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.
Stocks are off to a roaring start to the week, with major European indexes like London's FTSE and Germany's DAX rising 1 per cent to 2 per cent, while U.S. index futures for the Dow and S&P 500 are up about 1.2 per cent.
A number of factors have come together to spark today's advances. Mainland China markets kicked off the rally with Shanghai and Shenzen both gaining over 2 per cent, as confidence improved after the China Securities Regulatory Commission sacked its head, Xiao Gang, after his circuit breakers and other measures apparently caused more problems than they solved.
Oil has been rallying this morning amid rumours of another U.S.-Russia deal for a truce in Syria. A pause or end in hostilities between the sides backed by different oil producers could pave the way for cooperation on the production side. On the other hand, the International Energy Agency indicated today that the upside for oil remains limited, because even with U.S. shale production expected to decline this year, the glut of supply in the world oil market is likely to continue into 2016.
West Texas intermediate crude prices are rallying more than 5 per cent, and this is helping to boost confidence in equity markets as well. Copper is up nearly 2 per cent, which has miners in rally mode as well. Gains in these sectors, along with a falling British pound, have helped the FTSE to advance this morning and may also boost the S&P/TSX in Canada today. Rising commodity prices have also sparked renewed interest in the Canadian dollar this morning.
After years of rumour and speculation, the question over whether Britain will remain in the European Union or go its own way is set to come to a head over the next few months. Prime Minister David Cameron has agreed to a deal with the EU designed to keep the U.K. in the union, and has announced a referendum on whether to stay or go for June 23. Politicians are starting to pick sides. While Mr. Cameron is leading the stay side as expected, popular London Mayor Boris Johnson has declared support for the Brexit side.
Weekend events suggest that the vote could be very closely contested, and the British pound has been trading sharply lower this morning because a close contest means that the Bank of England is unlikely to take any action in the next several months.
As the campaign ebbs and flows over the next four months, we could see higher volatility in U.K. and European markets, with the biggest impact likely in the days immediately surrounding the vote - and probably bigger in currencies than stocks.
In economic news, flash manufacturing and service PMI reports overnight and this morning for Japan, Germany and France have generally come in below expectations. This has put pressure on the Japanese yen and also may be weighing on the euro, while helping to boost stocks, as it keeps the pressure on the ECB and Japan's central bank to increase stimulus even more. That said, it also raises the question of what additional stimulus could actually do, given that the current massive amounts of stimulus don't appear to be helping as much as hoped.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 +1.2 per cent; Dow +1.1 per cent; Nasdaq: +1.2 per cent; TSX 60 +1.0 per cent
Equities
Hong Kong's Hang Seng +0.93 per cent
Shanghai composite index +2.34 per cent
Japan's Nikkei 225 +0.90 per cent
London's FTSE +1.26 per cent
Germany's DAX +1.98 per cent
France's CAC 40 +1.80 per cent
Commodities
WTI crude oil (Nymex March) +6.51 per cent at $31.57 (U.S.) a barrel
Gold (Comex April) -2.10 per cent at $1,204.80 (U.S.) an ounce
Copper (Comex May) +2.24 per cent at $2.13 (U.S.) a pound
Currencies
Canadian dollar +0.0008 at 72.64 cents (U.S.)
U.S. dollar index +0.846 at 97.446
Bonds
U.S. 10-year Treasury yield +0.03 at 1.78 per cent
KEY ECONOMIC RELEASES
No major releases scheduled.
KEY CORPORATE NEWS
Lumber Liquidators Holdings Inc. tumbled 17 per cent in the premarket after U.S. regulators reversed their early findings to say that the company's flooring, tested for formaldehyde, was found to have a three times higher risk of causing cancer than previously stated.
Barrick Gold Corp , the world's largest gold miner, said it would spend a total of about $2 billion on projects in Nevada and Peru for construction starting 2019. The miner also said it would redeem up to $750 million in notes to help cut debt by at least $2 billion this year.The company's U.S.-listed shares were down about 3 per cent at $12.18 in premarket trading on Monday.
Earnings today include: Allergan plc; Alliant Energy Corp.; Dean Foods Co.; Fitbit Inc.; Motorola Solutions Inc.; ONEOK Inc.; Richmont Mines Inc.; Sunedison Inc.; Valeant Pharmaceuticals International Inc.; Verisk Analytics Inc.
Also see: Monday's small-cap stocks to watch
With files from wire services