Equities
U.S. stock futures were mixed early Friday with Amazon and Microsoft bolstering tech shares and easing geopolitical tensions on the Korea peninsula helping boost markets overseas. On Bay Street, futures were weaker as oil prices wavered. Overnight, world markets were largely positive.
“Yesterday’s better-than-expected tech stock earnings are helping Nasdaq buck the trend of slightly lower Canadian and U.S. equity futures markets this morning,” Michael Gregory, deputy chief economist at BMO Capital Markets, said in a note. “The latter comes alongside slightly lower Treasury yields and a stronger greenback. There’s a hint of risk-off here, despite the two Korean leaders dancing across the demilitarized zone.”
Just before dawn, leaders of North and South Korea pledged to formally end their 65-year war and said they intend to conclude a peace treaty later in the year.
On the corporate front, Amazon shares were up more than 7 per cent ahead of the North American open after the online retail behemoth posted said profit more than doubled in the latest quarter and issued a stronger-than-expected spring forecast. Amazon said sales in the quarter rose 43 per cent to US$51-billion. Analysts had been looking for sales of US$49.8-billion.
Microsoft shares, meanwhile, advanced more than 3 per cent in premarket trading. The company also topped analysts forecasts with quarterly results reported after Thursday’s close. Revenue at Microsoft’s productivity and business processes business jumped 17 per cent to US$9-billion, topping analysts’ average expectation of US$8.73-billion, according to Thomson Reuters I/B/E/S. Revenue for Microsoft’s More Personal Computing unit increased 13 per cent to US$9.9-billion, helped by a 32-per-cent increase for its Surface business.
On Bay Street, investors will likely give some extra attention to Aimia Inc. shares after the company announced late Thursday the unexpected exit of its CEO David Johnston. The company said the outgoing CEO and its board “have mutually agreed on his departure. Mr. Johnston will remain in the role until a successor is found.
In earnings, energy companies remain at the forefront with results form TransCanada Corp. and Imperial Oil in the mix.
TransCanada reported net income of $734-million or 83 cents a share, up from $643-million or 74 cents a year earlier. Excluding items, TransCanada reported earnings per share of 98 cents in the latest quarter, up from 81 cents a year earlier and ahead of the 85 cents analysts had been forecasting. Revenue rose $3.42-billion from $3.41-billion.
Imperial Oil, meanwhile, posted higher first-quarter profit and said it will raise its dividend to 19 cents. Imperial reported earnings of $516-million or 62 cents per share, up from $333-million or 39 cents a share a year ago. Revenue totalled $7.9-billion in the most recent quarter, up from about $7.2-billion last year.
In Europe, the pan-European STOXX 600 was modestly higher and was heading for its fifth consecutive week of gains. Britain’s FTSE 100 rose 0.67 per cent. Germany’s DAX advanced 0.79 per cent and France’s CAC 40 was up 0.24 per cent in early trading.
In Asia, markets ended the week on solid footing, bolstered by optimism heading into the Korea summit. Japan’s Nikkei ended up 0.66 per cent while the broader Topix was up 0.29 per cent. The Bank of Japan on Friday kept its key policy rate unchanged but also dropped the time frame for hitting its inflation target. That move was seen as an effort by the central bank to dial down market expectations for keeping more stimulus in check.
Hong Kong’s Hang Seng ended up 0.91 per cent and the Shanghai Composite Index rose 0.23 per cent.
Commodities
Crude prices were slightly weaker ahead of the start of trading in North America but still headed for a strong week overall as investors continue to weigh the possibility of renewed sanctions against Iran by the United States. Brent crude was down slightly at last check after a choppy night and had a range for the day of US$74.35 to US$74.73. West Texas Intermediate had a range for the day so far of US$67.82 to US$68.21. Brent crude, which touched US$75 a barrel, was headed for its third straight week of gains and is up about 6 per cent for the month on supply fears triggered by the possibility of fresh U.S. sanctions.
Brent crude, which touched US$75 a barrel, was headed for its third straight week of gains and is up about 6 per cent for the month on supply fears triggered by the possibility of fresh U.S. sanctions.
Some analysts suggested Friday’s slight dip reflected the impact of currency moves rather than a shift in the market.
“All we’re seeing is very strong pricing and the slight softening is primarily due to a stronger [U.S.] dollar,” Bjarne Schieldrop, SEB chief commodity analyst, told Reuters.
“I don’t think oil is actually taking a breather.”
In other commodities, gold prices were although the gains may not hold if news out of the Korea summit shifts risk appetite. Spot gold was up 0.1 per cent at last check, just off the previous session’s lows and near its weakest levels since last month.
Silver prices were also higher early Friday, although that metal is down more than 3 per cent for the week, marking its biggest weekly fall since early February.
