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Equity Markets

Canada's main stock index slipped on Friday as weakness in oil prices weighed on energy shares, offsetting a gain in gold miners.

The Toronto Stock Exchange's S&P/TSX composite index was down 80.31 points, or 0.53 per cent, at 15,184.33 shortly after the open.

The energy sector fell 0.3 per cent and consumer discretionary stocks fell 0.6 per cent.

Canadian retail sales posted their third healthy increase in a row in May, a sign of economic strength that could boost the case for the Bank of Canada to hike rates again this year.

Sales rose by 0.6 per cent from April to hit a record $48.91-billion, Statistics Canada said on Friday. The increase was much greater than the 0.2 per cent advance forecast by analysts in a Reuters poll.

The Canadian dollar bounced on that news, rising to 79.59 cents (U.S.), up 0.2 of a cent.

Canadian oil and gas producer Encana Corp. gained 3 per cent after it posted a quarterly profit that handily beat estimates and the company said it was expecting a strong 2018 even with current commodity prices.

But Husky Energy was down 1.4 per cent after it reported a $93-million loss for its second quarter and just $10-million of adjusted earnings, well below analyst estimates.

Oil prices fell on Friday after a consultancy report forecast a rise in OPEC production for July despite the group's pledge to curb output, reigniting concerns the market will stay awash with crude.

Benchmark Brent crude futures were down 23 cents at $49.07 (U.S.) a barrel, while U.S. West Texas Intermediate (WTI) crude futures traded at $46.68 a barrel, down 24 cents.

U.S. stock indexes opened lower on Friday, as industrial heavyweight General Electric's tepid results weighed on investor sentiments.

The Dow Jones Industrial Average fell 43.69 points, or 0.2 per cent, to 21,568.09. The S&P 500 lost 4.92 points, or 0.19 per cent, to 2,468.53. The Nasdaq Composite dropped 9.23 points, or 0.14 per cent, to 6,380.77.

Shares of GE fell 3.7 per cent after the company results beat estimates but posted a nearly 60 per cent decline in profit.

Honeywell International edged up 0.5 per cent after the technology and manufacturing company reported a rise in its second-quarter profit.

Tech earnings continue next week with results for Amazon, Alphabet and Facebook. On Thursday, the tech-heavy Nasdaq booked its longest winning streak - 10 straight sessions - since early 2015.

Overseas, the euro's jump to a fresh two-year high tempered market sentiment. The euro jumped after the European Central Bank suggested talks about paring its massive bond-buying program could begin this fall.

MSCI's indes of world stocks was steady after climbing for 10 straight sessions. In Asia MSCI's broadest index of Asia-Pacific shares outside Japan was down slightly after climbing about 5 per cent for the past two weeks.

In Europe, Britain's FTSE 100 fell 0.19 per cent. Germany's DAX was off 1.52 per cent and France's CAC 40 slid 1.34 per cent.

In Asia, Japan's Nikkei fell 44.84 points to finish the week at 20,099.75.  Hong Kong's Hang Seng fell 0.13 per cent and the Shanghai composite index was off 0.21 per cent.

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Commodities

Crude prices turned lower in choppy trading Friday after a new report raised the prospect of higher OPEC output this month. Both benchmark Brent crude and West Texas Intermediate had been trending higher in the early hours, but quickly dropped after Petro-Logistics, which tracks OPEC supply forecasts, said OPEC crude production would rise by 145,000 barrels per day in July. That would put the cartel's output above 33 million barrels a day, according to Reuters. The report comes as key crude producers are set to meet next week in Russia. Saudi Arabia, the world's biggest crude producer, had been reportedly weighing the possibility of more supply cuts to address market oversupply. But traders were skeptical a cut would be in the offing at Monday's meeting.

U.S. investment bank Jefferies said in a note that "actions from the next OPEC/non-OPEC working committee meeting seem unlikely."  It also said, "if OPEC is to achieve its objective of bringing OECD inventories back to normal levels it will need to take further steps,".

Meanwhile, the latest U.S. crude inventory numbers helped underpin sentiment. The Energy Information Administration says U.S. crude stocks fell by 4.7 million barrels in the week to July 14, more than the market had been forecast. Gas stocks were down 4.7 million barrels. The figure also exceeded forecasts.

In other commodities, gold prices high their highest level in three weeks as the U.S. dollar weakened to its lowest point in more than a year. Spot gold and U.S. gold futures for August delivery were both higher in early trading. Traders say continued political worries in Washington are playing in favour of the safe-haven metail.

"The global risk reluctance and Trump-related worries drive capital into the yellow metal," LCG senior market analyst Ipek Ozkardeskaya said in a note.

