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Equities

Canada’s main stock index opened lower Friday, weighed down by weaker energy prices. On Wall Street, the Dow and S&P 500 both started in the red with investors nervously awaiting the U.S. response to China’s national security law on Hong Kong.

At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 45.94 points, or 0.3 per cent, at 15,216.79.

In the U.S., the Dow Jones Industrial Average fell 76.49 points, or 0.30 per cent, at the open to 25,324.15, and the S&P 500 opened lower by 4.56 points, or 0.15 per cent, at 3,025.17.

The Nasdaq Composite gained 13.36 points, or 0.14 per cent, to 9,382.35 at the opening bell.

U.S. President Donald Trump said he would hold a press conference on Friday in response to China, but offered no further details. China’s parliament this week pushed ahead with national security legislation for the city, raising fears over its position as a finance hub.

“The two largest economies in the world have seen their relationship deteriorate recently as Beijing’s stance in relation to Hong Kong, as well as it’s treatment of minorities has angered the U.S. government,” CMC Markets analyst David Madden said.

“In addition to that, Donald Trump has been critical of the Chinese government’s handling of the coronavirus crisis, he feels they could have done more to warn the rest of the world about the situation. It seems that Mr Trump is eager to pick a fight with China so traders are ducking for cover now.”

In Canada, Statscan released a snapshot of how the Canadian economy was functioning as COVID-19 lockdowns took hold. The agency said the economy contracted by 7.2 per cent in March. For the first quarter, the economy contracted at an annual rate of 8.2 per cent, slightly better than most economists had been expecting. Statscan said early estimates also suggest that GDP fell by 11 per cent in April.

On the corporate side, investors got earnings from Canadian cannabis producer Canopy Growth. Laurentian Bank and CWB Financial.

In reporting its latest results, CWB said provisions for credit losses for the quarter ended April 30 totalled $34.9-million, up from $15.2-million in the same quarter a year ago. CWB reported a second-quarter profit attributable to common shareholders of $51.4-million or 59 cents per diluted share, down from $62-million or 71 cents per diluted share a year ago.

Laurentian Bank, meanwhile, said it was cutting its dividend by 40 per cent. The news came as the bank reported its quarterly results. Laurentian shares were down 8 per cent in early trading in Toronto.

Canopy Growth Corp’s TSX-listed shares dropped 17 per cent in morning trading after the company reported a bigger loss for the fourth quarter, hit by non-cash impairment and restructuring-related charges of $743-million. Ontario-based Canopy Growth’s net loss attributable to the company widened to $1.30-billion, or $3.72 per share, in the quarter ended March 31, from $379.5-million, or $1.10 per share, a year ago.

Overseas, major European markets were down in afternoon trading with the pan-European STOXX 600 falling 0.89 per cent. Britain’s FTSE 100 fell 1.49 per cent. Germany’s DAX lost 0.97 per cent and France’s CAC 40 declined 0.62 per cent.

In Asia, markets posted a mixed finish. Japan’s Nikkei ended down 0.18 per cent. Hong Kong’s Hang Seng lost 0.74 per cent. The Shanghai Composite Index rose 0.22 per cent.

Commodities

Crude prices were weaker and looked set for the first weekly decline in five as a rise in crude inventories again raised concerns about the speed of the recovery in demand.

The day range on Brent so far is US$34.16 to US$35.15. The range on West Texas Intermediate is US$32.42 to US$33.77.

Even as crude looked set for a weekly decline, prices were still on track for sharp gains for the month. WTI appears headed for a rise of 76 per cent for May. Brent was tracking toward a 38-per-cent gain, according to Reuters.

The U.S. Energy Information Administration said Thursday that both U.S. crude oil and distillate inventories jumped last week while demand remained weak.

Crude inventories rose 7.9 million barrels in the week to May 22, largely because of imports. That brought overall U.S. stocks, excluding strategic reserves, to 534.4 million barrels, about 1 million barrels away from a record. Analysts expected inventories to decline by nearly 2 million barrels.

“This week should prove as a stark reminder of how fragile the nascent crude price recovery is,” AxiCorp chief market strategist Stephen Innes said.

