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U.S. stock futures were higher alongside world markets on lingering optimism over the state of U.S.-China trade after a report suggesting the United States had considered easing some import tariffs. World stocks, measured by the MSCI all-country index, rose to their highest level and looked set for its fourth straight week of gains, marking its longest winning streak in six months. On Bay Street, futures were also higher as oil rose on reports suggesting a sharp reduction in OPEC output last month.

“It seems almost impossible to sensibly gauge where US – China relations stand. Yet the market hangs on each headline, highlighting just how sensitive it is to the ongoing trade issue,” Jasper Lawler, head of research for London Capital Group, said. “...This would not be the first time that we have heard reports of thawing trade tensions. The markets have been here before, so there is going to be a level of caution.”

On Thursday, The Wall Street Journal reported that U.S. Treasury Secretary Steven Mnuchin talked about lifting some or all tariffs imposed on Chinese imports and suggested a tariff rollback during trade talks set for the end of the month. The U.S. Treasury, however, denied Mr. Mnuchin had made such a recommendation. Chinese Vice Premier Liu He will visit the U.S. on Jan. 30 and 31 for a continuation of trade talks between the two nations.

Heading into the trading day, shares of Netflix Inc. were down nearly 2 per cent after the streaming company forecast first-quarter revenue just below Wall Street forecasts when it reported results after the close on Thursday. For the most recent quarter, Netflix reported revenue of US$4.19-billion, just below the $4.21-billion that analysts were expecting, according to IBES data from Refinitiv. The company also said it expects first-quarter revenue of US$4.49-billion. That was also below the US$4.61-billion analysts had forecast.

Elsewhere, shares of car maker Tesla Inc. were down nearly 8 per cent ahead of Friday’s open after CEO Elon Musk said the company will cut staffing levels by 7 per cent and described the road ahead as “very difficult.” Mr. Musk said Tesla hopes to turn a “tiny profit” in the current quarter but said last year’s work force expansion was more than the company could support. “Our products are too expensive for most people,” Musk said in the memo to Tesla staff. saying the company has to “work harder.” “Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors,” he said.

On Bay Street, traders got the latest reading on inflation. Statistics Canada said the consumer price index fell 0.1 per cent in December from November. Economists were expecting a decline of about 0.4 per cent. The annual rate of inflation, meanwhile, rose to 2 per cent, from 1.7 per cent in November. The headline figure had been expected to hold relatively steady. CIBC economist Royce Mendes noted that the stronger-than-expected reading on headline inflation reflected a recent change to methodology related to how airline fares are calculated. The effect, he said, should be short lived.

“Looking through all the volatility, the (Bank of Canada’s) three core measures remained steady from the prior month, averaging just a touch below 2 per cent,” he said. “All told, the loonie is rallying off the higher than expected headline, but could come back after investors digest the details.”

Overseas, easing trade concerns helped lift European stocks with the pan-European STOXX 600 rising 1.15 per cent in morning trading. Trade sensitive auto and resource stocks were among the session’s winners. Britain’s FTSE 100 rose 1.17 per cent. Germany’s DAX gained 1.12 per cent and France’s CAC 40 rose 1.39 per cent. Trade optimism also boosted Asian markets. Japan’s Nikkei gained 1.29 per cent. Hong Kong’s Hang Seng rose 1.25 per cent. The Shanghai Composite Index was up 1.42 per cent.

Commodities

Crude prices were higher early Friday buoyed by improved risk appetite and a report showing OPEC sharply cut output even before the start of new production limits went into effect. Brent crude and West Texas Intermediate were both positive ahead of the open with Brent moving in a day range of US$61.32 to US$62.12. WTI has a range of US$52.09 to US$52.93.

A monthly OPEC report showed output fell by 751,000 barrels a day last month to 31.58 million barrels. That was the biggest month-over-month decline in two years. The drop also came before the January start of production cut by OPEC and its allies, with members and others pledging to reduce production by 1.2 million barrels a day.

“Oil has been another benefactor of the improvement in risk appetite,” OANDA analyst Craig Erlam said. “This time last month, doom and gloom had engulfed the markets and people’s expectations for 2019 were becoming more pessimistic by the day, weighing heavily on oil prices. The bounce in markets and improvements on the fundamental outlook have prompted a similar rebound in oil which is continuing today."

Mr. Erlam said WTI and Brent face significant test around US$55 and US$65, respectively. “Momentum is very much with the bulls and I wouldn’t be surprised if they’re broken in the not-too-distant future,” he said.

However, a report Friday by the International Energy Agency also suggested rising U.S. production and slowing global economic growth will create headwinds for the oil market this year. In a report, the IEA said it was keeping its estimate of oil demand growth for this year unchanged at 1.4 million barrels per day. That’s near levels seen last year.