Silver was also higher, managing its best level since early July. A weaker greenback boosted copper prices above $6,000 a tonne in Asian trading Friday.

Currencies and bonds

The Canadian dollar moved into the mid-79-cent range as the U.S. dollar weakened. The loonie's day range so far is 79.34 cents (U.S.) to $79.55 cents. The day's economic news came in at or above forecasts. Statscan said June's annual rate of inflation was 1 per cent, matching forecasts. May retail sales, meanwhile, rose 0.6 per cent, ahead of the 0.3-per-cent increase economists had been expecting. The loonie, which had been softer in early going, shifted higher after the reports, continuing the march toward 80 cents (U.S.).

"Despite a soft inflation backdrop, the better-than-expected performance of the Canadian economy – particularly on the domestic front – should allow the Bank of Canada to follow through will another rate hike in October, fully unwinding the emergency cuts that were put in place following the oil price collapse," TD economist Dina Ignjatovic said in a note.

In other currencies, the euro hit a two-year high against the U.S. dollar. The euro was up 0.3 per cent early Friday, with traders citing moves by investors to cover short positions. The euro gathered steam Thursday when European Central Bank president Mario Draghi said policy makers would likely begin discussions in the fall about scaling back the central bank's massive stimulus program.

CMC chief markets analysts Michael Hewson said, while Mr. Draghi's position wasn't particularly hawkish, the traders saw otherwise.

"Sadly for him the currency markets weren't buying it and the euro, after initially dipping, roared back in the afternoon session, though it was probably helped by events in the U.S. and a possible investigation into the President's business dealings, which saw the US dollar slip back further," he said.

The U.S. dollar was weaker against a basket of world currencies early on with the failure of U.S. President Donald Trump's health-care bill continuing to raise concerns about the success of future legislation. The dollar was flat against the yen after the Bank of Japan said Thursday it would keep its stimulus program in place, suggesting it would lag other world central banks in shift to tightening mode.

In bonds, euro zone bonds got a lift from the ECB's latest policy statement and support from the International Monetary Fund for a Greek bailout.  Euro zone bond yields fell, with Italian, Portuguese and Spanish bonds performing strong on the day.

U.S. Treasurys were higher with the yield on the 10-year note down at 2.243 per centand the yield on the 30-year note at 2.81 per cent.

Stocks set to see action

Canadian oil and gas producer Encana Corp on Friday posted a quarterly profit compared with a loss a year earlier, when it took impairment and hedging charges of about $641-million. The Calgary-based company posted net earnings of $331-million, or 34 cents per share, in the second quarter ended June 30, compared with a loss of $601-million, or 71 cents a year earlier.However, total oil and gas production fell to 316,000 barrels of oil equivalent per day (boe/d) from 368,300 boe/d a year earlier.

Oil and gas producer Husky Energy Inc. posted a narrower loss, helped partly by higher oil prices and a rise in production. The company reported a net loss of $93-million or 10 cents per share, in the second quarter, compared with a loss of $196-million, or 20 cents a share, a year earlier. Husky produced 320,000 barrels of oil equivalent per day (boed), higher than the 316,000 boed it produced, a year earlier.

General Electric Co. posted a 12-per-cent drop in quarterly revenue on weakness in its energy connections unit. Earnings from continuing operations attributable to shareholders fell to $1.34-billion in the second quarter ended June. 30 from $3.30-billion a year earlier. Earnings per share from continuing operations fell to 15 cents from 36 cents, the company said.

Microsoft Corp. reported better-than-expected quarterly profit and revenue on Thursday, helped by strong performance in its fast-growing cloud business. Microsoft said revenue from its cloud unit, which includes the flagship Azure platform and server products, rose about 11 per cent to $7.43-billion in the fiscal fourth quarter ended June 30. Analysts on average had expected revenue of $7.32-billion, according to data and analytics firm FactSet.

Magna International Inc., one of Ontario's biggest employers, has issued a blunt criticism of the province's new labour legislation, saying the changes threaten future investment and jobs and will make the company less competitive. The new labour laws add to other factors that put new investment in the province at risk, Magna said in a submission to the Ontario legislature's standing committee on finance.

The U.S. Treasury Department on Thursday said it was fining global oil company Exxon Mobil Corp $2-million (U.S.) for violating sanctions on Russia in May 2014. The heads of the company 's U.S. subsidiaries signed eight documents between May 14 and May 23, 2014 with Igor Sechin, the head of Russia's largest oil producer, Rosneft, Treasury's Office of Foreign Assets Control said in a statement on its website.

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Economic News

Canada's annual rate of inflation was 1 per cent in June, down from 1.3 per cent in May.

May retail sales rose 0.6 per cent. Estimates were for a 0.3-per-cent increase.

With files from Reuters and Bloomberg