Skip to main content

Equity Markets

U.S. stock futures held early gains after July employment figures came in stronger than expected, signalling a higher start to the final trading day of the week. On Bay Street, futures were slightly higher as jobs numbers here came in largely in line with forecasts, although the pace of hiring slowed from recent months. "After a run of huge gains, nobody is going to complain about the more moderate hiring pace that Canada saw in July, and the attention instead will focus on yet another drop in the jobless rate," said CIBC World Markets chief economist Avery Shenfeld said in a note following the release of the Canadian figures. Statistics Canada said Friday that the Canadian economy added 10,900 new jobs last month. Consensus forecasts had been for job growth around the 10,000 mark. The unemployment rate fell to 6.3 per cent, its lowest since 2008. However, a separate report also showed that the June trade deficit widened far more than expected as exports fell. The June deficit widened to $3.6-billion, from $1.4-billion a month earlier. Economists had expected the trade gap to narrow.

South of the border, employers hired more workers than expected. Non-farm payrolls rose by 209,000 positions last month. That was the biggest increase in five months. Wages rose 2.5 per cent from the same month a year earlier.

"The wild card now is Washington. By the end of September Congress needs to raise both the debt ceiling and pass stopgap funding legislation to prevent a government shutdown in October,: TD senior economist Leslie Preston said. "If this process proves messy, it could roil financial markets, and potentially stay the Fed's hand from shrinking its balance sheet next month."

Outside economics, the markets will also be weighing reports that U.S. Special Counsel Robert Mueller has convened the grand jury investigation to help examine allegations of Russian interference in last fall's U.S. election. Reports also say the grand jury has issued subpoenas in connection with a June 2016 meeting that included President Donald Trump's son and son-in-law.

"Reports that special Council Muller has appointment a grand jury to investigate Russia's election interference is more bad news for the Trump fiscal agenda," Jasper Lawler, head of reseach for CMC Markets, said, noting few dramatic moves are likely ahead of the jobs data.

In corporate news, Toyota Motor Corp and Mazda Motor Corp. announced plans Friday to build a U.S. assembly plant as part of a pact that will also see the auto makers jointly develop electric vehicle technologies. The two will take small stakes in each other as part of the agreement.

Overseas, European markets stumbled out of the gate before edging higher. At last check, the FTSE 100 had managed to advance 0.2 per cent. Germany's DAX was up 0.11 per cent and France's CAC 40 rose 0.12 per cent. All three had started the final trading day of the week lower. Royal Bank of Scotland shares were about 2 per cent higher on after posting better-than-expected earnings.

In Asia, markets finished off the week mixed. Japan's Nikkei fell 0.38 per cent to 19,952.33. The Shanghai composite index was down 0.35 per cent and Hong Kong's Hang Seng edged up 0.12 per cent.

Commodities

Oil prices were lower early Friday as concerns about rising output continued to cast a long shadow over the markets. Both Brent and West Texas Intermediate were trading down in early going, giving up at least some of the strength seen overnight. Traders say losses on concerns about rising production have been offset by increased demand. Recent U.S. figures released showed U.S. gasoline demand hit record levels last week.

"Developments this week have seen some pessimism return to markets," National Australia Bank said in its August outlook, according to a Reuters report. "We forecast Brent to trade at around $53 per barrel in Q4 2017."

Thomson Reuters figures show crude exports from OPEC nations rose to record heights in July, despite a pledge to cap production through to next March. The numbers suggested that most of the increased exports came from Nigeria, which - along with Libya - is exempt from the production cuts.

In Russia, Rosneft, that country's biggest oil producer, said crude output rose by just over 11 per cent in the second quarter compared to the same period earlier and stood at 4.57 million barrels a day. In the United States, recent figures show production has hit 9.43 million barrels a day, the highest in two years.

In other commodities, gold neared its highest level in seven weeks as the U.S. dollar continues to toil at multi-month lows. Spot gold was up slightly and looked set to end the week flat. U.S. gold futures were also a touch higher in early going.

Silver rebounded about touching a week low a day earlier.

Copper prices remained near two-year highs

Currencies and bonds

The Canadian dollar fell after Statscan reported that the pace of hiring slowed in July. The loonie dropped to the bottom end of the day's range of 79.19 cents to 7964 cents immediately after the figures were released. The latest report came in roughly in line with analysts' expectations, although it lacked the impact of surprisingly strong reports seen in previous months. Meanwhile, a separate report showing a sharply wider trade gap and falling exports in June also dented the currency.

"The wider trade deficit might be seen as a slight negative for the [Canadian dollar], but the tight jobless rate will keep chatter alive about an October rate hike," CIBC World Markets chief economist Avery Shenfeld said in a note after the release of the latest economic reports.

The Bank of Canada hiked interest rates earlier this summer and a spate of strong economic reports since have raised expectations that another increase is in the offing. The loonie spiked around the time of the central bank's July rate increase and has held onto most of those gains in recent weeks. Weaker oil prices Friday were also weighing on the currency in early trading, although crude has steadied somewhat as the North American open approaches.

