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.
Building on Friday's gains, most major stock markets around the world are rallying to start the week. Chinese markets have been leading the charge, with Shanghai and Shenzen stocks gaining 1.6 per cent to 1.9 per cent. The Hang Seng climbed 0.3 per cent. Chinese inflation data were mixed but a pickup in the country's leading index has been seen as a positive by traders.
U.S and Canadian index futures for the Dow, S&P, Nasdaq and TSX 60 are all up nearly half a percentage point. In Europe, the Dax is up more than 1 per cent while the FTSE is flat.
Today the focus now shifts to the start of earnings season, with Alcoa reporting after U.S. exchanges close today. The big market moves in both directions over the last three months suggest indecision on the outlook for earnings this year. The recent market correction appears to have come from concerns that price-to-earnings valuations may have bounced back too quickly. The answer to the question of whether prices are currently too high or earnings estimates are currently too low could spark significant moves in the markets over the coming weeks.
Stock markets dropped sharply through the last earnings season, part of which was related to a selloff in China. On balance, companies reported strong earnings for the fourth quarter, but then issued disappointing guidance for the first quarter and/or 2016. Economic data held up reasonably well through the quarter, so the question now facing traders is whether management and markets were overly pessimistic back in January and early February, or if the recent recovery in stocks has been too much too fast?
In addition to earnings, traders may focus on the outlook for commodity demand and pricing when Alcoa issues its results. Later in the week, the schedule is dominated by the big U.S. banks. Traders may focus on any comments related to exposure to the struggling energy sector or energy-producing regions.
Commodity markets have been steady so far today, with crude oil trading up slightly as it consolidates Friday's gains. Currency trading is mixed, with gold up and the Japanese yen down. The British pound is the top performer, gaining 1.0 per cent on the euro and 0.8 per cent on the greenback, as Brexit uncertainty fears subside for now. The Canadian dollar is up modestly against the U.S. dollar.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA: (as of 715 a.m. ET)
Futures
Dow +0.38 per cent; S&P 500 +0.40 per cent; Nasdaq: +0.44 per cent; TSX 60 +0.5 per cent
Equities
Japan's Nikkei 225 -0.44 per cent
Shanghai composite index +1.66 per cent
Hong Kong's Hang Seng +0.35 per cent
Germany's DAX +1.23 per cent
London's FTSE +0.12 per cent
France's CAC 40 +0.71 per cent
Commodities
WTI crude oil (Nymex May) -0.15 per cent at $39.66 (U.S.) a barrel
Gold (Comex June) +0.65 per cent at $1,251.90 (U.S.) an ounce
Copper (Comex May) -0.48 per cent at $2.07 (U.S.) a pound
Currencies
Canadian dollar +0.0012 at 77.06 cents (U.S.)
U.S. dollar index -0.055 at 94.180
Bonds
U.S. 10-year Treasury yield +0.02 at 1.73 per cent
KEY ECONOMIC RELEASES
No major reports scheduled
KEY CORPORATE NEWS
Canadian Pacific Railway said it has ended its efforts to merge with Norfolk Southern.
Yahoo shares were up 1.4 per cent in the premarket after the parent company of Britain's Daily Mail said it was in talks with potential partners to mount a bid for the company's Internet assets.
Home Depot was up 1 per cent after Goldman Sachs raised its price target on the stock.
Earnings today include: Alcoa Inc.; Kinder Morgan Inc.; Performance Sports Group Ltd.
With files from wire services