Equities
Key indexes in Canada and the U.S. started lower Friday with elevated yields and uncertainty over interest rates tempering global sentiment.
At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 49.68 points, or 0.26 per cent, at 19,299.13. The index was down 0.77 per cent for the week heading into Friday’s session.
In the U.S., the Dow Jones Industrial Average fell 48.90 points, or 0.15 per cent, at the open to 33,365.27.
The S&P 500 opened lower by 4.15 points, or 0.10 per cent, at 4,273.85, while the Nasdaq Composite dropped 28.40 points, or 0.22 per cent, to 13,157.77 at the opening bell. All three indexes were in the red for the week ahead of the start of trading on Friday.
Late Thursday, yields on the benchmark U.S. 10-year Treasury rose briefly to 5 per cent, a closely watched level not seen since 2007, Reuters reported. By early Friday morning, the 10-year yield was slightly lower at 4.95 per cent. The moves came as Federal Reserve chairman Jerome Powell echoed recent comments from other Fed officials suggesting high bond yields are “helping to further tighten financial conditions but also highlighted recent strength in the U.S. economy.
“Chair Powell’s ‘proceeding carefully’ comment cemented expectations of another pause on Nov. 1, though he kept the door open for rate hikes at subsequent meetings if the economy doesn’t slow to a below-trend rate and loosen the labour market further,” Sal Guatieri, BMO senior economist and director of economics, said.
The Bank of Canada’s next policy announcement comes next week and markets are expecting the central bank to hold steady after a tamer-than-forecast reading on inflation this week.
On Friday, Canadian investors got August retail sales figures from Statistics Canada ahead of the start of trading. The government agency said sales fell 0.1 per cent to $66.1-billion for the month. Sales were down in six of nine sectors, led by declines in auto and parts dealers, Statscan said. Early estimates suggest sales in September were little changed.
“While 12 per cent of retailers reported that the port strikes still impacted business in August, the advance estimate for September didn’t include any signs of a rebound, with sales seemingly flat in that month,” CIBC economist Katherine Judge said.
“This suggests that consumer spending is getting weaker for the second quarter in a row, with domestic demand under pressure from higher interest rates, and indicating that the Bank of Canada likely won’t need to take interest rates any higher from here.”
On the corporate side, Wall Street got earnings this morning from American Express. The credit card giant topped third-quarter profit expectations as consumer spending remained resilient. The company reported a profit of US$2.45-billion, or US$3.30 per share, up from US$1.88-billion or US$2.47 per share a year earlier. On average, analysts had expected a profit of US$2.94 per share, according to LSEG IBES data. Shares were down more than 1 per cent in early trading on Friday.
Overseas, the pan-European STOXX 600 was down 1.14 per cent by midday. Britain’s FTSE 100 was 1.11-per-cent lower. Germany’s DAX and France’s CAC 40 lost 1.43 per cent and 1.25 per cent, respectively.
In Asia, Japan’s Nikkei closed down 0.54 per cent. Hong Kong’s Hang Seng fell 0.72 per cent.
Commodities
Crude prices were higher and headed for a second week of gains as mounting tensions in the Middle East continue to fuel concerns about potential supply disruptions in the region.
The day range on Brent was US$92.78 to US$93.76 in the early premarket period. The range on West Texas Intermediate was US$89.98 to US$90.78.
Both benchmarks were up more than 1 per cent in the early premarket period and were looked set for a second consecutive weekly increase.
“Shipping markets are highly vulnerable to developments in the Middle East,” Stephen Innes, managing partner with SPI Asset Management, said.
“There are two distinct geopolitical scenarios to consider: one in which the conflict remains localized within Israel and another in which it escalates into a broader regional conflict that impacts shipping activities through the Strait of Hormuz.”
The latter scenario, he said. would have more significant implications for global energy transport due to the strait’s strategic importance as a critical route for oil and gas shipments.
“With all that in mind, similar to last weekend, we could see the return of hedging the gnarly weekend headline risk dynamics drive sentiment into the close,” he said.
Gold prices, meanwhile, hit a three-month high and were on track for a second straight week of gains as geopolitical concerns boost the metal’s safe-haven appeal.
Spot gold was up 0.2 per cent at US$1,977.60 per ounce by early Friday morning, after hitting its highest since July 20. U.S. gold futures added 0.5 per cent to US$1,990.30.
Currencies
The Canadian dollar was firmer as the U.S. dollar saw a slight pullback against a group of world currencies.
The day range on the loonie was 72.80 US cents to 73.09 US cents in the early premarket period. The loonie has lost about 0.22 per cent against the greenback over the past five days as of early Friday morning and was down more than 1 per cent over the past month.
“The CAD finds itself in the rare position of being one of the top intraday performers against the USD this morning despite commodity FX trading generally weaker,” Shaun Osborne, chief FX strategist with Scotiabank, said. “Firmer crude prices may be helping the CAD offset the impact of weaker stocks.”
The U.S. dollar index was down 0.03 per cent in early trading at 106.22 and was on track for a weekly loss.
Britain’s pound fell as much as 0.37 per cent to two-week lows after a series of data releases showed a collapse in British consumer confidence in October following weak retail sales the month before, Reuters reported. The pound was last down 0.2 per cent at US$1.2116, skimming two-week lows.
The euro was flat at US$1.0572.
More company news
The chief financial officer of Transat AT Inc. is leaving the company to become chief financial officer at Dollarama Inc. Transat says Patrick Bui will step down from his position at the travel company on Dec. 15. He is expected to remain in his role through the announcement of Transat’s results for its financial year ending Oct. 31 to help ensure a smooth transition. He is set to join Dollarama on Dec. 18. He fills a job left vacant by the departure of J.P. Towner who moved from the discount retailer to become chief financial officer at Rona Inc. -The Canadian Press
The board of directors of Aimia Inc. is recommending shareholders reject a takeover offer from Mithaq Capital SPC because it says it undervalues the company and is not compelling. The board says the hostile offer does not reflect some of the potential growth opportunities that the company is pursuing and cautioned it contains some 20 conditions that must be satisfied or waived. Mithaq, a segregated portfolio company and affiliate of Mithaq Holding Co., a family office based in Saudi Arabia, is the largest shareholder in Aimia. -The Canadian Press
Economic news
(8:30 a.m. ET) Canadian construction investment for August.
(8:30 a.m. ET) Canadian retail sales for August.
(8:30 a.m. ET) Canadian monthly credit aggregates for August.
With Reuters and The Canadian Press