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.
The initial shock of last week's decision by the U.K. to leave the European Union appears to have worked its way through the markets. Having recalibrated, traders are now starting to anticipate what may happen next.
Building on Tuesday's bounce, U.K. and European indexes are up again today, with London's FTSE up 2.4 per cent and Germany's Dax up 1.8 per cent. The EU summit continues today with leaders planning for a closer union post-Brexit. Apparently German finance minister Wolfgang Schauble has a number of reforms planned. Most importantly, while recognizing the potential for volatility, two European officials indicated Brexit is "not a Lehman moment," which appears to be helping restore some confidence. The British pound continues to recover, regaining $1.3400 against the U.S. dollar.
Traders also appear to be taking solace from higher-than-expected UK mortgage lending and house prices, indicating the economy remained resilient through the close campaign. Japan retail sales were worse than expected, putting pressure on the Bank of Japan to act. There has also been speculation that the Bank of England and the U.S. Federal Reserve Board could cut rates or bring in more stimulus if needed. That's good to know, but the fact that central banks haven't stepped in so far indicates the situation, while volatile and uncertain, has not spun out of control and central bankers aren't panicking at the moment.
Crude oil is having another banner day, rallying 1.2 per cent on the back of another larger-than-expected American Petroleum Institute inventory drawdown. This indicates a robust U.S. economy and improving supply demand balance. This has helped to boost the Canadian dollar, and may boost interest in oil stocks. Energy-related markets may remain active through the morning, particularly around another inventory report - this one from the Department of Energy.
Bank stocks have been under pressure in recent days but could attract renewed interest after CIBC announced a $4.9 billion takeover of PrivateBancorp, which operates in the Chicago area. This may spark speculation that some banks, which have suddenly become cheaper even though their exposure to Brexit is limited or zero, could become takeover targets. This deal also can be seen as confirmation Brexit is not a repeat of 2008 and many banks are carrying on business as usual, a sign of confidence.
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 +0.60 per cent; S&P 500 +0.62 per cent; Nasdaq: +0.70 per cent; TSX 60: +0.51 per cent
Equities
Japan's Nikkei +1.59 per cent
Shanghai composite index +0.69 per cent
Hong Kong's Hang Seng +1.31 per cent
Germany's DAX +1.81 per cent
London's FTSE +2.21 per cent
France's CAC 40 +2.60 per cent
Commodities
WTI crude oil (Nymex Aug) +1.11 per cent at $48.38 (U.S.) a barrel
Gold (Comex Aug) +0.31 per cent at $1,322.00 (U.S.) an ounce
Copper (Comex July) -0.28 per cent at $2.1695 (U.S.) a pound
Currencies
Canadian dollar +0.19 at 76.95 cents (U.S.)
U.S. dollar index -0.400 at 95.845
Bonds
Canada 10-year bond yield -0.014 at 1.068 per cent
KEY ECONOMIC RELEASES
U.S. personal income gained 0.2 per cent in May vs. an estimated 0.3 per cent rise.
U.S. personal spending rose 0.4 per cent in May, matching estimates.
Still to come:
(9:30 a.m. ET) Fed chair Janet Yellen, ECB president Mario Draghi and Bank of England governor Mark Carney take part in a panel discussion at ECV Forum in Portugal.
(10 a.m. ET) U.S. pending home sales for May. Consensus is a decline of 1.0 per cent from April.
(10:30 a.m. ET) EIA petroleum status report
KEY STOCKS TO WATCH
Canadian Imperial Bank of Commerce said it would buy Chicago-based PrivateBancorp Inc in a cash-and-stock deal valued at about $4.9-billion (Canadian) to offer its Canadian clients access to U.S. banking services. PrivateBancorp's shares rose 26.5 per cent to $45.46 in premarket trading on Wednesday, close to the offer price of $47 (U.S.) per share.
The parent of grocer Sobeys Inc. suffered deepening problems in its Western Canadian business in its fourth quarter, posting a loss of $942.6-million. And chief executive officer Marc Poulin warned of signs that Sobeys' sluggish sales are spreading to other regions of the country. As a result of the problems, parent Empire Co. Ltd. took another hit in the quarter – a $1.3-billion impairment charge in addition to the $1.59-billion writedown it took in its previous quarter on the value of its western business, mainly its Safeway chain. The company reported a fourth-quarter loss of $942.6-million or $3.47 a share compared with a profit of $55.4-million or 20 cents a share a year earlier. Sales rose to $6.3-billion from $5.8-billion.
AGF Management reported Q2 adjusted EPS of 13 cents vs. a Street estimated 11 cents.
Nike dropped 2.2 per cent in premarket trading after reporting disappointing quarterly sales and releasing a downbeat forecast.
Williams Cos was down 3.6 per cent after Energy Transfer Equity terminated its merger with the company. Energy Transfer was up 1.3 per cent
Tesaro Inc said its ovarian cancer drug met the main goal of prolonging survival in patients, without the disease worsening, in a late-stage trial, sending its shares up 84 percent in premarket trading.
Earnings today include: Acuity Brands Inc.; EXFO Inc.; General Mills Inc.; Monsanto Co.
Also see: Wednesday's small-cap stocks to watch
With files from wire services