Equities
Canada’s main stock index opened higher Friday and was on track for a weekly gain, helped by strength in materials stocks. On Wall Street, the S&P 500 and Nasdaq both also saw an early advance in the wake of the latest reading on inflationary pressures in the U.S. economy.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 90.18 points, or 0.43%, at 20,855.91. The index was up 0.8 per cent heading into Friday’s session.
In the U.S., the Dow Jones Industrial Average fell 55.08 points, or 0.15 per cent, at the open to 37,349.27.
The S&P 500 opened higher by 7.17 points, or 0.15 per cent, at 4,753.92, while the Nasdaq Composite gained 42.31 points, or 0.28 per cent, to 15,006.18 at the opening bell. All three indexes were positive for the week ahead of Friday’s opening bell.
Ahead of the start of trading, Statistics Canada reported that Canada’s economy stalled again in October, with GDP unchanged for the month. That was the third consecutive month of no growth. It was also short of economists’ forecasts, which called for an advance of 0.2 per cent. September’s GDP was revised down to no growth from earlier estimates of a 0.1-per-cent advance.
Early estimates from Statscan also suggest growth of 0.1 per cent in November.
“BoC officials will take flat GDP growth as further confirmation that the output gap has closed,” Citi economist Veronica Clark said.
“But as officials have been expecting activity to move sideways for another 2-3 quarters (as do we), GDP by industry flat in October should not influence officials’ assessments of the likely timing for rate cuts. We continue to expect the first cut only in July.”
On Wall Street, markets will got a reading on the Federal Reserve’s preferred measure of inflation with the release of personal consumption expenditure data, which measures personal spending on goods and services by U.S. households.
The U.S. Commerce Department said early Friday that the core personal consumption expenditure index, excluding food and energy prices, rose 0.1 per cent in November. The index was up 3.2 per cent on an annual basis, below the 3.3 per cent that economists had been forecasting.
“Santa’s seems to have started early this year and made his first stop at the FOMC, spreading holiday cheer with today’s personal income and spending report,” CIBC economist Ali Jaffrey said.
“For the sixth month in a row, core PCE inflation – the Fed’s preferred inflation gauge – has essentially been at target on a monthly annualized basis.”
The headline PCE, which includes food and energy costs, fell 0.1 per cent in November, leaving the annual rate at 2.6 per cent.
On the corporate side, The Globe’s Stefanie Marotta and James Bradshaw report Ottawa has given the go-ahead to Royal Bank of Canada’s $13.5-billion takeover of Britain-based HSBC Holdings PLC’s Canadian subsidiary, with the bank agreeing to several commitments to close the deal. Finance Minister Chrystia Freeland gave the final word on the acquisition Thursday night, and her stamp of approval seals the biggest domestic banking deal on record. Royal Bank stock was up 0.56 per cent shortly after the opening bell in Toronto.
On Wall Street, shares of Nike sank 10 per cent in early trading in New York after the sportswear giant cut its annual revenue forecast and laid out a US$2-billion cost-saving plan as consumer spending turns cautious.
Overseas, the pan-European STOXX was up 0.20 per cent in morning trading. Britain’s FTSE 100 gained 0.04 per cent. Germany’s DAX added 0.29 per cent while France’s CAC 40 edged up 0.18 per cent.
In Asia, Japan’s Nikkei closed up 0.09 per cent. Hong Kong’s Hang Seng lost 1.69 per cent.
Commodities
Crude prices were higher and on track for solid weekly gains as tension in the Red Sea continues to underpin market sentiment.
The day range on Brent was US$79.35 to US$80.35 in the early premarket period. The range on West Texas Intermediate was US$73.80 to US$74.89. Both benchmarks are headed to a weekly rise of nearly 5 per cent.
An increasing number of companies have said they plan to avoid the Red Sea due to recent on vessels carried out by the Houthi militant group, underpinning demand concerns in the market. The attacks have caused global trade disruptions through the Suez Canal, which handles about 12 per cent of worldwide trade, according to Reuters.
“The longevity of impact on prices is completely dependent on the length of time that shipping companies continue to steer clear of the area. What has exaggerated such impact is the lack of clarity on how, where and when the so-called naval coalition will turn up,” PVM analyst John Evans said.
In other commodities, gold was trading near its best level in three weeks and was on track for a weekly gain, supported by a softer U.S. dollar and lower Treasury yields.
Spot gold was up 0.2 per cent at US$2,049.20 per ounce by early Friday morning, after hitting its highest since Dec. 4 earlier in the session. Bullion has risen 1.6 per cent so far this week. U.S. gold futures rose 0.5% to $2,061.40 per ounce.
Currencies
The Canadian dollar was firmer while its U.S. counterpart traded near four-month lows.
The day range on the loonie was 75.21 US cents to 75.36 US cents in the early premarket period. The Canadian dollar was up 0.8 per cent against the greenback for the week as of early Friday morning.
The U.S. dollar index, which weighs the greenback against a selection of currencies, was down 0.11 per cent at 101.73. The index was down 1.73 per cent for the year-to-date.
The euro gained 0.03 per cent to US$1.1014. Britain’s pound advanced 0.13 per cent to US$1.2704 early Friday morning.
In bonds, the yield on the U.S. 10 year note was lower at 3.861 per cent ahead of the North American opening bell.
More company news
Bristol Myers Squib has reached a deal to buy Karuna Therapeutics for US$14-billion, the Wall Street Journal reported on Friday. Under the terms of the deal, Bristol would pay $330 a share in cash for Karuna and its experimental schizophrenia drug, which is now up for U.S. government approval, according to the report. The offer price represents a 53.4% premium to Karuna’s last closing price of US$215.19. -Reuters
Economic news
(8:30 a.m. ET) Canadian monthly real GDP for October.
(8:30 a.m. ET) U.S. personal spending and income for November.
(8:30 a.m. ET) U.S. durable goods and core orders for November.
(10 a.m. ET) U.S. new home sales for November.
(10 a.m. ET) U.S. University of Michigan consumer sentiment index for December.
With Reuters and The Canadian Press
Terry Weber