Rising oil prices and evidence of a slowing U.S. economy could temper gains for stocks, despite a strong profit report from Microsoft and a major merger bid in the steel industry.

The U.S. economy grew at a 1.1% annual rate in the fourth quarter, the slowest pace in three years, as consumers slowed spending and the trade deficit acted as a drag on growth.

For all of 2005, GDP advanced 3.5%.

In electronic trading Friday morning, crude oil futures were ahead 84 cents to US$67.10 a barrel.

In Canadian economic news, Statistics Canada said manufacturers were slightly more cautious in their outlook for the first quarter of 2006 compared to the fourth quarter of 2005

Fewer new orders, near record rates for capacity utilization, a strong Canadian dollar and continued competition from foreign imports were some of the challenges facing manufacturers in recent months.

The Canadian dollar opened at US87.2¢, up 0.27 of a cent.



In earnings news, Microsoft reported after the bell Thursday. The company said its profit rose 5.5% to US$3.65 billion on strong sales of software for server computers.

Proctor & Gamble reported early Friday, saying its net income rose 29% in the fiscal second quarter, amid strength in its P&G and Gillette businesses. Net income wasUS $2.55 billion, or 72¢ a share, the same as a year ago, and better than analysts’ expectations.

European shares enjoyed solid gains Friday, lifted by steelmaker ThyssenKrupp after reporting rising sales. Rival Mittal Steel of London launched a takeover offer for Arcelor SA that values the company at US$22.7 billion.

The bid Acelor cast uncertainty over tht company’s plans to take over Canada’s Dofasco Inc., and could send Dofasco back to failed bidder ThyssenKrupp AG.

The German DAX 30 climbed 1% and the U.K. FTSE 100 rose 0.7%.

Japan’s benchmark stock index surged to a fresh five-year high, reclaiming all the market’s losses from last week. The Nikkei 225 index climbed 3.6% in Tokyo.

Toronto stocks finished higher Thursday, as the market reacted to higher resource prices and the announcement that Hudson’s Bay Co. had accepted an acquisition offer from a group led by Jerry Zucker.

The S&P/TSX composite index moved up 62.27, or 0.53%, to 11,7347.43.

HBC announced it has accepted an offer of $15.25 a share from Maple Leaf Heritage Investments, headed by Jerry Zucker, representing a price of slightly over $1 billion for company. Shares in HBC fell 2¢, or 0.13%, to $15.03.

Seven of the 10 TSX main sub-groups were up, including the energy sector, which gained 1.07%, after dropping 1.93% in the previous session.

Suncor Energy Inc. reported its fourth-quarter profit more than doubled to $694 million, and it is forecasting even higher oil production in 2006. Suncor shares rose $2.02, or 2.36%, to $87.77.

AGF Management Ltd. said its 2005 profit rose 19% from last year. Its shares fell 85¢, or 3.56%, to $23.

The S&P/TSX Venture composite index finished up 16.71 points, or 0.67%, to 2,490.31.

In New York, strong corporate earnings from Caterpillar Inc., AT&T Corp., among others, rallied the market, despite news of heavy losses from General Motors Corp.

The Dow Jones industrial average rose 99.73 points , or 0.93%, to 10,809.47.

The S&P500 added 9.15, or 0.72%, to 1,273.83, and the Nasdaq composite index gained 22.35, or 0.99%, to 2,283.00.

GM reported a weak fourth quarter, and said it lost US$8.6 billion, or $15.13 per share, for fiscal 2005.