cent to US$1,640.15 per ounce, after hitting a record peak of US$1,646.81. Prices were up 2 per cent for the week in a seventh straight weekly gain, according to Reuters.
Currencies
The Canadian dollar slipped after Statscan said retail sales rose in July, but at a slightly slower pace than markets had been expecting.
The loonie was weaker immediately after the release of the figures but still remained near the middle of the day range of 75.23 US cents to 75.44 US cents.
Statscan said retail sales rose 0.4 per cent in July. Economists had been expecting an increase closer to 0.6 per cent.
Meanwhile, CIBC chief economist Avery Shenfeld said in a recent note that markets are now underpriced for action by the Bank of Canada with a possible December rate cut limiting strength in the loonie in the near term.
“We’re sticking with our call for a lone quarter point cut from the Bank of Canada, and while we merely nudged that a month earlier (to December), market expectations have swung more wildly, initially having bet heavily on an October cut, but subsequently dropping odds for a cut at all this year,” Mr. Shenfeld said.
He said the central bank’s most recent statement and a follow-up speech didn’t hint at imminent action, arguing it had expected a slowing global economy in ending its rate hikes at lower levels than in the U.S. As a result, the Canadian dollar caught an updraft as the probability of an October move was reduced.
“But a rate cut either delivered or strongly hinted at in December should see the dollar-Canada hovering near $1.33 (75.19 US cents) at year end and into H1 2020,” he said.
He noted inflation remains around the central bank’s target range fut details of the latest GDP figures suggest a more cautious picture of consumers and businesses. Household debt and lower savings, meanwhile, suggest consumption doesn’t have much remaining firepower. While Canada’s current account deficit narrowed by more than expected in the second quarter, Mr. Shenfeld said he expects enough trade disappointments to keep that number in the red and weigh on the loonie.
“Look for a depreciation in the C$ over the course of 2020 and into 2021, reaching $1.38 (72.46 US cents) by Q4 2020,” he said.
On world currency markets, the U.S. dollar was lower. The U.S. dollar index slid 0.1% to 98.18, putting it on track for its third consecutive weekly drop.
Britain’s pound was the biggest gainer, according to Reuters. European Commission President Jean-Claude Juncker said he thought Brussels could reach agreement with Britain on its departure from the European Union. Sterling rose 0.5 per cent to a two-month high against the U.S. dollar.
In bonds, the yield on the 10-year U.S. note was slightly higher at 1.782 per cent. The yield on the 30-year note was also up at 2.218 per cent.
More company news:
Beyond Meat Inc said it has named former Tesla Inc executive Sanjay Shah as chief operating officer, effective Sept. 18. Shah had earlier served as senior vice president of energy operations at Tesla since May 2018, responsible for the company’s worldwide energy business. He has also held leadership roles at Amazon.com Inc.
Netflix Inc. will make a “big increase” in its investment in British television production next year, taking advantage of the country’s strong story-telling expertise, Chief Executive Reed Hastings said on Friday. “The possibilities the internet brings for growing entertainment is phenomenal, and over the next several years with all of the expansion I think we are going to see a very large increase in how much content is produced here in the UK,” he said at the RTS television industry conference in Cambridge, England. “This year we spent a little over 400 million pounds ($502 million) in the UK and that’s continuing to grow following our subscriber base.”
Royal Bank of Scotland has appointed Alison Rose as its new chief executive, becoming the first major British lender to appoint a woman to its top job. Ms. Rose, who was widely tipped to get the role, will succeed outgoing CEO Ross McEwan on November 1. He is due to join National Australia Bank as their next chief executive.
The aviation industry is bracing for double-digit insurance premium hikes for the first time in about 15 years, as insurers wrestle with higher costs from aircraft groundings, including the grounding of Boeing Co’s 737 MAX jets following two fatal crashes, insurance executives said this week. Aviation industry premiums have been creeping up since 2017 as companies renew their contracts, in the aftermath of costly plane and helicopter groundings, executives said on the sidelines of a Montreal conference on aviation and products liability. The grounding of Boeing’s 737 MAX has put further pressure on rates, even as underwriters try to tighten insurance contract language governing groundings.
Chinese authorities in the southern city of Guangzhou last week detained a U.S. pilot for FedEx Corp on suspicion of smuggling weapons and ammunition, the foreign ministry said on Friday. The man, identified by the Wall Street Journal as former U.S. Air Force pilot Todd Hohn, was detained on Sept. 12 at the Guangzhou airport after customs discovered 681 air-gun pellets in a box in his luggage as he was preparing to board a flight for Hong Kong, Foreign Ministry spokesman Geng Shuang said. He was later “released from custody, subject to provision of a surety, pending investigation,” Geng told a news conference.
Economic news
(8:30 a.m. ET) Canada’s retail sales for July.
With Reuters and The Canadian Press
Terry Weber