Equities
Wall Street futures were lower early Friday as the continued back-and-forth trade feud between the United States and China continued with U.S. President Donald Trump threatening an extra US$100-billion in tariffs. Dow futures were down by triple digits in the early hours as China vowed to fight back. On Bay Street, futures were also weaker following the lead of global markets. Overseas, MSCI’s World Index slid 0.15 per cent early on while key European markets started the day in the red.
Late Thursday, Mr. Trump upped the ante in the escalating dispute, telling U.S. trade officials to look for extra tariffs on Chinese imports in the wake of what he called “unfair retaliation” from that country. In response, the Chinese commerce ministry again said it wasn’t afraid of a trade war with the United States, although it also wasn’t seeking one.
Early Friday, Mr. Trump defended his tariff proposals, saying there may be a “little pain” in the short term but that the United States would be better off in the long run.
“Whilst the knee jerk reaction was a heavy sell off from traders, markets since pared some losses, with Asia closing mixed and Europe still pointing to a lower start but less extreme than when the news broke,” Jasper Lawler, head of research at LCG, said in a note.
“The message from the White House has been mixed at best this week, with White House adviser Larry Kudlow and other officials playing down any trade war fears, which worked to boost the markets. However, much of the good work by Kudlow & Co. was undone by Trump on Thursday evening, who is showing an increasingly hard-line approach.”
Outside trade, investors on both sides of the border got readings on March employment.
In Canada, the picture was better than expected. Statistics Canada said the economy added 32,300 new jobs last month. Economists’ expectations had ranged from 10,000 to 20,000 new positions. The jobless rate was unchanged at 5.8 per cent. The job gains were made up entirely of full-time positions. Statscan said the labour force generated 68,300 full-time jobs last month and lost 35,900 part-time positions.
“The absence of any acceleration in wages or drop in the jobless rate should be enough to keep the Bank of Canada on hold for now, particularly given only muted GDP growth in the most recent two months of data,” CIBC World Markets chief economist Avery Shenfeld said. “Still, the contrast with a softer U.S. payrolls report has the (Canadian dollar) marginally firmer after the data, and two-year yields a bit higher. “
South of the border, the United States saw its smallest job gains in six months. Nonfarm payrolls rose by 103,000 last month, down from 326,000 in February. The March increase was the smallest since September and below the 202,000 average seen over the past three months. The unemployment rate was unchanged at 4.1 per cent, although an increase in wage gains also pointed to a tighter labour market.
In corporate news, Facebook shares were down slightly in premarket trading after chief operating officer Sheryl Sandberg said some advertisers have curtailed spending in the wake of the data-sharing crisis. Ms. Sandberg said the social media giant has seen “ a few advertisers pause with us and they’re asking the same questions that other people are asking.”
On Bay Street, bank annual meetings continue with Royal Bank’s AGM Friday morning. On Thursday, both Bank of Montreal and CIBC reiterated their optimism over rising profits from U.S. operations. The Globe’s James Bradshaw, however, noted that BMO also sounded a note of caution about the potential cost of shifting competitive dynamics between the two countries.
Overseas, European markets were lower as trade concerns again spread around the globe. The pan-European STOXX 600 was down 0.43 per cent in early going. Britain’s FTSE slid 0.20 per cent. Germany’s DAX was down 0.47 per cent and France’s CAC 40 fell 0.43 per cent.
In Asia, markets finished mixed as Thursday’s rally on Wall Street failed to carry over to the region. Japan’s Nikkei followed a choppy course in the final trading day of the week before finishing down 0.36 per cent. The Nikkei still managed to finish the week up about 0.5 per cent. Hong Kong’s Hang Seng returned after being closed for a public holiday to buck the trend in the region, ending Friday’s session up 1.11 per cent, with financial stocks moving higher. The Shanghai Composite Index ended off 0.15 per cent.
Commodities
Brent and West Texas Intermediate are both heading for their biggest weekly losses since early last month after renewed concerns over a trade war between China and the United States hit crude prices Friday. Brent crude was lower in early going and had a range for the day so far of US$67.67 to US$68.24. WTI was also lower and had a range of US$62.82 to US$63.79. Both posted fairly choppy patterns overnight with declines coming after Mr. Trump indicated another US$100-billion in tariffs against China could be in the offing.
“It is obvious that this stand-off between the United States (and) China is quite serious and navigating these waters will be tricky for traders,” JBC said in a note.
“Any meaningful change to the perception regarding future trade issues will most likely trump the potential effects of short-term variations to oil fundamentals.”
In other commodities, gold prices were underpinned by the latest trade news. Prices for spot gold and gold futures were little changed ahead of the U.S. payrolls report, which could have implications for the course of interest rate hikes in the United States.
