Canada’s main stock index closed flat Friday despite a jump in energy stocks as oil prices rose on supply concerns ahead of a meeting of OPEC and other large crude exporters.
Energy stocks rose 0.7 per cent led by Imperial Oil Ltd., which saw a 2.5-per-cent increase, and Husky Energy Inc., which gained 2.4 per cent.
The TSX composite index was up 10.25 points, or 0.06 per cent, at 16,225.00.
Three of the index’s 11 major sectors were lower, with the healthcare sector’s 2.5-per-cent fall being the steepest.
Marijuana producers led the health care sector down 2.4 per cent with Canopy Growth Corp. falling 4.6 per cent and Aurora Cannabis Inc. losing 3.4 per cent
In New York, B.C.-based Tilray Inc. was down 30.3 per cent, enduring another day of volatile trading.
The Canadian dollar edged lower against its U.S. counterpart on Friday, but was on track to gain for the second straight week as data showing a pickup in underlying inflation boosted bets for a Bank of Canada interest rate hike next month.
Canada’s annual inflation rate dipped to 2.8 per cent in August from 3.0 per cent in July, the seventh consecutive month it has exceeded the Bank of Canada’s 2.0-per-cent target, Statistics Canada data indicated. All of the central bank’s core inflation measures were 2.0 per cent or higher, for the first time since February 2012.
“I thought the inflation data was pretty robust,” said Amo Sahota, director at Klarity FX in San Francisco. “This keeps the market on track for looking at some more Canadian rate hikes.”
The Bank of Canada has raised interest rates four times since July 2017. Chances of another hike in October rose to nearly 90 per cent from 85 per cent before the data, the overnight index swaps market indicated.
Separate data showed that Canadian retail trade rose 0.3 percent in July from June.
The Canadian dollar was trading 0.1 per cent lower at $1.2916 to the greenback, or 77.42 U.S. cents.
Industrials led the Dow to a new closing high on Friday ahead of Monday’s major sector reshuffle, capping a week in which investors largely shrugged off trade worries.
The Dow Jones Industrial Average rose 69.43 points, or 0.26 per cent, to 26,726.41, the S&P 500 lost 1.5 points, or 0.05 per cent, to 2,929.25, and the Nasdaq Composite dropped 41.28 points, or 0.51 per cent, to 7,986.96.
MSCI’s gauge of stocks across the globe gained 0.36 per cent to hit the highest level since March 13.
Sterling tumbled and pushed the dollar up after British Prime Minister Theresa May said Brexit talks had hit an impasse and that the European Union must offer an alternative plan after the bloc’s leaders rejected her plans.
The pound fell 1.44 per cent, and was on course for its biggest daily loss since June 2017.
“Sterling bears are out in full force. They’ve pushed the pound quite aggressively down this morning,” said Dean Popplewell, a chief currency strategist at Oanda in Toronto.
The U.S. dollar rebounded from early lows but was still set for its biggest weekly drop since February as the equity market rally and rising bond yields fueled a rush to buy riskier assets. The dollar index rose 0.36 per cent to 94.254 against a basket of major currencies.
A rally in Chinese markets helped lift MSCI’s broadest index of Asia-Pacific shares outside Japan 1.32 per cent, partly on expectations that Beijing will pump more money into its economy to weather the trade war.
Miners and banks drove Britain’s top share index up 1.67 per cent, while Germany’s DAX, home to some of the continent’s biggest exporters, rose 0.85 per cent.
The week’s euphoria underscored how over-valued U.S. stocks are, said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York.
U.S. capital markets are exuberant, with stock valuations high at 21 times trailing earnings and struggling economies around the world a risk for U.S. stocks, he said.
“There’s really been no bad news to cause this market to take a breather for weeks,” Geraghty said. “The risk for U.S. equity markets is what’s going on overseas.”
U.S. long-dated Treasury yields slipped, in tandem with those in Europe, as Brexit talks stalled between Britain and the European Union.
U.S. 2-year yields, however, remained unaffected as they hit a fresh 10-year high in the run-up to an expected rate increase at next week’s Federal Reserve monetary policy meeting.
Benchmark 10-year notes last rose 1/32 in price to yield 3.0739 per cent.
Oil prices were up slightly in heavy, seesaw trading on Friday, giving back most earlier gains after news that major producers would consider additional supply a day after U.S. President Donald Trump again blasted the cartel.
Investors grappled with whether the Organization of the Petroleum Exporting Countries and non-OPEC producers will offset a shortfall from Iran once U.S. sanctions go into full force Nov. 4. Major producers are scheduled to gather in Algeria on Sunday.
“The question is just how much oil is going to be taken off the market with U.S. sanctions on Iran,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut. Compounding declining production in Venezuela, Iran’s production cuts could lead to a much tighter supply picture, he said. “I think that the market is building up energy for another try at multiyear highs.”
Global benchmark Brent crude settled 10 cents higher at $78.80 a barrel. U.S. light crude rose 46 cents to $70.78 a barrel, more than $1 below the session high of $71.80.
U.S. crude rose 2.5 per cent in the week and Brent posted a 0.7-per-cent weekly gain.
In early trade, supply worries sent Brent $1.00 higher to $80.12 per barrel. Prices retreated after a source told Reuters that OPEC and its allies were discussing the possibility of raising output by 500,000 barrels per day. Then prices rebounded as investors bet Iran’s production cuts would be too great to be fully offset.
The market again reversed course, with traders citing worries U.S. crude would come under pressure in the fourth quarter as inventories build after driving season ends.
Reuters