He said anxiety is building ahead of the June OPEC meeting, although reports that both Saudi Arabia and Russia have agreed to honour their compliance agreements has eased some concerns.

“The market was speculating on the potential for tensions between Russia and Saudi Arabia to re-emerge at the OPEC+ meeting scheduled to take place on June 9,” he said.

“So, the harmonious outcome from this discussion has diffused a possible escalation of tensions between the two colossal producers that in March heralded in the most devastating oil price war on record.”

In other commodities, gold prices were little changed as markets await the U.S. response to China.

Spot gold was unchanged at US$1,718.60 per ounce. U.S. gold futures rose 0.2 per cent to $1,716.50.

“Gold remains wedged between potentially positive economic developments that have been dragging prices lower, and a rise in geopolitical tensions with China over Hong Kong,” Cameron Alexander, an analyst with Refinitiv-owned metals consultancy GFMS, said.

Currencies

The Canadian dollar was firmer after Statistics Canada said the Canadian economy posted its worst quarter since 2009, although the contraction was slightly better than the market had been expecting.

The day range on the loonie so far is 72.50 US cents to 72.91 US cents. The loonie, while higher, was off the best levels of the day immediately after the release of the numbers.

Statscan says the economy shrank by 7.2 per cent in March. For the first quarter, the economy contracted at an annual rate of 8.2 per cent. Some economists had expected the quarterly contraction to come in closer to 10 per cent.

In global currencies, the euro added to recent gains to touch a two-month high against the U.S. dollar as investors await further news on U.S.-China relations.

The yen was also higher against major currencies ahead of U.S. President Donald Trump’s planned news conference as investors sought out safe-haven holdings.

The euro rose 0.2 per cent to US$1.111, its highest since March 30. The U.S. dollar fell 0.4 per cent against the Japanese currency at 107.17 yen.

Offshore, China’s yuan was little changed and traded at 7.1661 per U.S. dollar, not far from the nine-month low of 7.1965 yuan per dollar seen on Wednesday.

More company news

Credit Suisse is seeking to overturn a court ruling rejecting the bank’s bid to block an auditor appointed by Switzerland’s financial supervisor as part of its probe into a spying scandal, it said on Friday. Switzerland’s second-biggest bank had sought to scuttle watchdog FINMA’s appointment of Thomas Werlen, of international law firm Quinn Emanuel Urquhart & Sullivan, on grounds the firm and Werlen lacked sufficient independence.

Aritzia Inc. says it expects net revenue for its first quarter to be about 45 per cent lower than at the same time last year due to the impacts of COVID-19. The Vancouver-based company says it expects net revenue for the three months ending May 31, to fall to between $105-million to $110-million compared with about $197-million in the same period last year. The first quarter includes two weeks of sales before the company closed all its retail outlets on March 16, as well as a 150 per cent spike in e-commerce sales after Aritzia closed its boutiques.

French carmaker Renault said on Friday it was launching talks with unions to reorganize and cease assembling vehicles at several plants in France as it cuts some 15,000 jobs worldwide and tries to refocus to survive a slump in sales. Faced with a downturn in demand compounded by the coronavirus crisis, Renault is aiming to find 2 billion euros (US$2.22-billion) in savings over the next three years as it shrinks production and hones in on more profitable models.

Dell Technologies Inc beat analysts’ estimates for quarterly revenue on Thursday, boosted by demand for its workstations from companies moving more employees to work from home due to the coronavirus crisis. Total revenue fell marginally to US$21.90-billion, but topped estimates of US$20.81-billion, according to IBES data from Refinitiv.

Economic news

(8:30 a.m. ET) Canada’s real GDP for Q1.

(8:30 a.m. ET) Canada's monthly real GDP for March.

(8:30 a.m. ET) Canada’s industrial product index for April.

(8:30 a.m. ET) U.S. personal spending and income for April.

(8:30 a.m. ET) U.S. Core PCE Price Index for April.

(9:45 a.m. ET) U.S. Chicago PMI for May.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for May.

(11 a.m. ET) U.S. Fed Chair Jerome Powell joins a moderated teleconference discussion for the Griswold Center for Economic Policy.

With Reuters and The Canadian Press