Meanwhile, the U.S. dollar index, which measures the greenback against a basket of currencies, jumped to its highest level in four days immediately after the release of the July non-farm payrolls report. Earlier this week, the index hit its lowest level in more than a year.

In bonds, U.S. Treasury yields rose after the release of better-than-expected hiring figures out of the United States. The yield on the 10-year note was higher at 2.266 per cent. The yield on the 30-year note was also up at 2.84 per cent.

Stocks set to see action

Royal Bank of Scotland beat first-half profit forecasts on Friday in a sign its long-promised recovery is finally gathering pace, and said it may move up to around 150 jobs to Amsterdam after Brexit. The state-controlled bank's shares rose as much as 5 per cent after it reported an unexpected 44 percent jump in income at NatWest Markets, the rebranded investment banking unit that brought it to the brink of collapse during the financial crisis.

Toyota Motor Corp and Mazda Motor Corp. plan to build a $1.6 billion U.S. assembly plant, the two said on Friday, as part of an alliance that will also see the Japanese auto makers jointly develop electric vehicle technologies. The two will take small stakes in each other as part of the tie-up: Toyota, the world's second-largest automaker by vehicle sales last year, will take a 5 percent share of Mazda, extending its dominance in Japan's auto sector. Mazda will take a 0.25 percent share of its larger rival. The plant, something of a surprise at a time of overcapacity in the U.S. market, will be a boost to U.S. President Donald Trump, who campaigned on promises to increase manufacturing and expand employment for American auto workers.

Executives at Home Capital Group Inc. say they are entering a new phase in the company's recovery, promising to gradually turn on the taps and increase the flow of new loans it is underwriting. The steep costs of securing emergency financing amid a crisis of confidence and a run on its deposits earlier this spring, as well as cleaning up a mess of concerns over apparent fraud by some brokers in its network, pushed the beleaguered mortgage lender to a $111-million loss in the second quarter.

Yelp Inc said it would sell its Eat24 business to Grubhub for $287.5-million in cash. The consumer review website operator also said its board had authorized a $200-million share repurchase program. Meanwhile, Yelp's second-quarter revenue rose 20 per cent to $209-million, above the $205-million expected by analysts, on average. Net income of $7.6-million far exceeded $400,000 a year earlier. Earnings per share were 9 cents per share, versus 1 cent per share, a year ago. Yelp shares were up 19 per cent in premarket trading.

Nebraska regulators weighing the fate of TransCanada Corp's proposed Keystone XL pipeline have ruled that opponents of the project cannot use one of their best arguments against it in final hearings next week: that America does not need the oil. The state's five-member Public Service Commission is scheduled to hold court-like hearings on Aug. 7 to 11 before deciding whether to approve the project's route, marking the final hurdle for the long-delayed project after President Donald Trump gave it federal approval in March.

British education group Pearson said on Friday it would cut another 3,000 jobs and slash its interim dividend by 72 percent as it started another restructuring programme to tackle the pressures facing its business. The job cuts, which Chief Executive John Fallon said will mostly come late in 2018 and in early 2019, are in addition to 4,000 roles lost in its previous restructuring. Pearson announced a plan to cut costs by another 300 million pounds ($394 million) in May in a third cost-cutting programme to try to revive a business hit by the rapid move to digital learning.

Sharpie maker Newell Brands Inc's quarterly sales scrapped past analysts' estimates as it sold more home fragrances and baby and parenting products. The company on Friday also raised its full-year sales forecast to $14.8-billion to $15-billion from $14.52-billion to $14.72-billion.

Kraft Heinz Co, the maker of Velveeta cheese, Heinz ketchup and Oscar Mayer meats, reported a bigger-than-expected quarterly profit on Thursday as the company continued to cut costs amid weak demand in North America. Kraft, which is targeting to cut $1.7-billion in costs by the end of 2017, said on Thursday that its selling, general and administrative expenses fell about 15 per cent to $760-million in the second quarter ended July 1. This is the fourth straight quarter of double-digit declines in selling, general and administrative expenses.

More reading: Gordon Pape: How to make the right choices when investing in REITs
More reading: Eye on Shorts: What bearish investors are betting against

Economic News

(8:30 a.m. ET) Canada employment for July is released. The consensus estimate is an addition of 19,000 jobs and a 6.5-per-cent unemployment rate, compared to a gain of 45,000 jobs and 6.5-per-cent in June.


(8:30 a.m. ET) Canada merchandise trade balance for June is announced. The consensus is a deficit of $900-million, down from a $1.4-billion deficit in the previous month.


(8:30 a.m. ET) U.S employment for June is unveiled. The consensus is a gain 180,000 jobs with an unemployment rate of 4.3 per cent. The previous result was a gain of 222,000 and 4.4 per cent, respectively.


(8:30 a.m. ET) U.S. goods and services trade balance for June is released. The Street expects a deficit of $45.6-billion, down from $46.5-billion in May.

With files from Reuters