Equities
Canada’s main stock index opened higher Friday with a rebound in crude prices helping buoy energy shares. On Wall Street, key indexes were also up in early trading were also up on positive earnings from Apple and a better-than-expected reading on hiring in the U.S. economy.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 120.9 points, or 0.6 per cent, at 20,359.09.
In the U.S., the Dow Jones Industrial Average rose 120.81 points, or 0.36 per cent, at the open to 33,248.55. The S&P 500 opened higher by 23.51 points, or 0.58 per cent, at 4,084.73, while the Nasdaq Composite gained 106.63 points, or 0.89 per cent, to 12,073.03 at the opening bell.
The Dow, S&P and Nasdaq were all down for the week heading into Friday’s session as renewed concern about U.S. regional banks hit stocks. The TSX was also in the red for the week ahead of Friday’s opening bell.
“There appears to be an increasing sense of caution amongst central banks that they are reaching the limits of what they can do without causing something to break, Michael Hewson, chief market analyst with CMC Markets U.K., said in a note.
“We’re already seeing those strains manifest themselves in the U.S. banking sector, with Western Alliance Bancorp joining PacWest Bancorp in the fight to remain a going concern.”
This week both the ECB and the U.S. Federal Reserve raised rates by a quarter percentage point. Markets are now expecting the Fed to remain on pause at its June meeting although some are now arguing that the central bank could cut rates later in the year as concerns about the health of the U.S. regional banks simmer. The U.S. regional banking stocks steadied early Friday morning after sharp losses earlier in the week.
“There is a sense that this crisis has become a self-fulfilling prophecy of fear, with the market adopting a shoot first ask questions later mentality, which in turn is placing pressure on banks who don’t have a big business deposit base,” Mr. Hewson said.
On Friday, markets got a reading on the health of the jobs market on both sides of the border.
Statistics Canada said hiring in the Canadian economy rose by 41,400 positions last month. That was more than the roughly 20,000 economists had been forecasting. The jobless rate held steady.
“For now, labour markets look very firm, and continued to surprise broadly on the upside in April,” RBC assistant chief economist Nathan Janzen said.
“But growth headwinds from aggressive interest rate hikes over the last year continue to build, with tightening credit conditions in the U.S. adding to downside risks.”
As concerns about growth mount, he said, the Bank of Canada is likely done hiking interest rates, but labour markets are too strong and inflation is still to hot to justify a quick shift to cuts.
“We expect the BoC to remain on hold for the rest of this year,” he said in a note.
In the U.S., the economy generated 253,000 jobs in April. That was also ahead of forecasts. Economists had been looking for a number closer to 180,000 positions. However, March’s jobs growth in the U.S. was revised lower.
Elsewhere, shares of Apple were up more than 4 per cent in early trading. The tech giant reported profit and revenue ahead of forecasts in the latest quarter and said it expects gross margins above Wall Street expectations despite predicting a slight fall in revenue in the company’s current fiscal third quarter.
In Canada, results are due Friday morning from Enbridge, Magna International and Hydro One.
Overseas, the pan-European STOXX 600 was up 0.55 per cent in afternoon trading. Britain’s FTSE 100 gained 0.55 per cent. Germany’s DAX and France’s CAC 40 advanced 0.88 per cent and 0.79 per cent, respectively.
In Asia, Hong Kong’s Hang Seng closed up 0.50 per cent. Markets in Japan were closed.
Commodities
Crude prices were on track for a third week of declines despite early gains on Friday with recession worries clouding the demand outlook.
The day range on Brent was US$72.42 to US$73.89 in the premarket period. The range on West Texas Intermediate was US$68.48 to US$69.83. Prices were up early Friday but are coming off four consecutive days of declines.
“The outlook for the economy is getting uglier by the day and that is making it easier for energy traders to jump on the momentum selling that is hitting WTI crude,” OANDA senior analyst Ed Moya said in a note.
In other commodities, gold prices saw early losses but remained on track for the best in almost two months.
Spot gold was down 0.5 per cent to US$2,040.10 per ounce early Friday morning, but was up over 2 per cent for the week. U.S. gold futures were down 0.3 per cent to US$2,048.60.
Currencies
The Canadian dollar was higher early Friday while its U.S. counterpart lost ground as speculation swirls that the Fed could cut rates later in the year amid the crisis in the regional banking sector.
The day range on the loonie was 73.83 US cents to 74.13 US cents in the predawn period. The loonie was up about 0.42 per cent for the last five days as of early Friday morning.
On world markets, the U.S. dollar index, which measures the greenback against other major currencies, was down around 0.15 per cent at 101.23 and set for a second straight weekly decline, according to figures from Reuters.
“[Fed chair Jerome] Powell said that given the inflation outlook, rate cuts were not on the table,” OANDA analyst Kenny Fisher said in a note.
“The markets don’t buy it and have priced in a rate cut at around 50 per cent in July and a whopping 88 per cent in September, according to the CME Group.”
Elsewhere, Britain’s pound climbed to US$1.2633 , reaching its highest level in almost a year, Reuters reported.
The euro was up around 0.2 per cent at US$1.1036, but held below recent one-year highs. On Thursday, the ECB raised rates by a quarter percentage point and noted that previous hikes appear to be having an impact.
In bonds, the yield on the U.S. 10-year note was up at 3.403 per cent.
More company news
Enbridge Inc reported a rise in first-quarter profit on Friday, as sustained fuel demand boosted oil transportation volumes for the Canadian pipeline operator. The company earned 85 cents per share, on an adjusted basis, in the quarter at par with analysts’ expectations, according to Refinitiv data. -Reuters
Hydro One Ltd. reported its first-quarter profit fell compared with a year ago due higher operation, maintenance and administrative costs, offset in part by higher revenues. The power utility says it earned $282-million or 47 cents per diluted share for the quarter ended March 31. The result compared with a profit of $310-million or 52 cents per diluted share a year earlier. Revenue totalled $2.07-billion, up from nearly $2.05-billion in the first three months of 2022. -The Canadian Press
Magna International Inc on Friday raised its full-year sales forecast as the Canadian auto parts maker expects light vehicle production to improve in its two biggest markets of North America and Europe. The global auto industry is recovering from chip shortages and elevated prices for raw materials, freight and labor that had shackled efforts to meet customer demand. Magna’s revenue for the year is now expected to be between US$40.2-billion and US$41.8-billion, up from its previous forecast of US$39.6-billion to US$41.2-billion. -Reuters
Air Canada hiked its earnings outlook Thursday, saying it expects earnings to rise due to an improvement in traffic as well as stronger-than-anticipated demand and lower-than-expected fuel prices. The Montreal-based airline says adjusted earnings before interest, taxes, depreciation and amortization in 2023 are expected to come in between $3.5-billion and $4-billion, up from between the guidance of $2.5 billion and $3 billion released Feb. 17. -The Canadian Press
Economic news
(8:30 a.m. ET) Canadian employment for April.
(8:30 a.m. ET) U.S. nonfarm payrolls for April.
(3 p.m. ET) U.S. consumer credit for March.
With Reuters and The Canadian Press