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.
Overseas stock markets resumed their downward course overnight and North American markets are setting up to take a bruising at today`s open.
In Europe this morning, Germany`s Dax is off 1.8 per cent while London`s FTSE is down 0.8 per cent after its return to trading from a holiday. Index futures for the Dow, S&P 500 and TSX 60 are down about 0.9 per cent. Japanese stocks remain closed for holidays.
A number of developments occurred overnight that provide more evidence of a slowing world economy. Manufacturing Purchasing Managers Indexes reports for the U.K. and China came in below expectations and below 50 in contraction territory. Australia's central bank announced a surprise interest rate cut while its government announced a bigger budget deficit in a bid to get its struggling economy going. Australian stocks jumped 1.2 per cent. In Europe, the European Commission cut its GDP and inflation forecasts for the year, indicating monetary stimulus to date isn't really working. Finally, Spain called new elections for June 26 to try and break a political stalemate, to be held just days after the June 23 Brexit referendum.
It's a light day for economic news in North America, but another busy one for earnings reports. Two reports out of Canada this morning reflect what we would expect to see in a lower energy price environment: EnCana is struggling but, oil consumer WestJet is doing really well. (See more details below in our Key Stocks to Watch section.)
Crude oil is trading down 1 per cent in what still looks like an orderly correction of recent gains. The Russian ruble is down a similar amount, but the Canadian dollar is still refusing to participate in the slide, indicating traders still see this as normal trading and not a significant change in trend so far.
To no surprise given the news, the worst performer in currency markets overnight has been the Australian dollar, which has plunged 1.3 per cent on the rate cut, a development that would be welcomed by the Reserve Bank of Australia which had been concerned about their dollar's recent rise. Interestingly the money flowing out of there hasn't gone into the U.S. dollar - rather, other defensives have been the main beneficiaries, particularly the Japanese yen and Swiss franc.
Gold took another run at $1,300 but once again failed to get through. The British pound is steady while the euro continues to climb a particularly strong performance given gloomy fundamental news on the continent today.
In addition to more earnings reports we may also see traders position ahead of service PMI reports and US ADP payrolls due overnight and Wednesday morning.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA: (as of approximately 7:30 a.m. ET:)
Futures
Dow -0.72 per cent; S&P 500 -0.77 per cent; Nasdaq: -0.82 per cent; TSX 60 -0.75 per cent
Equities
Japan's Nikkei 225 Closed for holiday
Shanghai composite index +1.87 per cent
Hong Kong's Hang Seng -1.85 per cent
Germany's DAX -1.88 per cent
London's FTSE -1.21 per cent
France's CAC 40 -1.70 per cent
Commodities
WTI crude oil (Nymex June) -1.03 per cent at $44.32 (U.S.) a barrel
Gold (Comex June) +0.08 per cent at $1,296.90 (U.S.) an ounce
Copper (Comex July) -1.52 per cent at $2.23 (U.S.) a pound
Currencies
Canadian dollar -0.17 at 79.60 cents (U.S.)
U.S. dollar index -0.32 at 92.26
Bonds
U.S. 10-year Treasury yield -0.07 at 1.81 per cent
KEY ECONOMIC RELEASES
U.S. and Canada motor vehicle sales for April.
KEY STOCKS TO WATCH
WestJet Airlines said that its net earnings fell to $87.6 million, or 71 Canadian cents per share, in the first quarter ended March 31, from $140.7 million, or $1.09 per share, a year earlier. That beat Street expectations. Revenue fell 4.8 per cent to $1.03 billion.
Encana posted a bigger-than-expected quarterly loss due to lower production amid a steep fall in oil prices. On a per-share basis, Encana posted an operating loss, which excludes most one-time items, of 15 cents, compared with a profit of 3 cents a year earlier. Analysts on average had expected a loss of 12 cents per share, according to Thomson Reuters I/B/E/S.
Shares of drugmaker Pfizer were up 2.9 per cent in the premarket after the company reported a rise in quarterly revenue. Excluding items, the company earned 67 cents per share, above the average analyst estimate of 55 cents per share. Pfizer also raised its revenue and earnings forecast for the year helped in part by a favourable impact of recent changes in foreign exchange rates.
Halliburton Co, the world's No.2 oilfield services provider, reported a higher-than-expected adjusted profit for the first quarter as deep cost cuts helped cushion the impact of a drop in drilling and completion activity. Excluding charges, Halliburton earned 7 cents per share, higher than analysts average estimate of 4 cents, according to Thomson Reuters I/B/E/S.
Other earnings today include: 5N Plus Inc.; Aecon Group Inc.; Affiliated Managers Group Inc.; Agrium Inc.; Argonaut Gold Inc.; Arsenal Energy Inc.; Baytex Energy Corp.; Black Diamond Group Ltd.; BNP Paribas SA; CanWel Building Materials Group Ltd.; CBS Corp.; Centerra Gold Inc.; Cineplex Inc.; Columbia Pipeline Group Inc.; Cummins Inc.; CVS Health Corp.; Devon Energy Corp.; Duke Energy Corp.; Etsy Inc.; Fortis Inc.; Gibson Energy Inc.; Harris Corp.; IAMGOLD Corp.; Illumina Inc.; Lucara Diamond Corp.; Macerich Co.; Mallinckrodt Plc; Martinrea International Inc.; Matador Resources Co.; Match Group Inc.; Molson Coors Brewing Co.; Mylan NV; Myriad Genetics Inc.; New York Times Co.; Newfield Exploration Co.; North American Energy Partners Inc.; ONEOK Inc.; Pitney Bowes Inc.; Russel Metals Inc.; Sandstorm Gold Ltd.; Sprint Corp.; Tahoe Resources Inc.; Timmins Gold Corp.; TransAlta Corp.; UBS Group AG; Valero Energy Corp.; Wajax Corp.; Western Union Co.; Westshore Terminals Investment Corp.
With files from wire services