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Canada’s main stock index opened higher on Friday following a rise in oil prices and despite weak economic data.
OPEC’s oil supply fell to a four-year low, as Saudi Arabia and its Gulf allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary drop.
The S&P/TSX Composite Index rose 108.32 points, or 0.68 per cent, to 16,107.33 shortly after the open.
Oil prices were broadly steady on Friday as surging U.S. supply and concerns of a global economic slowdown were offset by falling OPEC output. International Brent crude futures were at US$66.39 per barrel, up 8 cents from Thursday’s settlement. U.S. West Texas Intermediate (WTI) crude oil futures were at US$57.38 per barrel, up 16 cents.
Energy stocks rose 1.2 per cent with Enerplus up 3.4 per cent, Baytex Energy gained 2.5 per cent, and Canadian Natural Resources rose 1.9 per cent.
Canada’s economic growth slowed more than expected in the fourth quarter on plunging Canadian crude oil export prices, underpinning market expectations that the Bank of Canada will not hike interest rates next week.
Statistics Canada said on Friday that annualized growth between October and December was 0.4 per cent, its slowest pace since the second quarter of 2016 and down from 2.0 per cent in the third quarter.
The pace of growth was below analyst forecasts of 1.2 per cent. The Bank of Canada, which has hiked rates five times since July 2017, in January cut its forecast for fourth-quarter annualized growth to 1.3 per cent from 2.3 per cent.
Health care stocks rose 1.3 per cent with Cronos up 2.7 per cent, Bausch Health up 2 per cent and Canopy Growth up 1.7 per cent.
U.S. stocks rose broadly at open on Friday as data showed inflation pressures remain tame, which together with slowing economic growth underscored the Federal Reserve’s “patient” stance towards raising interest rates further this year.
The Dow Jones Industrial Average rose 103.67 points, or 0.40 per cent, at the open to 26,019.67.
The S&P 500 opened higher by 13.73 points, or 0.49 per cent, at 2,798.22. The Nasdaq Composite gained 54.92 points, or 0.73 per cent, to 7,587.45 at the opening bell.
The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, rose 0.2 percent, after excluding volatile food and energy components, following a similar gain in November.
Investors are also awaiting the Institute for Supply Management (ISM) survey on U.S. manufacturing activity for February which is expected to have slowed slightly from January.
Earlier, a private survey showed China’s factory activity contracted for a third straight month in February but at a slower pace, helping lift global equities.
“It’s a China type day which is giving investors confidence that all is well in China and that fear is probably off the table,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
The Commerce Department said U.S. personal income fell for the first time in more than three years in January, pointing to a moderate growth in consumer spending.
Wall Street’s main indexes closed slightly lower on Thursday as support from better-than-feared U.S. GDP data was countered by concerns about earnings and U.S.-China trade relations.
The benchmark S&P 500 index has risen 11 per cent since the beginning of the year, bolstered by progress in trade talks and the Federal Reserve’s cautious stance on interest rates.
After President Donald Trump delayed a deadline that would have triggered higher tariffs on Chinese imports, Bloomberg reported on Thursday afternoon that a summit between Trump and his Chinese counterpart Xi Jinping to sign for a final trade deal could happen as soon as mid-March.
Gap Inc. surged 17.4 per cent after the company said it would separate its better-performing Old Navy brand and shutter about 230 stores of its struggling namesake apparel business.
Foot Locker jumped 10.7 per cent after the footwear retailer reported quarterly same store sales above analysts’ expectations. Its partner Nike Inc’s shares rose about 1.2 percent.
Tesla Inc fell 5.5 per cent after the electric automaker said it would not be profitable in the first quarter.
Commodities
Oil prices climbed on Friday as markets tightened amid output cuts by producer club OPEC, but surging U.S. supply and concerns of global economic slowdown kept a lid on further gains.
International Brent crude futures were at US$66.85 per barrel, up 54 cents, or 0.81 per cent, from their last settlement.
U.S. West Texas Intermediate (WTI) crude oil futures were at US$57.66 per barrel, up 44 cents, or 0.77 per cent.
Traders said oil markets were currently tightening.
In Venezuela, oil exports have plunged by 40 per cent to around 920,000 barrels per day (bpd) since the U.S. government slapped sanctions against its petroleum industry on Jan. 28.
This drop comes as the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member, has led efforts since the start of the year to withhold around 1.2 million bpd of supply to prop up prices.
“Global (oil) markets appear tighter than many anticipated for this time of year, but scores of unsold barrels can pile up quickly and saturate regions,” Canada’s RBC Capital Markets said in a research note on oil markets.
Gold slipped to two-week lows and was set for its biggest weekly drop in nearly four months on Friday, pressured by a reviving dollar and rising stocks.
Spot gold is down about 1.4 per cent so far this week, which could be its biggest weekly decline since the week ending Nov. 9. It was down 0.3 per cent at US$1,309.13 an ounce, having touched its lowest since Feb. 14 at US$1,305.53. U.S. gold futures shed 0.4 per cent to US$1,310.40.
“The news on jobs and Gross Domestic Product (GDP) was more favourable for the dollar, which has been gaining value. Because of that we are continuing to see some long liquidations,” Afshin Nabavi, senior vice president at MKS SA, said.
