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Equities

U.S. and Canadian markets opened in the red Friday with a disappointing reading on hiring south of the border and weak export figures out of China renewing investor concerns over the health of the global economy. The Canadian dollar, however, recovered some recent losses on the back of better-than-expected report on employment in this country although weak crude prices capped the gains.

At 10:00 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 150.23 points, or 0.94 per cent, at 15,906.28. Eight of 11 major sectors were underwater, led by energy.

In the U.S., the Dow Jones Industrial Average fell 152.16 points, or 0.60 per cent, at the open to 25,321.07 by midmorning. The S&P 500 fell by 19.54 points, or 0.71 percent, at 2,729.39. The Nasdaq Composite dropped 53.99 points, or 73 per cent, to 7,367.47.

The U.S. Labor Department said the American economy added just 20,000 new jobs last month, far fewer than the roughly 180,000 the markets had been expecting. Dow futures were down more than 200 points in the wake of the news. In this country, the picture appeared brighter, despite recent warnings from the Bank of Canada about unexpected weakness in the first half of 2019, with 55,900 new jobs created. Economists had forecast a gain closer to 6,000 positions.

“Coming off the back of such a strong January print, there was always the risk of a disappointing February job gain,” Avery Shenfeld, chief economist with CIBC, said. “However, the mere 20,000 increase in total non-farm payrolls was even weaker than we had anticipated, and puts a question mark over just how resilient the labour market is and how supportive household income growth will be in driving a pick-up in consumer spending.”

Friday’s analyst upgrades and downgrades

Meanwhile, figures showed China’s exports fell 20.7 per cent in February. That’s the most in three years and far more than the 4.8-per-cent drop the markets had been expecting. The February decline followed a surprise increase of 9.1 per cent the month before.

“The 20.7-per-cent decline in February exports marked the steepest fall in three years, and while some will reference seasonal factors, this is clearly a hugely important number to prove the damage the U.S.-China trade war is having,” Joshua Mahony, senior market analyst with IG, said. “It comes as no surprise to see both the Yuan and Chinese stocks hit hard overnight, for the longer this trade war runs, the more the Chinese economy will hurt.”

In the wake of the numbers, MSCI’s all-country index fell for a fifth straight session, marking the longest losing streak since December.

On the corporate front, Costco Wholesale Corp. shares were up nearly 4 per cent in early trading after the retailer topped profit forecasts in its latest quarter. Net income attributable to the company rose to US$889-million, or US$2.01 per share, from US$701-million, or US$1.59 per share, a year earlier. Analysts on average had expected a profit of US$1.69 per share, according to IBES data from Refinitiv. Revenue in the quarter was up 7 per cent to US$35.4-billion, short of Wall Street forecasts.

On Bay Street, MEG Energy Corp shares opened down 9 per cent after the company reported a bigger quarterly loss. The Calgary-based company’s net loss widened to $199-million, or 67 cents per share, in the fourth quarter from $24-million, or 8 cents per share, a year earlier. Production of bitumen, which is a low-grade crude oil, fell to 87,582 barrels per day (bpd) from 90,228 bpd. The company said average realized prices for bitumen fell to $13.90 per barrel from $48.30.

Shares of Montreal-based Lightspeed POS Inc. rose to $18 in their trading debut in Toronto. The software company had priced its stock at $16 on Thursday. The company’s shares were among the most heavily traded on the TSX Friday morning.

Market movers: Stocks seeing action on Friday – and why

Overseas, major European markets were in the red on the impact of the latest Chinese export figures and a cautious note from the European Central Bank, which put rate hikes on hold on Thursday and announced a fresh round of cheap loans for banks to help bolster the bloc’s economy. The pan-European STOXX 600 was down 0.85 per cent by 10:15 a.m. ET. Britain’s FTSE 100 fell 0.92 per cent. Germany’s DAX slid 0.62 per cent. France’s CAC 40 fell 0.66 per cent.

In Asia, the markets took a big hit. Japan’s Nikkei lost 2.01 per cent in the week’s final session. The Shanghai Composite Index sank 4.40 per cent. Hong Kong’s Hang Seng lost 1.91 per cent.

Commodities

Slumping Chinese exports and global economic concerns took a toll on crude oil Friday morning, with prices falling nearly 2 per cent. At last check, Brent was near the lower end of the day range of US$65 to US$66.09 with prices trending lower through the predawn period. West Texas Intermediate was also near the low end of the day range of US$55.61 to US$56.51.

Prices were hit by the 20.7-per-cent decline in Chinese exports in February and comments from ECB chief Mario Draghi that the bloc’s economy is in a period of “continued weakness and pervasive uncertainty.” Rising U.S. production also continues to weigh on prices, offset by production cuts by OPEC and its allies and the impact of U.S. sanctions on Iran and Venezuela.

“The United States will soon export more oil and liquids than Saudi Arabia,” consultancy Rystad Energy said this week, according to Reuters.

“The (Saudi) kingdom currently exports some 7 million bpd of crude oil plus about 2 million bpd of NGLs and petroleum products, compared with the U.S. now exporting approximately 3 million bpd of crude oil and 5 million barrels of NGLs and petroleum products,” Rystad said.

In other commodities, gold prices rebounded. Spot gold rose 0.6 per cent to US$1,293.17 per ounce. Prices on Thursday hit a low of US$1,280.91, just above the five-week high seen earlier in the week. U.S. gold futures gained 0.6 per cent to US$1,293.70.

