Colin Cieszynski
The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.
Stock markets continue to recover this morning, with U.S. index futures running up about 0.7 per cent and building on Tuesday's gains. European indexes have joined the party in earnest, with the FTSE and Dax both up about 1.6 per cent.
Crude oil is bouncing back strongly as Tuesday's trading turned out to be a normal correction of last week's gains, not a rejection of the deal reached among suppliers early in the day. The nearby contract of West Texas intermediate has been advancing to near $30.00 again this morning, with Brent trading near $32.50.
There's another meeting being held today on production. Iraq and Kuwait have joined Saudi Arabia, Russia, Venezuela and Qatar in agreeing to freeze production at January levels (a good start). Today the focus is on Iran, which wants to continue ramping up its production to pre-sanctions levels, which is not unreasonable considering that other countries increased their supply while Iran was out of the market. Whatever comes out of the meeting - deal or no deal - could have a significant impact on oil trading through the day.
Rising oil prices could help stocks in Canada to build on Tuesday's gains, but the main focus in likely to be on Bombardier. After years of talks, the company finally won a big order from Air Canada for up to 75 of its C Series aircraft, a huge shot in the arm for the struggling aircraft program. The company still has a lot of issues to work through considering that it missed on sales and earnings and is planning to lay off another 7,000 employees. But the Air Canada deal at least provides some optimism and may reduce the risk of Bombardier needing to be bailed out by governments for a while. Meanwhile, in the U.S., consumer electronics companies could attract attention after Garmin posted better than expected earnings and guidance.
In currency trading today, the Japanese yen has levelled off after Japanese officials suggested the potential for more stimulus at the next Bank of Japan meeting, comments that seem intended to put a cap on the recent yen ally. Gold has levelled off near $1,200. The Canadian dollar is picking up again today with oil on the rebound.
Federal Open Market Committee minutes are likely to be a non-event this afternoon since recent comments from FOMC members have moved beyond just keeping the Fed's options open to a debate over negative interest rates and whether further hikes could be delayed.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 +0.7 per cent; Dow +0.7 per cent; Nasdaq:+0.8 per cent; TSX 60 +0.8 per cent
Equities
Hong Kong's Hang Seng -1.03 per cent
Shanghai composite index +1.07 per cent
Japan's Nikkei 225 -1.36 per cent
London's FTSE +1.62 per cent
Germany's DAX +1.75 per cent
France's CAC 40 +2.00 per cent
Commodities
WTI crude oil (Nymex March) +2.48 per cent at $29.75 (U.S.) a barrel
Gold (Comex April) -0.52 per cent at $1,201.90 (U.S.) an ounce
Copper (Comex May) +0.71 per cent at $2.07 (U.S.) a pound
Currencies
Canadian dollar +0.0014 at 72.24 cents (U.S.)
U.S. dollar index -0.014 at 96.854
Bonds
U.S. 10-year Treasury yield +0.02 at 1.79 per cent
KEY ECONOMIC RELEASES
U.S. producer prices unexpectedly rose in January as margins for wholesale machinery and equipment increased, but lower energy prices and a strong dollar continue to keep inflation in check. The Labor Department said on Wednesday its producer price index edged up 0.1 per cent after slipping 0.2 per cent in December. In the 12 months through January, the PPI decreased 0.2 per cent after declining 1.0 percent in December. Economists polled by Reuters had forecast the PPI dropping 0.2 per cent last month and falling 0.6 per cent from a year ago.
U.S. housing starts unexpectedly fell in January likely as bad weather disrupted building projects in some parts of the country, in what could be a temporary setback for the housing market. Groundbreaking fell 3.8 per cent to a seasonally adjusted annual pace of 1.099 million units, the Commerce Department said on Wednesday. Part of the decline in starts could be attributed to the snowstorms, which blanketed the Northeast last month. December's starts were revised down to a 1.143 million-unit rate from the previously reported 1.15 million-unit pace. Economists polled by Reuters had forecast housing starts rising to a 1.17 million-unit pace last month.
(9:15 a.m. ET) U.S. industrial production and capacity utilization for January. Consensus estimates are an increase of 0.3 per cent and 76.7 per cent, respectively.
(2 p.m. ET) U.S. FOMC minutes from Jan. 26-27 meeting released
KEY CORPORATE NEWS
Bombardier Inc. said it planned to cut about 7,000 jobs as it reported fourth-quarter profit that fell short of analysts' estimates. It also signed a letter of intent for Air Canada to buy at least 45 of the planemaker's C Series jets. The job cuts, from a workforce of about 64,000, will occur during the next two years and result in restructuring charges of as much as $300 million, the company said. The Air Canada deal, while not a firm order, represents a list value of about $3.8 billion. The airline has an option to purchase an additional 30 C Series aircraft. Profit fell as the company broke even on a per-share basis, Bombardier said Wednesday, less than the 2-cent average of 15 analyst estimates compiled by Bloomberg. Revenue dropped 16 per cent $5.02 billion, trailing the $5.51 billion average forecast.
Shopify Inc., the Canadian e-commerce software maker that sold shares in an initial public offering in May, posted a narrower fourth-quarter loss than analysts expected, as more merchants signed up during the holiday shopping season. The Ottawa-based company reported a loss of 1 cent a share, excluding some items, compared with a projected 5-cent loss, the average of nine estimates compiled by Bloomberg. Revenue of $70.2 million beat estimates averaging $61.2 million.
Air Canada reported fourth-quarter earnings that beat analysts' estimates as fuel costs decreased and revenue advanced. Adjusted profit rose to 40 Canadian cents a share, the Montreal-based airline said in a statement Wednesday. Analysts on average had predicted 39 cents, according to 11 estimates compiled by Bloomberg. Revenue rose 2.5 per cent to $3.18 billion, compared with the consensus of $3.2 billion.
Priceline Group Inc reported a higher-than-expected quarterly profit, helped by higher hotel and rental car bookings. The operator of Booking.com, Priceline.com and Kayak.com said on Wednesday that net income applicable to common stockholders rose to $504.3 million, or $10 per share, in the fourth quarter ended Dec. 31 from $451.8 million, or $8.56 per share, a year earlier. Revenue rose 8.7 percent to $2.00 billion. On an adjusted basis, Priceline earned $12.63 per share, beating the average analyst estimate of $11.80, according to Thomson Reuters I/B/E/S.
GPS-based gadget maker Garmin Ltd reported higher-than-expected quarterly revenue, helped by strong demand for navigational devices used in aircraft and fitness trackers, and forecast full-year revenue above estimates. Revenue from the company's fitness business, which accounts for nearly 30 percent of total revenue, rose 13.6 percent in the fourth quarter ended Dec. 26.
Other earnings today include: Analog Devices Inc.; Barrick Gold Corp.; CF Industries Holdings Inc.; Constellation Software Inc.; IAMGOLD Corp.; Lucara Diamond Corp.; Marathon Oil Corp.; Marriott International Inc.; NetApp Inc.; Newalta Corp.; Progressive Corp.; T-Mobile US Inc.; Western Forest Products Inc.
Also see: Wednesday's small-cap stocks to watch
With files from wire services