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.
Stock markets around the world have been in rally mode overnight and into this morning. The Hang Seng rose 1.4 per cent while in Europe today, the Dax is up 1.7 per cent, the CAC is up 1.2 per cent and the FTSE is up 0.5 per cent. U.S. index futures for the Dow and S&P are up 0.3 per cent; TSX 60 futures are up 0.2 per cent. The U.S. dollar index, gold and the Japanese yen are all down about 0.2 per cent, as traders go back into risk-on mode. Commodities are mixed, with West Texas intermediate and Brent up 0.4 per cent to 0.6 per cent, while copper is down more than 2 per cent.
A number of factors have converged to drive today's moves. Positive momentum from Monday's U.S. afternoon trading has been working its way through markets, with traders deciding to take a dovish read from Fed Chair Janet Yellen's comments. She dropped a previous reference to interest rate increases coming soon, but enthusiasm related to this could get overdone as the overall tone of the speech was quite neutral. She also noted that, in the aftermath of Friday's dismal job's reading, people should not read too much into one number (which I think will get revised upward next month, as often happens after an outlier report). She also noted rising wage and consumer spending growth. She also mentioned FOMC member forecasts are coming next week (which could be raised in June to signal a July hike) and indicated that in a normal economy rates would be higher by now.
Valeant Pharmaceuticals may come under pressure today after the company reported first quarter results that came in well below expectations ($1.27 vs street $1.36) and cut its EPS ($6.60-$7.00 from $8.50-$9.50). The company blamed recent turmoil and disruptions but indicted that it expects to have its financial reporting back on track this week. Resource stocks may be active again today in response to commodity price swings, with base metal miners vulnerable as copper slides.
In Europe today, continental indexes are playing catch up to the larger gains in the U.K. today. Economic data has been positive on both sides of the English Channel, with euro zone GDP, Germany industrial production, U.K. same store sales and U.K. house prices all beating the street. The continental data suggest an improving economy, while the U.K. data indicates that the Brexit debate has not been the drag on the U.K. economy that some had claimed.
In currency trading, the U.S. dollar is in retreat again today, as traders adjust expectations to a potentially less hawkish Fed. The Japanese yen and gold are also falling, as capital rotates back out to more aggressive stances. The Canadian dollar is up modestly, with crude trading at or slightly above $50 per barrel.
Now, here is a closer look at what's going on this morning.
MARKET DATA:
Futures
Dow +0.28 per cent; S&P 500 +0.24 per cent; Nasdaq: +0.34 per cent; TSX 60 +0.23 per cent
Equities
Japan's Nikkei +0.58 per cent
Shanghai composite index +0.07 per cent
Hong Kong's Hang Seng +1.42 per cent
Germany's DAX +1.75 per cent
London's FTSE +0.44 per cent
France's CAC 40 +1.20 per cent
Commodities
WTI crude oil (Nymex July) +0.54 per cent at $49.96 (U.S.) a barrel
Gold (Comex Aug) -0.33 per cent at $1,243.30 (U.S.) an ounce
Copper (Comex July) -2.29 per cent at $2.06 (U.S.) a pound
Currencies
Canadian dollar +0.29 at 78.25 cents (U.S.)
U.S. dollar index -0.019 at 93.883
Bonds
Canada 10-year bond yield unchanged at 1.238 per cent
KEY ECONOMIC RELEASES
U.S. nonfarm productivity fell less sharply than previously thought in the first quarter, but labor-related costs still surged as companies employed more workers to boost output. The Labor Department said on Tuesday productivity, which measures hourly output per worker, contracted at an annualized rate of 0.6 percent, instead of the 1.0 percent pace reported last month. The revision, which reflected modestly higher output than previously estimated, was in line with economists' expectations.
Still to come:
(10 a.m. ET) Canada Ivey PMI for May
KEY STOCKS TO WATCH
Valeant Pharmaceuticals International Inc. cut its 2016 profit forecast as new Chief Executive Officer Joseph Papa starts his attempt to turn around the embattled drugmaker. The shares plummeted 10 per cent in early trading. Earnings will be $6.60 to $7 a share, excluding some items. In March, under former CEO Michael Pearson, Valeant anticipated $8.50 to $9.50. Analysts were predicting earnings of $8.49, the average of estimates compiled by Bloomberg. In the first quarter, earnings of $1.27 missed analysts' predictions by 10 cents.
Suncor Energy Inc. lowered its crude output forecast for the year by about 6.2 per cent because of facility outages caused by wildfires raging across northern Alberta. Suncor, the producer most affected by the fires, reduced its production target to between 585,000 and 620,000 barrels a day in a statement on Monday. That compares with a forecast released in April of between 620,000 and 665,000 barrels a day.
Cott Corp. is acquiring European water and office coffee services company Eden Springs for $683 million (470 million euros).
Canadian National Railway Co. Chief Executive Officer Claude Mongeau is stepping down following surgery last year on his larynx.He will be replaced by Luc Jobin on July 1, who has served as chief financial officer since 2009
Other earnings today include: Currency Exchange International Corp.; HD Supply Holdings Inc.; Major Drilling Group International Inc.; Michaels Companies Inc.; VeriFone Systems Inc.
Also see: Tuesday's small-cap stocks to watch
With files from wire services