Jennifer Dowty
Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
International markets are showing signs of stability and even resiliency - at least for now.
As we look at North American futures, markets are expected to open solidly higher. In the U.S., Dow futures are up 175 points or 1 per cent, S&P 500 futures are ahead by 21 points or 1.1 per cent, and Nasdaq futures are indicating a higher opening by 1.2 per cent. In Canada, S&P/TSX 60 index futures are higher by 5.7 points. Futures have been moving increasingly into the green as the morning progresses.
Turning to overseas markets, they were relatively neutral. The People's Bank of China set the yuan mid-point higher for a third consecutive day, which gave some stability to Chinese markets overnight. The Shanghai composite and Shenzhen composite inched higher by 0.2 per cent and 0.4 per cent, respectively. The Korean KOSPI and Australian ASX 200, both edged lower, but with mild losses, down by 0.2 per cent and 0.1 per cent, respectively. Japanese markets resumed trading, after a holiday closure on Monday, and played catch-up, declining 2.7 per cent. Consumer sentiment in Japan improved for a third consecutive month, rising to 42.7 in December, its highest level since 2013.
Major European markets are in the green – well in positive territory, in fact. The German DAX is back above 10,000, climbing 2.3 per cent. The French CAC is up 2.1 per cent, and the London FTSE is higher by 1.5 per cent.
Here's the bottom line. Bearish sentiment is spreading for oil and the equity markets, but this can be a bright sign. When the headlines on page one become increasingly dire, and analysts are slashing their forecasts and advising investors to sell, it can indicate that a bottom may soon be in sight, at least for non-resource stocks. However, we have yet to see capitulation, and the negative momentum for commodities remains intact.
On Monday, U.S. financial services giant, Morgan Stanley, joined the bandwagon of bears, forecasting the price of oil may drop to $20. Major investment firms such as JP Morgan and Goldman Sachs are also predicting oil may fall to $20. On Monday, the Royal Bank of Scotland said it believes the price of oil could fall to as low as $16 and is reportedly telling its clients to brace for a "cataclysmic year," recommending investors, "Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small."
We remain in highly erratic markets. In the days ahead, this choppy market activity is likely to persist with Chinese trade data released this evening, and on Friday, U.S. retail sales will be announced.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 +1.1 per cent; Dow +1.0 per cent; Nasdaq: +1.2 per cent
Equities
Hong Kong's Hang Seng -0.89 per cent
Shanghai composite index +0.20 per cent
Japan's Nikkei 225 -2.71 per cent
London's FTSE +1.5 per cent
Germany's DAX +2.3 per cent
France's CAC 40 +2.1 per cent
Commodities
WTI crude oil (Nymex Feb) +0.51 per cent at $31.57 (U.S.) a barrel
Gold (Comex Feb) -0.4 per cent at $1,091.60 (U.S.) an ounce
Copper (Comex Mar) -0.4 per cent at $1.96 (U.S.) a pound
Currencies
Canadian dollar +0.0002 at 70.37 cents (U.S.)
Euro -0.0005 at 1.0854 (U.S.)
Bonds
U.S. 2-year Treasury yield 0.9597 per cent
U.S. 10-year Treasury yield 2.186 per cent
KEY RELEASES
United States
10:00 a.m. (EST) November Job Openings & Labor Turnover (JOLTS) Survey. Expectations are for 5450 thousand, up from the prior month 5383 thousand.
Canada
There are no key Canadian economic releases today.
CORPORATE EARNINGS RELEASES
United States
CSX Corp (CSX) will be releasing fourth-quarter 2015 results after the closing bell.
Canada
No companies in the S&P/TSX composite index are expected to report financial results today.
CORPORATE NEWS RELEASES
Eldorado (ELD). Late Monday, the company announced it will be "suspending construction and development activities at the Skouries Project" in Greece.
Enerplus (ERF). On Monday, the company announced it is selling various natural gas properties in Alberta for approximately $193 million. The company plans to use the proceeds to reduce its debt levels.
Lululemon Athletica (LULU). Late Monday, the company raised its net revenue guidance for the fourth-quarter to between $690 million and $695 million, up from its previous guidance of between $670 million and $685 million. Management increased its earnings per share guidance for the fourth-quarter to between 78 cents and 80 cents, up from its prior guidance of between 75 cents and 78 cents. Laurent Potdevin, the chief executive officer, said, "We had a very successful holiday season driven by strong execution in stores and online during the key holiday weeks. Sales for the fourth quarter are exceeding expectations and gross margin rates and expenses remain in line with prior guidance. We are looking forward to 2016 and will enter the year with a very strong leadership team across the company that is relentlessly driving our strategic priorities and long term vision."
Canadian tour operator Transat AT Inc said on Tuesday it was looking for buyers for its operation in France and Greece. The Montreal-based company said it had not yet entered into any negotiations.
Alcoa last night reported EPS of $0.04 vs Street estimates of $0.02. Sales of $5.25 billion were below Street estimates of $5.32 billion. It forecast aluminium demand to grow 6 per cent in 2016.
ANALYSTS' ACTIONS
AltaGas (ALA). The analyst at Raymond James maintained his outperform recommendation, but trimmed his price target to $36 from $38.
Baytex Energy (BTE). The analyst at Raymond James maintained his market perform recommendation, but trimmed his price target to $7 from $10.50.
Canadian Natural Resources (CNQ). The analyst at Raymond James maintained his outperform recommendation, but trimmed his price target to $36 from $39.
Canadian Oil Sands (COS). The analyst at Raymond James maintained his market perform recommendation, but trimmed his price target to $10 from $10.75.
Canfor (CFP). The analyst at RBC Capital Markets reduced his recommendation to a sector perform from an outperform, and slashed his price target to $18 from $28.
Canfor Pulp Products (CFX). The analyst at RBC Capital Markets reduced his recommendation to a sector perform from an outperform, and trimmed his price target to $12 from $15.
Imperial Oil (IMO). The analyst at Raymond James maintained his market perform recommendation, but reduced his price target to $45 from $52.
Quebecor Inc. (QBR/B). On Monday, the analyst at Cormark Securities revised his recommendation to a top pick from a buy, but maintained the stock's price target of $40.
Ritchie Bros. Auctioneers (RBA). The analyst at RBC Capital Markets is maintaining her outperform recommendation, but reduced the stock's price target to $28 (US) from $32 (US).
Suncor (SU). The analyst at Raymond James maintained his outperform recommendation, but trimmed his price target to $40 from $43.
QUOTE OF THE DAY
"If you want to know your true opinion of someone, watch the effect produced in you by the first sight of a letter from him." – Arthur Schopenhauer
Jennifer Dowty