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.
U.S. index futures are slipping increasingly into the red as the opening bell approaches, with losses of about 0.2 per cent. European indexes are mostly higher, but also losing some steam. Crude oil is holding steady, still attracting support following Monday's breakout rally, as more wildfires in Canada shut in some oil sands production facilities - a setback on the road to recovery.
Traders looking for confirmation of Friday's stronger-than-expected U.S. retail sales report received a big boost from Home Depot's earnings report, which beat the Street on sales, earnings ($1.44 to $1.35), and the company also raised its guidance for the year. This suggests that recent weak results from department stores may be contained to that sector, with consumers electing to spend their money elsewhere.
Today's trading action in the U.K., where the FTSE and British pound are rising, appears particularly significant, showing a sea change in sentiment may be underway. Back in the winter, traders had viewed news favouring the "Leave" side as negative and news favouring "Remain" as positive. This effect had been fading as the campaign progressed, with pro-"Leave" news having less and less of a negative impact.
This morning, for the first time, U.K. markets are up on news favouring the camp wanting to leave the European Union. A TNS poll released this morning showed those in favour of leaving leading those who want to retain by 41 per cent to 38 per cent. This is the first time a poll from that particular agency showed the "Leave" side leading for the first time in several months. Today's developments indicate that a big change in sentiment is underway in the U.K., with voters and traders viewing the "Leave" option as increasingly favourable.
Today's U.S. inflation report came in slightly hotter than expected. Recent FOMC comments have been indicating June remains open for a potential rate hike, with retail sales favouring the hawkish camp. The U.S. dollar index, trading just below 95.00, indicates currency traders are still pricing in two rate increases this year, but bond traders continue to think there may not be any. U.S. inflation has been increasing, and some Fed members have become concerned about falling behind the curve on inflation. Higher-than-expected inflation could boost the hawkish case.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA:
Futures
Dow -0.18 per cent; S&P 500 -0.22 per cent; Nasdaq: -0.10 per cent; TSX 60 +0.04 per cent
Equities
Japan's Nikkei +1.13 per cent
Shanghai composite index -0.25 per cent
Hong Kong's Hang Seng +1.18 per cent
Germany's DAX -0.23 per cent
London's FTSE +0.38 per cent
France's CAC 40 -0.07 per cent
Commodities
WTI crude oil (Nymex June) +0.15 per cent at $47.79 (U.S.) a barrel
Gold (Comex June) +0.02 per cent at $1,274.40 (U.S.) an ounce
Copper (Comex July) -0.43 per cent at $2.08 (U.S.) a pound
Currencies
Canadian dollar -0.21 at 77.33 cents (U.S.)
U.S. dollar index +0.13 at 94.691
Bonds
Canada 10-year bond yield -0.001 at 1.312 per cent
Canada 2-year bond yield +0.006 at 0.570 per cent
KEY ECONOMIC RELEASES
The cost of living in the U.S. climbed in April by the most in three years an indication that inflation may be picking up toward the Federal Reserve's goal. Consumer prices increased 0.4 per cent, the biggest gains since February 2013, following a 0.1 per cent advance in March. The so-called core measure, which strips out food and energy costs, rose 0.2 percent after a 0.1 percent gain the prior month. Economists expected total prices to rise 0.3 per cent from the month before. The increase in core prices matched the median estimate of economists surveyed. At a year-over-year rate, core prices rose 2.1 percent in April after climbing 2.2 percent the prior month.
U.S. new-home construction rose in April, extending a pattern of gains and losses that signals the U.S. homebuilding industry is contributing little to economic growth. Residential starts increased 6.6 per cent to a 1.17 million annualized rate from 1.1 million in March. The median forecast of 79 economists surveyed by Bloomberg projected an increase to a 1.13 million rate. Permits, a proxy for future construction, also climbed.
Statistics Canada says manufacturing sales fell 0.9 per cent to $50.0 billion in March, due to lower sales of transportation equipment and primary metals. It was the second consecutive monthly decline. Economists had expected a drop of 1.8 per cent, according to Thomson Reuters.
Still to come:
(9:15 a.m. ET) U.S. industrial production and capacity utilization for April. Consensus projections are an increase of 0.3 per cent and 75.0 per cent, up 0.2 per cent, from March, respectively.
KEY STOCKS TO WATCH
Home Depot Inc, the world's biggest home improvement chain, reported better-than-expected quarterly comparable sales and profit on Tuesday, saying demand rose across the board. Shares of the company, which also raised its sales and profit forecasts for the year ending January 2017, were up about 2 per cent at $137.65 in premarket trading.
Hudson's Bay Company says it plans to open up to 20 new stores in the Netherlands over the next two years, creating thousands of new jobs in a nation recently hit by the closure of a major chain of stores.
Other earnings today include: Clearwater Seafoods Inc.; TJX Companies Inc.; Vodafone Group PLC
Also see: Tuesday's small-cap stocks to watch
With files from wire services