Equities
Canada’s main stock index saw a muted start Friday while Wall Street posted modest early gains as traders look ahead to next weeks Federal Reserve rate decision.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 21.24 points, or 0.08 per cent, at 19,921.46.
In the U.S., the Dow Jones Industrial Average rose 18.83 points, or 0.06 per cent, at the open to 33,852.44.
The S&P 500 opened higher by 10.95 points, or 0.26 per cent, at 4,304.88, while the Nasdaq Composite gained 73.87 points, or 0.56 per cent, to 13,312.40 at the opening bell.
“Wall Street is clearly in waiting-on-the-Fed mode, but optimism is growing that the Fed might end up being done with their rate hiking cycle,” OANDA senior analyst Ed Moya said.
“The data-dependent Fed has locked themselves into a skip and that seems to be mostly priced in. Even if we get a somewhat hot inflation report next week, they are likely to keep rates steady at the June 14th meeting.”
The Fed makes its next rate decision on Wednesday.
In Canada, Bank of Canada deputy governor Paul Beaudry said on Thursday afternoon that the central bank raised rates this week after surprisingly strong consumer spending data and signs that easing inflation had begun to stall. The Globe’s Mark Rendell reports that Mr. Beaudry gave no indication of where interest rates are heading in the near term, or whether the bank intends to hike its benchmark rate again in July or September, as many Bay Street analysts now believe it will. But Mr. Beaudry did say that, over the long run, interest rates may be higher than before the COVID-19 pandemic, because of structural changes in the global economy, The Globe reports.
On Friday, Canadian investors got a disappointing reading on May employment. Statistics Canada says the economy lost 17,300 jobs last month. Economists had been expecting a gain of about 21,000 positions. The jobless rate ticked up to 5.2 per cent last month from 5 per cent the month before. The May increase in the jobless rate was the first since August 2022.
“The weak jobs figure will have markets paring back expectations for further interest rate hikes from the Bank of Canada, although policymakers will probably like to see some further softening ahead to convince them that no more rate increases are needed,” CIBC senior economist Andrew Grantham said.
Overseas, the pan-European STOXX 600 was down 0.36 per cent by midday. Britain’s FTSE 100 fell 0.62 per cent. Germany’s DAX was down 0.17 per cent and France’s CAC 40 lost 0.34 per cent.
In Asia, Japan’s Nikkei jumped 1.97 per cent. Hong Kong’s Hang Seng added 0.47 per cent.
Commodities
Crude prices struggled in early trading and looked set for a second weekly decline with concerns about the global economy continuing to weigh on sentiment.
The day range on Brent was US$75.26 to US$76.03 in the early premarket period. The range on West Texas Intermediate was US$70.62 to US$71.35.
Both benchmarks are down about 1 per cent for the week.
“It’s been a very choppy week in oil markets, with traders forced to digest the latest compromise deal from OPEC+ against the backdrop of more interest rate hikes and dampening prospects for the global economy,” OANDA senior analyst Craig Erlam said in a note.
“Resilience in the economy now is impressive but the longer it lasts, the more it will be met with higher interest rates that could ultimately deliver a harder landing.”
Central banks in both Canada and Australia surprised markets this week by raising interest rates. The Bank of Canada had been the first major central bank to move to the sidelines earlier this year.
Early in the week, crude got a lift from a decision by Saudi Arabia to further cut output in July, although the impact of that move has since faded in the markets.
“Brent has been firmly entrenched in the $70-$80 range for more than a month now and if Saudi Arabia can’t get the rest of the alliance on board before the end of the year, you have to wonder what the bullish case for crude will be,” Mr. Erlam said.
“Stronger growth is obviously one but that isn’t exactly conducive to ongoing rate hikes and stubbornly high inflation.”
In other commodities, spot gold fell 0.2 per cent to US$1,964.59 per ounce by early Friday morning, but headed for a nearly 1-per-cent weekly rise. U.S. gold futures held steady at US$1,979.70.
Currencies
The Canadian dollar was higher while its U.S. counterpart held near a two-week low against a group of world currencies ahead of next week’s Fed rate decision.
The day range on the loonie was 74.78 US cents to 75.01 US cents. The Canadian dollar is up nearly 0.70 per cent against the greenback over the past five days and up 1.55 per cent over the last month.
On world markets, the dollar index last stood at 103.42, having lost more than 0.7 per cent in the previous session, its largest daily decline since mid-March, Reuters reported.
A higher-than-forecast reading on weekly U.S. jobless claims on Thursday stoked speculation that the Fed could hold rates steady at next week’s policy meeting.
The euro was flat on the day at US$1.07735 having gained 0.78 per cent on Thursday to a two-week intraday high due to the dollar sell off, according to figures from Reuters. Britain’s pound, which rose about 1 per cent on Thursday, was at US$1.2545 early Friday, close to its one-month high.
In bonds, the yield on the U.S. 10-year note was higher at 3.749 per cent in the predawn period.
More company news
A work stoppage order by a Chilean environmental court on Thursday will prevent Canadian miner Lundin from reopening its Alcaparrosa copper mine, which it closed nearly a year ago after a gaping sinkhole opened in a nearby village. The environmental court said that a temporary work stoppage was requested by government agency CDE which has filed a lawsuit before the court against the company. The stoppage could last until that trial is complete. The CDE lawsuit accuses Lundin and its subsidiary of environmental damage in connection with a 118-foot-wide (36-meter-wide) sinkhole in Tierra Amarilla village in northern Chile. Lundin voluntarily stopped work at the mine in July 2022 when the sinkhole appeared. In November, the company announced a plan to gradually restart the mine over 18 months. -Reuters
Canada’s Brookfield Asset Management said on Friday it would buy payments provider Network International for 2.2 billion pounds (US$2.76-billion) in cash, as it expands its payments business in the Middle East and Africa. The 400 pence-per-share offer represents a premium of about 64% to United Arab Emirates-based Network International’s closing price on April 12, the last business day prior to the start of the offer period. The FTSE 250 company’s shares climbed as much as 6% to a more-than-one-month high of 385 pence in morning trade. -Reuters
Electric vehicles made by General Motors will be able to use much of Tesla’s extensive charging network beginning early next year. In addition, GM will adopt Tesla’s connector, the plug that links an electric vehicle to a charging station. GM joins Ford in shifting its electric vehicles to work with about 12,000 of Tesla’s roughly 17,000 chargers, and both Detroit automakers are pushing to make Tesla’s connector the industry standard. GM CEO Mary Barra and her Tesla counterpart, Elon Musk, made the announcement Thursday during a Twitter Spaces conversation. Tesla shares were up more than 5 per cent in morning trading on the news. -The Associated Press
Economic news
(8:30 a.m. ET) Canadian employment for May.
(8:30 a.m. ET) Canada’s capacity utilization for Q1.
(10 a.m. ET) U.S. quarterly services survey for Q1.
With Reuters and The Canadian Press