U.S. and Canadian stocks markets are set to continue Thursday’s rise as easing trade tensions buoy investor sentiment to push markets yet again to new highs.
Investors have been also pushing marijuana stocks higher, and in recent days many brokerages took steps to cover losses on their clients' cannabis investments, buying shares to close short positions or selling their clients' remaining cannabis holdings to cover losses. This buying and selling of shares in Tilray and other cannabis stocks was a major factor in the frenetic recent trading activity, according to banking sources.
On Thursday, Canopy Rivers newly listed shares soared as appetite for marijuana stocks continued. These stocks are expected to see more action Friday.
On Thursday, trade-sensitive industrial stocks led the gains on Wall Street. The Dow Jones Industrial Average rose 0.95 per cent while the S&P 500 gained 0.78 per cent, both hitting record highs.
The latest rally comes after new U.S. and Chinese tariffs on each other’s goods were set at lower rates this week than previously expected, raising hopes that hostilities between the world’s two largest economies may be easing.
Earlier this week, Chinese Premier Li Keqiang pledged on that Beijing will not engage in competitive currency devaluation, news that also helped calm investors who were worried about a further escalation in trade tensions.
“The tariffs that were announced by both sides during the week were deemed to be not as harsh as originally suspected,” said David Madden, markets analyst at CMC Markets in London.
“The U.S. in particular showed restraint, but that was partially so the Trump administration would have more ammunition should they feel it is required down the line. Now that the latest series of tariffs are out of the way, investors fell back into their bullish routine.”
Despite growing anecdotal reports from companies on both sides of the Pacific that the trade war is starting to impact their operations, the outlook for corporate profits remained solid in many markets on the back of strong global growth, keeping equity valuations relatively attractive.
Overseas, global stocks hit their highest levels in over six months on Friday, as investors gravitated to the view that the latest exchange of tariffs between the United States and China may be less damaging than initially feared.
The broad strength across markets helped MSCI’s All-Country World Index, which tracks shares in 47 countries, hit its highest level since March 13. The index was last up 0.4 per cent on the day, and was set to post its best weekly performance since early May.
Britain’s FTSE rose 1.06 per cent, Germany’s DAX gained 0.67 per cent, and France’s CAC added 0.68 per cent.
In Asia, the Nikkei was up 0.82 per cent, China’s Shanghai index jumped 2.5 per cent and Hong Kong’s Hang Seng added 1.73 per cent.
Commodities
Oil prices rose on Friday ahead of a meeting of OPEC and other large crude exporters that will focus on production increases as U.S. sanctions restrict Iranian exports.
OPEC and its allies are scheduled to gather in Algeria on Sunday to discuss how to allocate higher supply to offset the shortage of Iranian supplies.
Brent is close to four-year highs, trading just below US$80 a barrel, as investors bet that the Organization of the Petroleum Exporting Countries will be unable to compensate fully for the loss of oil from Iran, OPEC’s third-biggest producer.
But the meeting on Sunday is unlikely to be able to change production policy. Such a move would require OPEC to hold what it calls an “extraordinary meeting,” which is not on the agenda.
U.S. President Donald Trump increased pressure on OPEC on Thursday, calling on the organization to “get prices down now!”
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices,” Trump wrote on Twitter.
Trump’s criticism was directed primarily at Saudi Arabia, OPEC’s biggest producer, after the kingdom said it could tolerate oil prices above US$80, at least in the short term, said Commerzbank commodities analyst Carsten Fritsch.
“Saudi Arabia now faces a dilemma,” Fritsch said. “Refusing to step up production would mean going against the will of ally Trump, but giving in to Trump’s demand would make it his accomplice, which could see OPEC tested to the limit.”
Gold prices edged up on Friday to a one-week high as the dollar weakened on receding fears of a full-blown Sino-U.S. trade war, keeping the yellow metal on track for its first weekly gain in four.
“Higher gold prices are due to the fact that China-U.S. trade tensions have somewhat dissipated,” OCBC analyst Barnabas Gan said.
“Right now we have to tread very carefully on gold as any uptick in trade tension is bearish. U.S. tariffs should actually improve trade balance in the U.S and should give more strength to the dollar and push gold prices down.”
New U.S. and Chinese tariffs on each other’s goods were set at lower rates this week than previously expected, raising hopes that hostilities between the world’s two largest economies may be easing.
Investors have been buying the dollar believing that the United States has less to lose from the dispute. But the dollar has weakened this week, with investor flows being diverted away from the greenback to its peers such as emerging market currencies as trade war concerns have ebbed.
Currencies and Bonds
The Canadian dollar was trading slightly lower Friday, near the 77.5-US-cent mark.
In currency markets, the U.S. dollar slipped to a two-month low against a basket of major trading partners as easing worries on trade wars quelled bids for the U.S. currency.
The euro last traded at $1.1785, after touching a 3-month high of $1.18030. It lost some steam after a euro zone manufacturing survey came in below forecasts.
“The weakness in the dollar is prompting investors to unwind their short bets against other currencies such as the euro and this move may have further room to run,” said Manuel Oliveri, a currency strategist at Credit Agricole in London.
Amid positive risk sentiment, the yen slid to a two-month low of 112.88 to the dollar.
Stocks to Watch
Shares in Canada’s telecom players could see reaction today after wireless-industry experts warned that Canadian carriers could face higher costs if they can no longer make deals with Huawei Technologies Co. Ltd. as they prepare for major spending to build the next generation of technology. Public Safety Minister Ralph Goodale confirmed earlier this week that the federal government is conducting a national-security analysis meant to minimize cyberthreats from equipment made by foreign telecom companies, which comes after Australia last month banned Huawei and its Chinese rival ZTE Corp. from supplying gear for next-generation cellular networks. The United States has a similar policy on Chinese equipment vendors.
Canadian aircraft leasing company Global Vista, one of the largest customers for Bombardier’s long-range Global 7500 business jet, said on Thursday it expects greater demand for the plane after Canadian and U.S. regulators certify the aircraft. Bombardier expects Canadian certification this month, a necessity if the Montreal-based plane-and-train maker is to begin delivering its flagship business jet to clients, Reuters reported this week citing sources. Regulator Transport Canada has the final say on timing.
Torstar Corp. is buying iPolitics Inc., a news website based in Ottawa, in an attempt to bolster the content of the Toronto Star and the company’s other assets as it tries to draw more digital subscribers.
Alimentation Couche-Tard Inc. says it will allow shareholders to vote on the pay packages of the company’s top five executives, but not until next year.
Economic News
Canada’s annual rate of inflation slipped to 2.8 per cent in August from 3 per cent in July, Statistics Canada said. On a monthly basis, consumer prices edged up 0.1 per cent after climbing 0.5 per cent the month before.
Canadian retail sales rose 0.3 per cent to $50.9-billion in July, Statscan said. Excluding autos, sales were up 0.9 per cent.