Equities
Canada’s main stock index opened down Friday after a blockbuster jobs report renewed concerns about the course of interest rates later in the year. Wall Street’s key indexes were also in the red in early trading with growth stocks under pressure.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 78.89 points, or 0.38 per cent, at 20,518.86.
In the U.S., the Dow Jones Industrial Average fell 28.34 points, or 0.08 per cent, at the open to 33,671.54.
The S&P 500 opened lower by 12.58 points, or 0.31 per cent, at 4,068.92, while the Nasdaq Composite dropped 74.98 points, or 0.64 per cent, to 11,714.60 at the opening bell.
“Central bankers, particularly from the Fed, have been out in force stressing caution over interest rate expectations,” OANDA senior analyst Craig Erlam said.
“And it’s clearly had an impact following that red-hot [U.S.] jobs report last Thursday. Markets are now pricing in two more hikes from the Fed and possibly one cut later in the year.”
In Canada, markets got a surprisingly strong reading on job growth in the Canadian economy. Statistics Canada said 150,000 new positions were created in January. Economists had looking for an increase of about 15,000 jobs. January marked the fifth straight month of employment growth. The unemployment rate held steady at 5 per cent. Wages were up 4.5 per cent on a year-over-year basis.
The report comes after the Bank of Canada raised interest rates by a quarter percentage point last month, marking the eighth consecutive increase, and signalled a conditional pause on future moves.
“The Bank of Canada’s conditional pause on interest rates was likely done partly so that policymakers didn’t feel the need to respond to any single strong data print, no matter how strong, but rather assess how the economy is faring over the course of a few months,” CIBC economist Andrew Grantham said.
“However, that won’t stop markets reacting to today’s strong data by pricing in a greater probability of further hikes, and pricing out rate cuts.”
On the corporate side, Aurora Cannabis Inc. announced Thursday that it has completed a transformation plan delivering $340-million in annualized savings since February 2020, but said it still incurred a $67.2-million net loss in its most recent quarter, according to The Canadian Press. The plan involved an extensive restructuring and several rounds of layoffs and facility closures over the last three years as it contended with shifting COVID-19 measures and grappled with aligning supply and demand. The company released results after Thursday’s close. Earlier in the day, cannabis company Canopy Growth announced a major restructuring that would see it cut 800 jobs and close its flagship production facility.
Early Friday, Enbridge and Magna International both reported their latest quarterly results.
Pipeline operator Enbridge posted a quarterly loss from a year-earlier profit as it took a $2.5-billion hit from higher cost of capital related to its gas transmission reporting unit. The Calgary-based firm posted a loss of $1.07-billion, or 53 cents, in the quarter ended Dec. 31, compared with a profit of $1.84-billion, or 91 cents per share, in the year-ago quarter. On an adjusted basis, the company earned 63 cents per share, missing analysts’ average expectation of 73 cents, according to Refinitiv data. Shares were up 0.47 per cent in Toronto just before 10 a.m. ET.
On Wall Street, shares of Lyft sank more than 30 per cent after the ride-sharing company forecast profit in the current quarter below market forecasts as it lowered prices. The company’s revenue forecast for the current quarter also fell short of expectations.
Overseas, the pan-European STOXX 600 was down 0.81 per cent. Germany’s DAX lost 0.89 per cent while France’s CAC 40 was off 0.57 per cent. Britain’s FTSE 100 slid 0.33 per cent.
In Asia, Japan’s Nikkei closed up 0.31 per cent. Reuters reports that Japan’s government is likely to appoint academic Kazuo Ueda as the Bank of Japan’s next governor, a surprise choice that boosted the yen as investors bet he could phase out super-low interest rates sooner than expected.
Hong Kong’s Hang Seng slumped 2.01 per cent with the tech index down more than 4 per cent.
Commodities
Crude prices jumped in early trading and were on track for weekly gains after Russia announced plans to reduce oil production next month in the wake of price caps imposed by the West.
The day range on Brent is US$83.93 to US$86.90 in the early premarket period. The range on West Texas Intermediate was US$77.47 to US$80.33. Both benchmarks were up more than 2 per cent early Friday morning and were heading for weekly gains of more than 8 per cent.
The latest gains came after Russia’s Deputy Prime Minister Alexander Novak said on Friday that the country plans to reduce its crude oil production in March by 500,000 barrels per day (bpd), or about 5 per cent of output.
“Unlike supply disruptions, Russian production cuts have more permanency, given the challenging logistics of ramping up production again in Russia,” Stephen Innes, managing partner with SPI Asset Management, said in an early note.
“So this cut, in theory, should place a higher floor under oil prices.”
In other commodities, gold prices rose 0.1 per cent to US$1,864.08 per ounce by early Friday morning, after hitting its lowest level since Jan. 6 earlier in the session. U.S. gold futures fell 0.2 per cent to US$1,875.50.
Currencies
The Canadian dollar was up while its U.S. counterpart was treading water against a group of world currencies.
The day range on the loonie was 74.21 US cents to 74.83 US cents in the early premarket period. The loonie moved to the upper end of that spread after the release of the latest Canadian employment numbers.
“The CAD is a modest outperformer on the session so far, holding little changed against the stronger USD as higher oil prices help support it and the Norwegian krone relative to other major currencies,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The CAD has not shown much in the way of a strong connection to energy prices recently but the fact that it is — so far — ignoring weaker equity market trends (which have been a much stronger pull on the CAD’s intraday performance) is a bit of a change for the currency to say the least.”
On worlds markets, the U.S. dollar index, which measures it against six currencies, was last little changed at 103.17. For the week, the index is on track for a 0.2-per-cent gain, which would be its second straight positive week and a run it has not had since October, according to Reuters.
The pound was flat at US$1.2118 after Britain managed to avoid a technical recession, with the economy showing zero growth the fourth quarter of 2022.
The euro fell 0.1 per cent at US$1.0726 and was set for a second straight week of losses.
The yield on the benchmark U.S. 10-year note edged up to 3.688 per cent in the early hours of Friday morning.
More company news
Magna International Inc reported a nearly 80-per-cent slump in its quarterly profit on Friday, as the Canadian auto parts maker struggled with higher costs for labor and energy on the back of volatile auto production schedules. Net income attributable fell to US$95-million, or US$0.33 per share in the fourth quarter ended Dec. 31, from US$464-million, or US$1.54 per share, a year earlier. -Reuters
Economic news
(8:30 a.m. ET) Canadian employment for January.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Survey for February.
With Reuters and The Canadian Press