“The expectation is for a slowdown (in the jobs data), and if that happens it is certainly a bullish signal for gold only because it is slightly bearish for the dollar. If the numbers are in line or worse-than-expected, gold could rally above $1,300,” said David Govett, head of precious metals at Marex Spectron.

Silver prices were up 0.7 per cent at US$15.12. Platinum rose 0.8 per cent to US$819.45.

Currencies and bonds

The Canadian dollar bounced off its lowest levels in two months on news that the economy generated more than 55,000 new jobs last month. The loonie spiked above 74.50 US cents and was trading near the top end of the day’s range of 74.26 US cents to 74.67 US cents.

“Is the Canadian economy a dead parrot, or like the one in the Monte Python skit, maybe its just resting, since today’s jobs data seem to suggest that there’s a lot of life left in it,” Mr. Shenfeld said.

“A 56,000 jobs gain might be simply the last stages in these survey data catching up to the better one year track record for the separate data from employers, but it follows on the heels of a huge January gain.”

The loonie has been hovering around its lowest levels in two months on concerns about weakening economic growth.

On Thursday, Bank of Canada deputy governor Lynn Patterson reaffirmed the central bank’s earlier dovish position. (Earlier this week, the bank held rates steady and predicted weaker-than-expected economic growth in the first half of the year, suggesting that expect rate hikes late in 2019 are now likely off the table.) Following Ms. Patterson’s remarks, money markets priced in about a 35 per cent chance of a rate cut this year. Before the central bank’s policy announcement on Wednesday, markets had priced in just a small chance of a cut. (The probability of a cut fell back to about 20 per cent after the release of the latest Canadian jobs figures.)

“Our rates team argues it seems like they are putting up at least some defence in favour of transitory weakness, but the emphasis is on the need for more data (and time) to see if something more fundamental is at play behind the slowdown outside of energy-related weakness,” Elsa Lignos, global head of FX strategy, said in a note. “Between the lines, it seems they are more concerned that housing/consumption may be weaker than thought if the adjustment in housing still has room to run.”

In other currencies, the euro was slightly higher on Friday at US$1.1209 but looked set for a 1.5-per-cent drop for the week, the worst weekly decline in over a year.

The U.S. dollar held its earlier losses against a basket of currencies on Friday as U.S. payrolls grew much weaker than forecast in February, which was offset by a drop in unemployment and a bigger-than-expected rise in wage growth, according to Reuters. At 8:52 a.m. ET, an index that tracks the greenback against the euro, yen, sterling and three other currencies was 0.39 per cent lower at 97.282.

In bonds, U.S. Treasury yields fell on the disappointing employment numbers.per cent in the wake of the report.

Stocks set to see action

Barrick Gold’s majority-owned Acacia Mining PLC has until March 30 to stop waste water pollution at its North Mara gold mine in Tanzania or the facility will be shut down, the country’s mining minister said on Friday. Doto Biteko, appointed minister in January with orders to be “strict” on managing Tanzania’s mineral wealth, said Acacia must stop contaminated water seeping from a waste storage dam at the mine to nearby communities in the country’s north. “We have given them until March 30 to fix this problem or face closure without notice. The life of even one Tanzanian is worth more than their gold mining activities,” Biteko told Reuters.

Hydro One says Ontario’s management board of cabinet has approved its revised executive compensation plan. Under the proposed framework, the utility will pay its chief executive a maximum of $1.5-million a year in direct compensation, with a base salary of no more than $500,000. Hydro One shares were down 0.83 per cent in Toronto shortly after the opening bell.

The U.S. Federal Communications Commission said on Thursday it has halted the informal 180-day “shot clock” on the review of the merger of wireless providers Sprint Corp and T-Mobile US Inc to give the public three additional weeks to comment on the US$26-billion tie-up. The FCC said the decision was made after the third- and fourth-largest U.S. wireless carriers had filed significant additional information on their network integration plans for 2019-2021 and other new information on the merger. Shares of both companies were down slightly in early going.

DowDuPont Inc said it will separate its material science unit, to be called Dow, on April 1. DowDuPont, which was formed by the $130 billion merger of chemical giants Dow Chemical and DuPont in September 2017, is in the process of splitting itself up into three companies – Dow, DuPont and Corteva Agriscience. In relation to the separation, the company also declared a dividend for DowDuPont stockholders, who will receive one share of Dow for every three shares of DowDuPont held as of March 21. The dividend will be payable on April 1. DowDuPont stock was down 1.4 per cent.

The Bank of England has told Visa Europe to appoint consultants PwC to ensure that recommendations were fully implemented to avoid a repeat of an outage last year, the bank said on Friday. Visa Europe suffered partial disruption to its payment card authorization system in June 2018, affecting 5.2 million transactions in Britain and elsewhere, prompting the company to hire an outside party to carry out an independent review. “The Bank recognizes that Visa Europe has accepted all of the recommendations of the independent review, in full, and is committed to implementing them in a timely manner,” the BoE said in a statement.

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Economic news

Canada Mortgage and Housing Corp. said Canada’s seasonally adjusted annual rate of housing starts in February totalled 173,153, down 16.3 per cent from January. The markets had been looking for a number around 205,000.

The Canadian economy added 55,900 new jobs last month, far ahead of the 6,000 economists had been forecasting. Statistics Canada said the gain was driven by full-time hiring. The jobless rate held steady at 5.8 per cent.

(8:30 a.m. ET) U.S. non-farm payrolls for February.

(10 a.m. ET) U.S. Fed chair Jerome Powell speaks on Monetary Policy Normalization and Review at the 2019 Stanford Institute for Economic Policy Research.

With Reuters and The Canadian Press