“We have breached US$1,315 and US$1,310, which are very important support levels. Won’t be surprised even if we see a test of US$1,300 later today.”
Currencies and bonds
The Canadian dollar rose above the 76-cent-US level as oil prices gained and ahead of the release of Canada’s fourth quarter GDP data.
“Key long-term trendline support comes in at $1.3120 (76.21 cents US) to end the week, with resistance at $1.3221 (75.63 cents US),” said Sue Trinh, head of Asia FX Strategy with RBC Capital Markets.
The U.S. dollar moved higher on Friday, hitting a 10-week high against the yen, as a jump in U.S. Treasury rates sent investors chasing higher yields into the greenback.
The U.S. currency managed to claw back earlier losses after data showed U.S. gross domestic product increased at a 2.6 per cent annualized rate in the fourth quarter, above economists’ forecasts for a 2.3-per-cent gain.
With U.S. interest rates higher than in other developed economies, investors have been turning to the dollar for yield.
“What’s the dollar rebound on? Is it sentiment or yield? The answer is it’s just about yield,” said Simon Derrick, currencies analyst at BNY Mellon.
The yen was the main casualty from the dollar’s rise, losing as much as half a per cent to 111.98 yen, a 10-week low.
The Japanese currency, along with fellow safe-haven currency Swiss franc, had been supported earlier in the week when tensions between India and Pakistan and the collapse of U.S.-North Korea talks rattled markets.
Against a basket of rival currencies the dollar rose 0.1 per cent to 96.259.
The U.S. 10-year Treasury yield was at 2.713 per cent and the Canadian 10-year bond yield was at 1.952 per cent
Stocks to watch
Canadian Pacific Railway Ltd. is pushing back on the transport minister’s order regarding the use of rail-car handbrakes, seeking changes to a new rule enacted after the fatal train wreck near Field, B.C., on Feb. 4. The new rule requires that operators of trains halted in an emergency stop on a mountain grade apply a “sufficient” number of handbrakes to prevent the train from rolling away.
Three Victoria’s Secret stores in Canada are expected to close this year as parent company L Brands Inc. looks to improve on its financial performance. A spokesperson for the U.S.-based lingerie brand’s parent company declined to tell The Canadian Press which locations will be shuttered in Canada, but says they are part of a plan to slash 53 stores worldwide. It shares were up nearly 2 per cent in premarket trading.
Wells Fargo & Co. officials have reached a $240-million settlement of litigation accusing them of poor oversight, resulting in the creation of millions of unauthorized customer accounts. Its shares gained 0.6 per cent in premarket trading.
Gap Inc. surged 23 per cent after the company said it would separate its better-performing Old Navy brand and shutter about 230 stores of its struggling namesake apparel business.
Foot Locker jumped 13.4 per cent after the footwear retailer reported quarterly same store sales above analysts’ expectations. Its partner Nike Inc.’s shares rose about 1.2 per cent.
Tesla is finally ready to offer a version of its Model 3 sedan with a starting price of $35,000. The company on Thursday began accepting orders for the lower-priced version, with delivery in two to four weeks. CEO Elon Musk also said the company was now only taking orders online, and would close some showrooms and reduce its work force. Its shares fell 3.7 per cent in premarket trading.
Martinrea International Inc. ends a strong year by posting record fourth-quarter profits. The Toronto-based auto parts manufacturer says its net earnings for the three months ended Dec. 31 increased 16.8 per cent to $37.8 million, from $32.4 million a year earlier. Excluding one-time items, adjusted profits rose slightly to $43.8 million or 51 cents per diluted share, one cent above the 2017 quarter. Sales grew to $926.2 million from $878.6 million in the fourth quarter of the prior year. Martinrea was expected to earn 51 cents per share in adjusted profits on $889.1 million of revenues, according to analysts polled by Thomson Reuters Eikon.
U.S. casino operator Caesars Entertainment Corp. has struck a deal with investor Carl Icahn that appoints three new directors to its board, although the billionaire hedge fund manager continues to press for a sale of the company. Its shares rose 2 per cent in premarket trading.
Earnings include: Boralex Inc.; Chartwell Retirement Residences; EnWave Corp.; GMP Capital Inc.; Onex Corp.; Pulse Seismic Inc.
Economic news
(8:30 a.m. ET) Canada’s real GDP for fourth quarter is released. The Street expects an annualized rate rise of 1.0 per cent from Q3.
(8:30 a.m. ET) Canada’s real GDP at basic prices for December is announced. Consensus is unchanged from November.
(8:30 a.m. ET) U.S. reports personal spending and income for December.
(8:30 a.m. ET) U.S. core PCE Price Index for December is reported. Consensus is a rise of 0.2 per cent from November and 1.9 per cent year-over-year.
(9 a.m. ET) Canada’s Markit manufacturing PMI for February is released.
(10 a.m. ET) U.S. reports manufacturing PMI for February.
(10 a.m. ET) U.S. University of Michigan consumer sentiment for February is released. Consensus is a reading of 96,.0 up from 91.2 in January.
Also: Canadian and U.S. auto sales for February are released.
With files from Reuters