Currencies and bonds
The Canadian dollar was slightly weaker in early going as its U.S. counterpart looks set for its best week since late 2016. The day range on the loonie so far is a slim 77.52 US cents to 77.72 US cents. With little economic news this week, the loonie’s movement has largely been linked to shifts in the broader currency markets and investor concern over continuing NAFTA talks.
In world currencies, the U.S. dollar index, which weighs the greenback against a basket of its global counterparts, was higher at 91.778, posting fairly steady advances through the predawn hours. The index is up about 1.5 per cent for the week so far and looks like it manage its best showing since November 2016.
The U.S. dollar caught an updraft earlier this week when the yield on the key U.S. 10-year Treasury note cracked the psychologically significant 3-per-cent level. The yield peaked at 3.03 per cent on Wednesday. By early Friday, the yield had retreated to 2.974 per cent. The yield on the 30-year note was also lower at 3.155 per cent.
“The [U.S.] dollar looks set to cap it’s best weekly run since late 2016,” Mark McCormick, TD’s North American head of FX strategy, said. “It reflects a few different micro-themes, but the most the crucial driver now is the pullback in the European reflation narrative alongside a modest pivot in central bank rhetoric.”
Bonds and currency traders now turn their attention to the morning release of the first reading on first-quarter U.S. GDP. The U.S. Commerce Department said the U.S. economy grew at an annual rate in the quarter of 2.3 per cent. That’s better than the 2-per-cent rate most economists had been forecasting but down from 2. 9 per cent in the fourth quarter.
CIBC World Markets chief economist Avery Shenfeld called said the report - along with a first-quarter reading on employment costs that came slightly better than expectations - is “slightly bearish for Treasuries.”
“U.S. GDP was a tad firmer than expected to start the year, but with that gap largely driven by inventory building, there will be no rush to rewrite the outlook for the year as a whole,” he said.
Stocks set to see action
Cameco Corp posted a first-quarter profit on Friday compared with a loss a year ago as the uranium producer benefited from lower costs and higher prices of the commodity. Net earnings were $55-million, or 14 cents per share, in the quarter ended March 31, compared with a loss of $18-million, or 5 cents per share, a year earlier. Revenue rose to $439-million from $393-million.
Fertilizer giant Nutrien Ltd. says it will temporarily lay off up to 1,300 workers at two of its potash mines in Saskatchewan. The layoffs are to affect staff at the Vanscoy mine this month and the Allan mine in early May. Will Tigley, a company spokesman, told The Canadian Press some essential staff would remain at both facilities. According to Nutrien, the layoff is directly related to rail transportation backlogs, the possibility of a Canadian Pacific Railway strike and growing inventory. The company says layoffs aren’t unusual and they could last for days or weeks.
Colgate-Palmolive Co reported higher quarterly revenue, as the world’s largest toothpaste maker saw more demand for its oral, personal and home care products in Europe and North America. Net sales rose 6.4 per cent to US$4-billion, in line with analysts’ average estimate of US$4.02-billion, according to Thomson Reuters I/B/E/S. Net income rose to US$634-million, or 72 US cents per share, in the first quarter ended March 31, from US$570-million, or 64 US cents per share, a year earlier.
U.S. oil refiner Phillips 66 reported a 2 per cent fall in first-quarter profit on Friday, hurt by higher costs. The company’s consolidated earnings fell to US$524-million in the first quarter from US$535-million a year earlier. Adjusting for number of shares outstanding the company earned US$1.07 per share, from US$1.02 per share a year earlier. Adjusting for some items, Phillips 66 earned US$512-million from US$294-million.
Fujifilm Holdings Corp and Xerox Corp have reopened talks about their US$6.1-billion merger agreement, a Fujifilm spokeswoman said. “It is true that we have received a request for a renegotiation from Xerox,” the camera and photocopier firm said in a statement. On Friday, the spokeswoman said this meant the firms had reopened talks on deal terms and conditions. Xerox Chairman Robert Keegan told a New York state court the two had reopened talks, sources had told Reuters.
An explosion at Husky Energy’s refinery in Superior, Wisconsin, caused a fire that burned for several hours on Thursday and sent smoke billowing into the air, prompting the evacuation of thousands of residents, officials said. Local media said at least 15 people were injured but no fatalities were reported. All of the refinery’s workers were accounted for, Husky said.
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Economic news
The U.S. economy grew at an annual rate of 2.3 per cent in the first quarter of the year, exceeding economists’ forecasts. Most had been expecting the annual rate to come in close to 2 per cent. The U.S. economy grew at an annual rate of 2.9 per cent in the fourth quarter.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for April. Consensus is 98.0, down from 101.4 in March.
With Reuters and The Canadian Press