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 are surging higher today on speculation that the Remain side could win today's Brexit Referendum. Germany's Dax is up 2.2 per cent while London's FTSE is up 1.5 per cent and U.S. index futures are up 1 per cent. Futures for the TSX 60 are up 0.8 per cent. Crude oil is also benefiting from risk-on sentiment, with Brent up 1.9 per cent and West Texas intermediate up 1.6 per cent.
Speculation on the results in currency markets has capital flowing out of defensive havens and back into Europe. Gold is down another 0.5 per cent while the Japanese yen is finally starting to crack after its recent rally, with the U.S. dollar popping back up above 105 per yen. Meanwhile, the British pound has cleared $1.4800 to trade at its highest level in months and the euro has jumped a penny toward $1.1400 per U.S. dollar.
Even with these moves, traders should recognize it's not a good day to get complacent. Although market and betting action has come in on one side (bettors indicated client activity suggest about an 80 per cent chance of a Remain win), anything can happen in the polling booth. The last published polls were still suggesting a very close race, with neither side leading by more than a few percentage points. Today's market and betting action suggests that at this point, a Remain win may be getting priced in already, so follow through could be brief.
Because of this, a Leave win could be seen as a bigger surprise and could generate more market volatility if it occurs. That being said, the really extreme negative market moves that had been predicted by some people in recent days (like George Soros' prediction for a 20 per cent fall in the pound) appear unlikely considering the number of central banks that have indicated plans to step in and manage volatility if needed.
Overnight, flash Purchasing Managers Index reports showed German manufacturing improving, but German services activity missing expectations. French PMI reports were under the 50 mark that separates expansion from contraction.
Today brings U.S. flash manufacturing PMI and jobless claims, which may attract some attention from traders trying to figure out where the U.S. economy is headed after the mixed signals of the nonfarm payrolls disappointment, Fed official James Bullard's recent swing to the dovish camp on interest rates, and Fed chair Janet Yellen's neutrality.
For the most part, trading in Canada today may be driven by international events and commodity price trends. Blackberry, however, could be active on its earnings report. Results were mixed, beating the Street on earnings but missing on sales. The company indicated it still expects software and services revenues to grow 30 per cent this year. The stock is up 5 per cent in the premarket.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA: (as of approx 7 a.m. ET)
Futures
Dow +0.92 per cent; S&P 500 +0.95 per cent; Nasdaq: +1.01 per cent; TSX 60: +0.83 per cent
Equities
Japan's Nikkei +1.07 per cent
Shanghai composite index -0.46 per cent
Hong Kong's Hang Seng +0.35 per cent
Germany's DAX +2.34 per cent
London's FTSE +1.56 per cent
France's CAC 40 +2.27 per cent
Commodities
WTI crude oil (Nymex Aug) +1.28 per cent per cent at $49.74 (U.S.) a barrel
Gold (Comex Aug) -0.60 per cent at $1,262.40 (U.S.) an ounce
Copper (Comex July) +0.84 per cent at $2.1535 (U.S.) a pound
Currencies
Canadian dollar +0.62 at 78.66 cents (U.S.)
U.S. dollar index -0.536 at 93.180
Bonds
Canada 10-year bond yield +0.054 at 1.286 per cent
KEY ECONOMIC RELEASES
U.S. initial jobless claims were 295,000 last week vs. an estimated 270,000.
Still to come:
(9:45 a.m. ET) U.S. Markit Flash Manufacturing PMI for June
(10 a.m. ET) U.S. new home sales for May. Consensus is an annualized rate decline of 8 per cent.
KEY STOCKS TO WATCH
BlackBerry reported earnings that exceeded analysts' earnings estimates but came up short on revenue, dragged down by ever-shrinking smartphone sales that offset efforts to boost the company's bottom line through software products. Fiscal first-quarter earnings per share, excluding some items, broke even, compared with the average analyst estimate of a loss of 7 cents. Revenue in the quarter was $424 million, boosted by software revenue of $166 million that was 21 per cent higher than the same period last year ($137 million). Analysts had estimated total revenue of $471 million. Shares are up 5 per cent in the premarket.
Accenture Plc posted a better-than-expected 8.6 percent rise in quarterly net revenue, driven by demand for consulting services, particularly from customers in North America. However, the mid-range of the company's forecast for fourth-quarter revenue fell slightly below analysts' average estimate. The company said it expects fourth-quarter revenue of between $8.25 billion and $8.50 billion. Analysts were expecting revenue of $8.39 billion, according to Thomson Reuters I/B/E/S.
Other earnings today include: Commercial Metals Co.; Sonic Corp.; SYNNEX Corp.
With files from wire services