“The key to gold’s direction remains the dollar, and we expect the dollar to recover a bit more,” ABN Amro analyst Georgette Boele told Reuters.
In other metals, silver prices were slightly weaker. London copper eased as the U.S. dollar advanced, although prices were seen climbing by about half a percentage point this week, marking the second consecutive week of gains.
Currencies and bonds
The Canadian dollar moved off morning lows after the March employment report surpassed expectations. The figures showed the economy generated 32,300 new positions last month. The day range so far of 78.15 US cents to 78.49 US cents, with the dollar sitting near the upper end of that spread in the wake of the Statscan report.
The U.S. dollar index, which weighs the greenback against a selection of world currencies,was a touch lower after a report in that country showed hiring gains were the slowest since September. The index was at 90.448 , just south of break even after that release. Solid wage gains seen in the report helped support the greenback., although CIBC economist Andrew Grantham noted the increases were in line with expectations and unlikely to lift the U.S. currency.
“Hourly wages rose by 0.3 per cent on the month, a solid reading following a marginal 0.1-per-cent gain in February, but no better than what the consensus was looking for,” he said. “The annual rate of wages, at 2.7 per cent, was also no higher than what the street was looking for and hasn’t shown much sign of further acceleration in the past year.”
In bonds, U.S. Treasury yields slid on the report. The yield on the U.S. 10-year note was lower at 2.795 per cent in the wake of the release. The yield on the 30-year note was also lower at 3.044 per cent.
Stocks set to see action
Hydro One Ltd. says it has received antitrust clearance in the United States for its deal to acquire U.S. energy company Avista Corp. The Ontario-based utility says the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired Thursday night. Hydro One announced the friendly deal to acquire Avista last summer in an agreement that valued the company at $6.7-billion.
Walmart completed a thorough due diligence process on e-commerce firm Flipkart this week, two sources told Reuters, as the U.S. retail giant looks to take a controlling stake of 51 per cent or more in the Indian company. Walmart has already floated a shareholder agreement, or offer proposal, and is looking to shell out about US$10-billion to US$12-billion for the stake that would value Flipkart at roughly US$20-billion, one of the sources familiar with the matter said. A deal is far from finalized, however, and talks between the two parties and investors in Flipkart are ongoing, said a third source told the news agency.
U.S. industrial conglomerate Honeywell International Inc is targeting a roughly 10-per-cent increase in revenue from Southeast Asia this year, in part boosted by growing defense spending in the region, a company executive told Reuters. The company, which makes everything from jet engines to thermostats, is primed to benefit in the region as China’s territorial stance on South China Sea has raised the stakes for its ASEAN neighbours. “For a long time, militaries in Southeast Asia were a bit laissez faire about ordering and upgrading aircraft and so on,” Honeywell’s Southeast Asia president Briand Greer told Reuters in a recent interview.
Shares in Johnson & Johnson were down in premarket trading after the company suffered its first trial loss in a lawsuit claiming its talc-based products including Johnson’s Baby Powder contain cancer-causing asbestos. A New Jersey jury on Thursday ordered J&J and another company to pay US$37-million in damages.
A Hong Kong-based activist investment fund said Toshiba Corp’s chip unit was worth as much as US$40-billion, double the sale price agreed with a Bain-led consortium, as it escalated its opposition to the deal. Argyle Street Management is seeking to persuade Toshiba to either negotiate a higher price or list the unit, highlighting concerns that the Japanese conglomerate agreed to sell it too cheaply while in the throes of a financial crisis last year. The fund says other activist investors are on its side, but it is not clear how much support it has garnered. Argyle has also not disclosed the size of its stake in Toshiba.
Samsung Electronics Co Ltd said on Friday its first-quarter operating profit likely rose 57.6 per cent from a year earlier, beating market expectations. The tech giant said its January-March profit was likely 15.6 trillion won (US$14.7-billion), compared with an average forecast of 14.5 trillion won from a Thomson Reuters survey of 21 analysts. Revenue was estimated to have increased 18.7 per cent, Samsung said in a regulatory filing.
More Reading:
Friday’s small-cap stocks to watch
Why investors piled into Canadian oil stocks Thursday
Economic news
Canada added 32,300 new jobs last month, ahead of expectations. The jobless rate held at 5.8 per cent.
The U.S. economy generated 103,000 new positions, the slowest growth in six months. The unemployment rate was steady at 4.1 per cent.
(10 a.m. ET) Canada Ivey PMI for March.
(1:30 p.m. ET) U.S. Fed Chair Jerome Powell speaks in Chicago on economic outlook.
(3 p.m. ET) U.S. consumer credit for February. Consensus is an increase of $15-billion.
With Reuters and The Canadian Press