So far, Brent crude is up about 2 per cent for the week and looks headed for a third week of gains.

In other commodities, gold prices were down as perceived risks in the market pulled back. Spot gold was down 0.1 per cent at US$1,290.51 per ounce early Friday, while U.S. gold futures were down 0.2 per cent at US$1,290 per ounce.

The risk perception has for some degree stabilized and that took away some support for gold,” Dominic Schnider, head of commodities and APAC forex at UBS Wealth Management in Hong Kong, told Reuters.

Palladium also continued its winning run, holding above US$1,400 an ounce after touching record levels on Thursday. Spot palladium rose 1.1 per cent to US$1,411 per ounce early Friday after hitting a record of US$1,434.50 on Thursday. Palladium looks set for its fourth weekly increase.

Currencies and bonds

The Canadian dollar added to early gains after Statscan reported that the annual rate of inflation rose to 2 per cent in December from 1.7 per cent the month before. The reading left the loonie in the upper end of day range of 75.28 US cents to 75.56 US cents.

Economists had expected the annual rate to hold closer to 1.7 per cent in the latest report. Statscan says lower energy prices were offset by higher costs for services like air transportation, telephone services and travel tours. Excluding gasoline prices, the consumer price index rose at an annual rate of 2.5 per cent, the agency said.

Meanwhile, it its latest currency outlook, CIBC says a continued rebound in oil should help lift the Canadian dollar in the near term.

“A recovery in oil prices and export volumes should allow the [Bank of Canada] to raise rates near mid-year, supporting the loonie,” CIBC said. “But more broadly, the C$ is still a range-bound story, unlikely to benefit from DXY (U.S. dollar index) softness given Canada’s persistent current account gap and need to do better on exports as housing slows.”

On broader markets, the U.S. dollar was steady against a basket of world counterparts and looked set for its first weekly gain in five. Early Friday, the U.S. dollar index was little changed but looked set to post an increase for the week of about 0.4 per cent. That would be its biggest gain since the middle of last month.

Elsewhere, Reuters notes that the British pound slipped against the euro, partially trimming some of its overnight gains as traders wagered on a second referendum vote on Britain’s EU membership.

In bonds, the yield on the U.S. 10-year note was higher at 2.773 per cent. The yield on the 30-year note was also up slightly at 3.096 per cent.

Stocks set to see action

Walmart will continue to operate through CVS Health’s pharmacy benefit management commercial and managed Medicaid retail pharmacy networks. Shares of CVS, which have been under pressure since Tuesday when it said it could not come to an agreement with Walmart on pricing, rose more than 2 per cent before the opening bell. Including Walmart, the CVS Caremark national pharmacy network will have nearly 68,000 participating pharmacies for members to choose from, including independently-owned, community-based pharmacies, other local pharmacies in grocery stores and mass merchants and regional and national chains.

Tiffany & Co said its worldwide same-store sales fell 2 per cent during the holiday season, leading the upscale jeweller to temper its expectation for full-year profit. “Overall holiday sales results came in short of our expectations,” Chief Executive Officer Alessandro Bogliolo said. The company said it now expects full-year profit to be likely towards the lower end of its previously-disclosed range of $4.65-$4.80 per share. Shares were down 2 per cent in premarket trading.

Ryanair cut its forecast for full-year profit for the second time in three months, blaming lower-than-expected winter fares, and said it could not rule out a further downgrade if Brexit causes disruption. Shares in the Irish-based carrier fell on the news and also weighed on rivals such as EasyJet as Ryanair. Europe’s largest low-cost airline now expects profit after tax for its financial year to March 31 - excluding start-up losses at its Laudamotion unit - of between 1 billion euros (US$1.14-billion) and €1.1-billion, compared to a previous estimate of €1.1-billion to €1.2-billion.

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Economic news

Statistics Canada says the consumer price index fell 0.1 per cent in December from November. Analysts had been expecting a decline of 0.4 per cent. The annual rate of inflation rose to 2 per cent, from November’s 1.7 per cent.

Foreign investors bought $9.5-billion of Canadian securities in November, mostly bonds, Statscan said. Meanwhile, Canadian investors cut their holdings of foreign securities by $4.1-billion as they sold U.S. stock. As a result, international securities generated a net inflow of funds of $13.5-billion in the Canadian economy. That was the biggest inflow since November 2017, the agency said.

(9:15 a.m. ET) U.S. industrial production for December. Consensus is a rise of 0.3 per cent from November.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for January. Consensus is 96.0, down from 98.3 in December.

With Reuters and The Canadian Press

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
CVS-N
CVS Corp
+0.42%79.76
TSLA-Q
Tesla Inc
-2.25%175.79
NFLX-Q
Netflix Inc
-1.01%607.33

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