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Equities

Canada’s main stock index opened slightly lower on Friday following a sharp escalation in U.S.-China trade row but stabilizing oil prices lifted energy stocks, keeping losses in check.

At 9:36 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 11.66 points, or 0.07 per cent, at 16,365.38.

The health care index was up 3.5 per cent and telecom services gained 0.9 per cent. Aphria boosted the health care index as it became the first major Canadian cannabis company to report a quarterly profit. Its shares jumped 28.9 per cent.

Shares in CannTrust fell 7.7 per cent after the Ontario Securities Commission said it has opened an investigation into CannTrust, after revelations the company was growing cannabis without a licence.

Bombardier Inc. shares were up 0.8 per cent after the company said it is hiring an independent organization to review its procedures for doing business in foreign markets in the wake of allegations that company officials used corruption and collusion to win a rail contract in Azerbaijan.

Technology shares were the biggest decliner, down 2 per cent with Open Text down 6.4 per cent, Kinaxis off 3 per cent and Shopify down 2 per cent.

Materials fell 0.7 per cent and financials were down 0.3 per cent.

U.S. stock indexes fell at open on Friday, weighed by tariff-sensitive technology stocks following a sharp escalation in U.S.-China trade tensions, while a tepid domestic jobs growth in July reinforced fears of an economic slowdown.

The Dow Jones Industrial Average fell 54.76 points, or 0.21 per cent, at the open to 26,528.66.

The S&P 500 opened lower by 9.66 points, or 0.33 per cent, at 2,943.90. The Nasdaq Composite dropped 54.70 points, or 0.67 per cent, to 8,056.42 at the opening bell.

Wall Street was set to open lower on Friday after a sharp escalation in U.S.-China trade tensions and tepid job growth in July reinforced fears of a global economic slowdown.

The Labor Department said nonfarm payrolls increased by 164,000 jobs last month and the economy created 41,000 fewer jobs in May and June than previously reported. However, July’s numbers were in line with economists’ expectations.

“Job numbers were not too far from expected, it shows the trend is slowing down. It’s consistent with another rate cut either in September or October,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“The bigger issue for the Fed policy outlook is the tariff issue because that implies you will see higher costs for finished goods rather than intermediate goods that we have been importing from China.”

The report comes a day after President Donald Trump threatened to slap a 10% tariff on $300 billion of Chinese imports from next month, sending global markets tumbling overnight and investors fleeing for perceived safe-havens like U.S. Treasuries and the Japanese yen.

China on Friday said it would not be blackmailed and warned of retaliation.

Industrial bellwether Caterpillar Inc fell 0.6 per cent. Shares of tariff-sensitive Apple Inc slid 1.6 per cent, while chipmakers, which get a large portion of their revenue from China, also took a hit.

The sudden escalation in the trade rhetoric comes after the Federal Reserve on Wednesday played down expectations of further aggressive monetary policy actions after cutting interest rates for the first time in a decade.

Hopes that the Fed would be more accommodative to counter the impact of the bruising trade war had helped Wall Street’s main indexes hit record highs last month. Fed funds futures implied traders were positioned for a 100% chance the central bank would reduce its target range on interest rates by a quarter point in September, CME Group’s FedWatch program showed.

Semiconductor stocks Nvidia Corp , Applied Materials Inc and Intel Corp fell between 0.4 and 0.7 per cent.

The second-quarter earnings season is in full swing, with 74.4 per cent of the 355 S&P 500 companies that have reported so far beating profit estimates, according to Refinitiv data.

NetApp Inc slumped 20.7 per cent after the data storage equipment maker lowered its forecast for the first quarter and 2020, blaming a weakening macro environment in the latter half of the quarter.

Pinterest Inc jumped 15.7 per cent after the online scrapbook company raised its full-year sales forecast and reported second-quarter revenue above estimates.

Overseas, European shares sank. Britain’s FTSE was down 1.8 per cent, Germany’s DAX was off 2.5 per cent and France’s CAC dropped 2.6 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6 per cent to its lowest since mid-June while Japan’s Nikkei tumbled 2.1 per cent.

Chinese stocks were also hit hard, with the benchmark Shanghai Composite and the blue-chip CSI300 down 1.4 per cent and 1.6 per cent, respectively, while Hong Kong’s Hang Seng slumped 2.35 per cent.

Commodities

Oil prices rose around 2 per cent, regaining ground after their biggest falls in years on U.S. President Donald Trump’s threat to impose more tariffs on Chinese imports.

The move would intensify a trade war between the world’s top two economies and crude consumers that has disrupted global supply chains and roiled financial markets.

Brent crude futures slumped more than 7 per cent on Thursday, their steepest drop in more than three years. U.S. West Texas Intermediate (WTI) crude futures fell nearly 8 per cent to post their biggest drop in more than four years.

This ended a fragile rally built on steady drawdowns in U.S. inventories even though global demand looked shaky due to the trade dispute.

Brent futures rose $1.60, or 2.64 per cent, to US$62.10 a barrel on Friday. WTI futures gained $1.25, or 2.32 per cent, to US$55.20 a barrel.

“Given the latest turn in U.S.-Sino trade relations, sustaining this uplift may be subject to how China chooses to respond to President Trump’s new tariff initiative”, Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.

