Equities
Stocks in Canada and the U.S. started lower Friday after stronger-than-expected readings on hiring in both countries renewed concerns about the possibility of interest rates remaining higher for longer.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 68 points, or 0.36%, at 19,069.81. The index was down nearly 2 per cent for the week heading into Friday’s session.
In the U.S., the Dow Jones Industrial Average fell 78.87 points, or 0.24 per cent, at the open to 33,040.70.
The S&P 500 opened lower by 23.40 points, or 0.55 per cent, at 4,234.79, while the Nasdaq Composite dropped 92.16 points, or 0.70 per cent, to 13,127.68 at the opening bell.
“It’s been a tough week for equity markets with concerns over rising yields keeping investors on the back foot,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
Jobs reports are key on both sides of the border on Friday.
In Canada, Statistics Canada says the economy generated 63,800 new positions, far more than expected. Economists had been looking for a number closer to 20,000. The unemployment rate held steady at 5.5 per cent. the average hourly wage for permanent employees rose 5.3 per cent from September 2022, up from the 5.2 per cent annual rise in August.
“While September’s gain in employment easily outpaced consensus expectations, there was some weakness within the detail which should limit the implications for the Bank of Canada,” CIBC senior economist Andrew Grantham said, noting the gains in hiring weren’t broad based and, instead, were largely driven by a gain of 66,000 positions in education, which can be volatile during that month.
“Overall employment growth was also tilted more towards part time than full time in September,” he said.
In the United States nonfarm payrolls jumped by 336,000 positions. That was also more than markets forecast. Economists were looking for hiring to slow to 170,000 new positions.
Traders have been closely watching recent economic data, looking for signals about the direction of interest rates in the months ahead.
“Overall, today’s report makes things a little complicated for the Fed,” CIBC economist Ali Jaffrey said. “The strong figures and upward revisions to previous months underscores that demand remains solid but slowing wage growth and firm labour supply still indicate the labour market is restoring balance, even if at a slower pace.”
On the corporate side, the Wall Street Journal reports that Exxon Mobil is in advanced talks to buy Pionee Natural Resources in a deal that would value the company at about US$60-billion. The report cites unnamed sources familiar with the matter. The deal would be Exxon’s biggest since it bought Mobil in 1998. Pioneer shares were up more than 8 per cent shortly after the opening bell in New York.
Overseas, the pan-European STOXX 600 was up 0.66 per cent at midday. Britain’s FTSE 100 gained 0.42 per cent. Germany’s DAX and France’s CAC 40 were up 0.73 per cent and 0.69 per cent, respectively.
In Asia, Japan’s Nikkei closed down 0.26 per cent. Hong Kong’s Hang Seng jumped 1.58 per cent.
Commodities
Crude prices were steady but on track for sharp weekly losses as demand concerns persist amid uncertainty over the global economy and the impact of high interest rates.
The day range on Brent was US$83.76 to US$84.80 in the early premarket period. The range on West Texas Intermediate was US$82.07 to US$83.12.
Brent is down about 12 per cent so far this week while WIT has lost about 9 per cent.
“Brent crude has fallen over US$10 since the end of last month as surging global bond yields have crippled the global growth outlook,” OANDA senior analyst Ed Moya said.
“Energy stocks have gone from Wall Street’s best trade to it is time to abandon ship. US gasoline demand destruction is intensifying and given how overbought the energy market was in September, momentum oil selling has been fierce.”
Meanwhile, prices saw some downward pressure early Friday from news of a partial lift of Russia’s fuel export ban. Reuters reports this morning that Russia has lifted its ban on diesel exports for supplies delivered to ports by pipeline, under the provision that companies sell at least 50 per cent of their diesel production to the domestic market. The ban on all gasoline exports remains in place.
In other commodities, gold prices were steady, holding near 11-month lows.
Spot gold was flat at US$1,819.52 per ounce by early Friday morning, and was on track for a second straight weekly loss. Gold was down 1.6 per cent so far this week. U.S. gold futures firmed 0.1 per cent to US$1,833.20.
“Wall Street is still mostly maintaining a bearish stance for equities, which should eventually lead to safe-haven flows for gold,” Mr. Moya said in a note. “Gold just needs the peak in rates in place but we might not have a clear picture until the release of both Friday’s U.S.jobs report and the October 12th inflation data.”
Currencies
The Canadian dollar was modestly lower, trading around the 73-US-cent mark, while its U.S. counterpart steadied against world currencies and was on track for its 12th week of gains.
The day range on the loonie was 72.84 US cents to 73.02 US cents in the predawn period. The Canadian dollar has lost more than 1 per cent against the greenback over the last five days. Year to date, the loonie is down 1.17 per cent.
The U.S. dollar index, which weighs the greenback against a group of currencies, was up 0.02 per cent at 106.35 ahead of the North American opening bell. The index is on track for its 12th weekly gain, a feat it hasn’t achieved since 2014, according to Reuters.
Elsewhere, the euro was last down 0.16 per cent at US$1.0533, just above the 10-month low of US$1.0448 seen earlier this week. The euro is on track for a weekly decline against the U.S. dollar.
In bonds, the yield on the U.S. 10-year note was little changed in the predawn period, but again moved higher following the release of the latest U.S. jobs numbers. Shortly after the release of the data, the yield on the 10-year note was up at 4.841 per cent. Earlier this week, the yield hit 4.884 per cent, its highest level in 16 years.
More company news
France blocked a deal that would have seen the takeover of two Canadian-owned French maker of valves used in nuclear reactors because it did not think commitments made by U.S. bidder Flowserve were sufficient, a finance ministry source said. Flowserve, which makes pumps and valves, said on Thursday it was dropping its US$245-million takeover of Montreal-based Velan, whose French subsidiaries Segault and Velan SAS make valves used in nuclear plants, submarines and aircraft carriers. “The minister (Bruno Le Maire) took the decision to reject the two acquisitions because the commitments to reduce all risks associated with the deal were not sufficient,” the French finance ministry source told journalists on Friday. -Reuters
Microsoft is aiming to close its US$69-billion deal for “Call of Duty” publisher Activision Blizzard on Oct. 13 if it gets approval from Britain’s antitrust regulator, the Verge reported on Friday, citing a source. The Xbox maker had in July extended the cutoff date for the deal to Oct. 18 to get more time to secure approval from the UK. The companies did not immediately respond to Reuters requests for comment. -Reuters
Levi Strauss & Co cut its annual forecasts for the second time after missing third-quarter sales estimates, reeling from hefty promotions and falling demand at wholesale channels in North America. Gloomy consumer spending has hit retailers like Macy’s and Nordstrom as high prices and borrowing rates squeeze budgets, denting demand for Levi’s denims bottoms, tops and cargo pants. -Reuters
Shareholders of global grains merchant and oilseeds processor Bunge approved the company’s acquisition of Glencore-backed Viterra during a shareholder meeting on Thursday, Bunge said in a statement. The merger, which will create a company worth US$34-billion including debt, is expected to be finalized in mid-2024 after closing conditions are met and regulators have signed off on the deal, Bunge said. The shareholders’ approval brings Bunge closer to wrapping up the deal that is unprecedented in size in the global agricultural sector and will create an agribusiness giant nearer in global scale to rivals Archer-Daniels-Midland and Cargill. -Reuters
Economic news
(8:30 a.m. ET) Canadian employment for September.
(8:30 a.m. ET) U.S. nonfarm payrolls for September.
With Reuters and The Canadian Press