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 around the world have continued their correction overnight, but declines have been moderate for many markets.
London's FTSE, Hong Kong's Hang Seng and Japan's Nikkei are all down in the 0.50 per cent to 1.25 per cent range, while indexes in continental Europe are down in the 2.00 per cent to 3.00 per cent range. U.S. index futures for the Dow and S&P 500 are down about 0.9 per cent.
Falling oil and copper prices have put pressure back on energy producers and metal miners. While resource weakness could impact trading in Canada today as well, this could be offset by another rally in gold and the potential for more gains by gold miners. How the market reacts to Royal Bank's earnings and dividend increase could be significant. So far in the premarket, its U.S.-listed shares are down about half a percentage point.
Crude oil is dropping again today following a much higher than expected American Petroleum Institute inventory build and could be active today through the Department of Energy report, which will also provide a fresh read on inventories. It's important to put recent action in perspective, however. The 2-3 per cent drops in West Texas intermediate and Brent are moves of less than $1.00/barrel and WTI remains well above its recent double bottom through this soft patch, still trading above $30.00 for the nearby contract. Similarly, stock markets around the world remain well above their recent double bottom lows, which in technical analysis means a strong support base has been formed.
In other words, we're not really seeing a panic stampede for the exits of the kind that prevailed in January. Today's trading looks more like an orderly common trading correction. It does mean, though, that markets don't appear to be ready for takeoff either, so base building and swings up and down within sideways trends may persist for a while.
In currency markets today, the British pound remains under pressure, breaking $1.40 against the U.S. dollar, as the potential for a close race in the June Brexit vote continues to weigh on sterling. Overall, the defensive rotation of capital back into defensive havens continues with gold, the U.S. dollar, the Japanese yen, and swiss franc the top performers, while resource currencies like the Norwegian krone, Australian dollar, New Zealand dollar and the loonie are falling again.
Today's action in the Canadian dollar, which is down much less than its resource peers and even less than the euro, is particularly intriguing. A small fall in the loonie relative to WTI indicates that traders see current oil weakness as a retrenchment, not a new downturn. It also suggests that Canada's proximity to the strong U.S. economy is being seen as a positive. On the flip side, Brexit and ECB stimulus risks continue to weigh on nearby currencies, particularly the Norwegian krone and Swedish kronor. We could be nearing a turning point for European currencies over the next several weeks as the Brexit vote gets priced in and the ECB makes its stimulus decision.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.8 per cent; Dow -0.9 per cent; Nasdaq: -1.2 per cent
Equities
Hong Kong's Hang Seng -1.15 per cent
Shanghai composite index +0.88 per cent
Japan's Nikkei 225 -0.85 per cent
London's FTSE -1.51 per cent
Germany's DAX -2.48 per cent
France's CAC 40 -2.35 per cent
Commodities
WTI crude oil (Nymex April) -3.48 per cent at $30.76 (U.S.) a barrel
Gold (Comex April) +1.14 per cent at $1,236.70 (U.S.) an ounce
Copper (Comex May) -1.71 per cent at $2.07 (U.S.) a pound
Currencies
Canadian dollar -0.0032 at 72.17 cents (U.S.)
U.S. dollar index +0.410 at 97.891
Bonds
U.S. 10-year Treasury yield -0.03 at 1.69 per cent
KEY ECONOMIC RELEASES
(10 a.m. ET) U.S. new home sales for January. Consensus is an annualized rate decline of 4.4 per cent
KEY CORPORATE NEWS
Royal Bank of Canada reported a quarterly profit that missed market estimates on Wednesday, hurt by weakness in its insurance and capital markets businesses. But the lender, Canada's second largest by assets, raised its quarterly dividend. Net income for the first quarter which ended Jan. 31 was $2.45 billion (Canadian), or $1.58 per share, compared with $2.46 billion, or $1.65 per share, a year earlier. Excluding special items, earnings were $1.64 per share. Analysts on average had expected $1.67 a share, according to Thomson Reuters I/B/E/S.
Encana Corp. reported its fourth straight quarterly loss, cut its annual spending forecast and lowered the dividend amid tumbling oil and natural-gas prices. The net loss was $612 million in the fourth quarter, compared with net income of $198 million a year earlier. Excluding one-time items, the 13-cent-a-share result beat the 1-cent average of 18 analyst estimates compiled by Bloomberg.
Gildan Activewear reported Q4 adjusted EPS of 28 cents (U.S.), matching Street expectations.
Calfrac Well Services Ltd. said it has eliminated its dividend, effective immediately, as it reported worse-than-expected earnings this morning.
Lowe's revenue for the fourth quarter beat most expectations and its profit outlook for the year did too amid a housing recovery that is sending more do-it-yourselfers through its doors. For the three months ended Jan. 29, Lowe's earned $11 million, or a penny per share. Excluding a $530 million impairment charge tied to the company's exit from an Australian joint venture, earnings were 59 cents per share, which was in line with Wall Street expectations, according to a poll by Zacks Investment Research. Revenue rose to $13.24 billion from $12.54 billion, which was better than the $13.05 billion that analysts were projecting.
Target Corp. reported fiscal fourth-quarter net income of $1.43 billion, after reporting a loss in the same period a year earlier. On a per-share basis, the Minneapolis-based company said it had net income of $2.32. Earnings, adjusted for non-recurring gains and to account for discontinued operations, were $1.52 per share. The results did not meet Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.54 per share.
Other earnings today include: AES Corp.; Aimia Inc.; Centerra Gold Inc.; Continental Resources Inc.; Cipher Pharmaceuticals Inc.; Endeavour Mining Corp.; HP Inc.; HudBay Minerals Inc.; IMAX Corp.; Lake Shore Gold Corp.; MacDonald Dettwiler and Associates Ltd.; Northland Power Inc.; Progressive Waste Solutions Ltd.; QLT Inc.; Shell Midstream Partners LP; Sienna Senior Living Inc.; Sleep Country Canada Holdings Inc.; Thompson Creek Metals Company Inc.; Trican Well Service Ltd.; Westar Energy Inc.
BlackBerry said it has acquired U.K.-based cyber security consultancy Encription, moving the company deeper into the services business as it continues to morph into a more software-focused entity amid its ongoing turnaround. Terms were not disclosed.
JP Morgan was down 1.1 per cent in the premarket after it said it would set aside another $500 million in provisions for expected losses on energy loans and that its investment banking revenue was falling. At least three brokerages cut their price targets on the stock.
Also see: Wednesday's small-cap stocks to watch
With files from wire services