“The rise in oil prices may be simply the result of a technical bounce back from an oversold close yesterday.”

Gold retreated on Friday, shedding as much as 1 per cent, as investors booked profits following a 2 per cent rise in the previous session after U.S. President Donald Trump threatened fresh tariffs on China.

Spot gold was down 0.6 per cent at US$1,436.45 per ounce in a volatile session which saw prices fall as much as 1 per cent after scaling a two-week peak of US$1,446.10 earlier.

The metal was still on course for a weekly gain of about 1.3 per cent. U.S. gold futures, meanwhile, were up 1.1 per cent at US$1,448.60.

ABN Amro analyst Georgette Boele said that as gold had not managed to test the US$1,452.60 high hit on July 19, a return to the US$1,440-US$1,450 range would see some investors continue to take profits, making it harder for prices to move higher.

However, gold could break above US$1,450 if the dollar comes under pressure due to weak U.S. data, she added.

Currencies and bonds

The Canadian dollar was trading slightly lower, at 75.6 cents US despite a rise in oil prices Friday.

The Canadian dollar weakened to a six-week low against its U.S. counterpart on Thursday as oil prices slumped, pressured by the prospect of additional U.S. tariffs on Chinese goods.

China’s offshore yuan fell to its weakest in 2-1/2 years on Friday and was close to a record low after U.S. Trump’s threat to impose new tariffs on Chinese imports.

The yuan was last down 0.2 per cent at 6.9693 against the dollar after falling to 6.98, its weakest since January 2017.

The Japanese yen was up 0.5 per cent at 106.82 against the dollar . It had earlier jumped to 106.76, its strongest since April 2018.

The Swiss franc, another currency widely viewed as a safe-haven, reached a two-year high of 1.0940 against the euro in mid-morning London trading.

The U.S. dollar did not benefit from the scramble for safety. Its index was last down 0.1 per cent at 98.242, falling away from 26-month highs hit on Thursday before news of the tariff threat.

“I’m looking for the yuan to continue to move towards all time highs, but not yet seeing it through yet,” said Neil Jones, head of European hedge fund sales at Mizuho.

Jones said he has seen more yen demand coming through, describing it as “a convenient hedge” against increased global risks sparked by U.S. protectionism.

Other corporate news

Telus Corp. attracted more new wireless customers than expected in the second quarter and reported financial results largely in line with analyst forecasts. The Vancouver-based telecom said Friday it added 82,000 new mobile subscribers in the three months ended June 30, beating consensus estimates in the range of 55,000. Its stock gained 0.25 per cent.

Imperial Oil Ltd reported a more than six-fold rise in quarterly profit on Friday, helped by a $662 million benefit from Alberta’s corporate tax rate change. Its stock rose 1 per cent.

Exxon Mobil Corp on Friday reported a 21 per cent drop in quarterly profit, its third period in a row of weaker year-over-year results, as falling earnings in refining and chemicals offset improved oil production. Its stock was down 0.3 per cent.

Restaurant Brands International Inc’s quarterly profit beat analysts’ expectations on Friday, as more diners visited its Burger King outlets, and investments made in international expansion paid off. The Canada-based quick-service restaurant company owns Burger King, Tim Hortons, and Popeyes Louisiana Kitchen. On an adjusted basis, the company earned 71 cents per share, while analysts on average had estimated 65 cents, according to IBES data from Refinitiv. Revenue rose to $1.4 billion from $1.34 billion. Its shares gained 3.4 per cent.

Boeing Co plans further changes to the software architecture of the 737 MAX flight-control system to address a flaw discovered after a test in June, two people briefed on the matter said late on Thursday. The redesign, first reported by the Seattle Times, involves using and receiving input from both flight control computers rather than one. Its shares gained 0.8 per cent.

Lowe’s Cos. is laying off thousands of employees at its U.S. stores as it outsources some of their duties to outside companies. The home-improvement chain, based in Mooresville, North Carolina, declined to say exactly how many employees were affected. But The Wall Street Journal reported that thousands of employees were told this week that their jobs were eliminated, which the company confirmed. It’s stock was up 0.2 per cent.

Earnings include: Berkshire Hathaway Inc.; Brookfield Infrastructure Partners LP; Brookfield Property Partners LP; Chevron Corp.; Constellation Software Inc.; Dorel Industries Inc.; Enbridge Inc.; Exxon Mobil Corp.; Fairfax India Holdings Corp.; Fortis Inc.; Imperial Oil Ltd.; Logistec Corp.; Power Corp.; Power Financial Corp.; Restaurant Brands International Inc; Riocan REIT; Slate Office REIT; Supremex Inc.; Telus Corp.;

Economic news

(8:30 a.m. ET) Canada's merchandise trade balance for June. The Street expects a deficit of $300-million.

(8:30 a.m. ET) U.S. employment report for July. Consensus is a rise of 166,000 from June with an unemployment rate of 3.7 per cent (unchanged).

(8:30 a.m. ET) U.S. goods and services trade deficit. Consensus is US$54.5-billion, falling from US$55.5-billion in May.

(10 a.m. ET) U.S. factory orders for June. Consensus is an increase of 0.7 per cent from May.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for July. Consensus is a reading of 98.5, up from 98.2 in June.

With files from Reuters

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