A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2016.
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 will return.
U.S. and Canadian markets appear headed for a slightly weaker opening this morning, with market sentiment taking a hit amid renewed weakness in the European banking sector. Investors are also assessing mixed earnings across the globe.
Commerzbank AG dragged a gauge of banks to the worst performance of the 19 industry groups on the Stoxx Europe 600 Index, tumbling 8.2 per cent after Germany's second-biggest bank scrapped its profit target for this year, forecasting a drop in earnings. Total SA and Royal Dutch Shell Plc lost at least 1.1 per cent, pulling crude producers lower after oil descended into a bear market on Monday. Daimler AG and Volkswagen AG led declines among auto-related stocks as data showed sales of new cars in Germany fell in July.
The European Stoxx 600 index is down about 1 per cent. Shares slid Monday as investor skepticism overshadowed stress-test results showing most of the region's banks would keep an adequate level of capital in a crisis.
"There doesn't seem to be much confidence for banks making profit in this low-cost environment," said Guillermo Hernandez Sampere, the head of trading at MPPM EK. "Oil prices were one of the main subjects in Q1 and now it's back, but the situation hasn't changed. There's still too much being produced by the large oil countries."
The benchmark European equity gauge is down 8 per cent this year and 2.8 per cent from its pre-Brexit level, despite in July posting the biggest monthly gain since October. Record outflows from European stock funds and thin volume last month underscored investor's lack of conviction in the rally amid concerns about the fallout of the U.K. leaving the EU, the efficacy of central bank stimulus and economic growth prospects.
Here in North American, earnings will also be in focus, with American International Group Inc. among companies posting results. About 57 per cent of S&P 500 members that have reported so far beat sales projections, while 80 per cent topped profit forecasts. Analysts estimate profit at S&P 500 companies fell 3.2 per cent in the second quarter.
Better-than-forecast earnings and economic data helped support the S&P 500's run to its first all-time high in more than 13 months, with the index rebounding as much as 8.7 per cent after the U.K. vote to leave the European Union rattled markets worldwide. The rally lost steam last week, though, as data on second-quarter gross domestic product missed estimates. So did did a manufacturing gauge for July released on Monday.
"When you have oil dropping to these levels and a string of weak economic data out of the U.S., of course people start to worry about growth again," said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn, Germany. "When you consider that U.S. equities have had quite a good run lately and they're just so expensive right now, it seems like a sensible time to take some profits and sit the market out."
At 18.4 times this year's projected earnings, the S&P 500 is trading near its highest multiple in more than a decade.
Oil prices were higher on Tuesday after falling by up to 10 per cent over the course of one week, but investors remained concerned about oversupply weighing on prices.
West Texas Intermediate crude rose 51 cents to $40.57 a barrel by 6:48 a.m. ET, after dipping below $40 for the first time since April in the previous session.
"There is much talk about the product glut replacing the oil glut, and this is a worrisome indicator for crude demand," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.
Global fuel inventories are brimming as refineries have churned out huge volumes of diesel, gasoline and jet fuel but the supply glut has diminished profit margins and demand has been unable to keep up with supply.
Analysts said high crude and product production levels would continue to weigh on markets and that as a result, refiners were likely to reduce orders for new crude feedstocks, affecting demand for oil.
U.S. commercial crude inventories are expected to show a weekly fall after last week's unexpected rise in stocks broke a nine-week drawdown, according to a Reuters poll.
Gasoline and distillate inventories are also expected to have fallen, the poll indicated.
Despite the slightly higher prices on Tuesday, oil market data imply bearish market conditions.
Industry data shows that the global oil rig count for new production edged up in June for the first time this year, rising by two to 1,407, largely thanks to an uptick in U.S. drilling.
Actual production in the United States is also up slightly, according to government data.
Now, here is a closer look at morning markets and key corporate and economic news.
MARKET DATA: (as of about 7 a.m. ET)
Futures
Dow -0.11 per cent; S&P 500 -0.17 per cent; Nasdaq: -0.13 per cent; TSX 60: -0.27 per cent
Equities
Japan's Nikkei -1.47 per cent
Shanghai composite index +0.59 per cent
Hong Kong's Hang Seng unchanged
Germany's DAX -1.34 per cent
London's FTSE -0.33 per cent
France's CAC 40 -1.39 per cent
Commodities
WTI crude oil (Nymex Aug) +1.37 per cent at $40.61 (U.S.) a barrel
Gold (Comex Aug) +0.32 per cent at $1,364.00 (U.S.) an ounce
Copper (Comex July) +0.70 per cent at $2.215 (U.S.) a pound
Currencies
Canadian dollar +0.32 at 76.51 cents (U.S.)
U.S. dollar index -0.253 at 95.460
Bonds
Canada 10-year bond yield +0.075 at 1.102 per cent
KEY ECONOMIC RELEASES
U.S. personal income gained 0.2 per cent in June vs. an estimated 0.3 per cent rise.
U.S. personal spending rose 0.4 per cent in June vs. an estimated 0.3 per cent gain.
Still to come:
(9:30 a.m. ET) Canada RBC Manufacturing PMI for July.
KEY STOCKS TO WATCH
Bombardier's rail division says Ontario's GO Transit system will be getting 125 additional two-level commuter rail cars to be produced over a two-year period at its factory in Thunder Bay, Ont. Bombardier valued the order at $428 million.
Procter & Gamble reported earnings of 79 cents per share vs. expected EPS of 74 cents.
Pfizer said its adjusted earnings came to 64 cents a share, beating Street expectations of 62 cents. The drugmaker posted revenue of $13.15 billion in the period, also exceeding Street forecasts.
Other earnings today include: 5N Plus Inc.; Aetna Inc.; Alleghany Corp.; American International Group Inc.; Cardinal Health Inc.; Cerner Corp.; Choice Hotels International Inc.; Clearwater Seafoods Inc.; Concho Resources Inc.; Devon Energy Corp.; Diamondback Energy Inc.; Discovery Communications Inc; DreamWorks Animation SKG Inc.; Electronic Arts Inc.; Ensign Energy Services Inc.; Etsy Inc.; Fitbit Inc.; FMC Corp.; Genworth MI Canada Inc.; Gibson Energy Inc.; Hanwei Energy Services Corp.; Indigo Books and Music Inc.; Magellan Midstream Partners LP.; Mallinckrodt Plc; Molson Coors Brewing Co.; Mosaic Co.; North American Energy Partners Inc.; ONEOK Inc.; Pitney Bowes Inc.; Saputo Inc.; Second Cup Ltd.; Senvest Capital Inc.; Trinidad Drilling Ltd.; WSP Global Inc.
With files from Bloomberg and other wire services