Jennifer Dowty
Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
Good Tuesday morning to you. Markets are set to sink again today.
On Monday, it was all about oil's free fall, with the energy sector plunging over 5 per cent on the TSX. Today, its resources' stocks turn to take a hit.
Overnight, Chinese trade data were mixed; however, investors are focused on the export data, which fell short of expectations. November exports declined, for the fifth consecutive month, by 6.8 per cent year-over-year. The Street was forecasting a drop of 5 per cent. This was relatively in-line with the prior month's fall of 6.9 per cent year over year. November imports fell 8.7 per cent. This was an improvement from the previous month's decline of 18.8 per cent, and above expectations of an 11.9 per cent decline.
Shares of mining companies, Anglo American, BHP Billiton, and Rio Tinto are down 8 per cent, 6 per cent, and 6 per cent, respectively, in European trading.
More broadly today, negative sentiment continues to weigh on equity markets, with futures pointing to a lower opening. In the U.S., Dow futures are down over 190 points, or 1.1 per cent, S&P futures are lower by 23 points, or 1.1 per cent, and Nasdaq futures are lower by 54 points, or 1.1 per cent. In Canada, the S&P/TSX composite index is also set to open lower with futures down 5 points.
Overseas in the Pacific Rim, all major equity markets closed with losses for the day. In China, the Shanghai composite and Shenzhen composite dropped 1.9 per cent and 1.8 per cent, respectively. In Japan, the Nikkei 225 fell 1 per cent. Japanese economic growth for the third-quarter was revised higher. The final figure came in at growth of 1 per cent on an annualized basis, from the previously reported figure of a decline of 0.8 per cent, suggesting that the Japanese economy is not in a recession, but experiencing slow but positive growth. In Australia, the ASX 200 fell 0.9 per cent, and in Korea, the KOSPI declined 0.8 per cent.
Major European markets are down and the losses are increasing as the trading session wears on. The German DAX is down 1.4 per cent, the French CAC is lower by 1.3 per cent, and the London FTSE is lower by 1.1 per cent.
Turning to commodities, the price of gold is relatively unchanged, down $4 (U.S.) to $1,070. The price of copper is flat. Oil prices are relatively unchanged, up 3 cents to $37.68, natural gas prices are down 2 cents to $2.05.
The Canadian dollar continues to slide and is below 74 cents this morning to 73.82 cents per U.S. dollar.
Here's the bottom line. It was a brutal day for the TSX composite on Monday, with the index plunging over 300 points, or 2.4 per cent, driven lower by the collapse in the price of oil. Today, it will be another ugly day for equity markets. But the VIX index, which measures fear in the marketplace, has climbed just one point to 15. In other words, investors are not panicking - yet. There is no capitulation.
I continue to recommend avoiding resource stocks and remain bearish on the group; however, I would add to the list of stocks to avoid those companies exposed to the unusually warm winter weather, so retailers, winter equipment providers, and ski resorts, as well, those companies vulnerable to the falling Canadian dollar. For other companies without resource, weather, and currency exposures, the sell-off is a welcome opportunity for investors to accumulate shares, with a staggered approach. That being said, today is not the day for long-term investors to go bargain hunting. Wait for the markets to stabilize.
Now, here's a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -1.1 per cent; Dow -1.1 per cent; Nasdaq: -1.1 per cent
Equities
Hong Kong's Hang Seng -1.34 per cent
Shanghai composite index -1.89 per cent
Japan's Nikkei -1.04 per cent
London's FTSE -0.88 per cent
Germany's DAX -1.12 per cent
France's CAC 40 -1.04 per cent
Commodities
WTI crude oil (Nymex Jan) -2.42 per cent at $36.74 (U.S.) a barrel
Gold (Comex Feb) -0.36 per cent at $1,071.20 (U.S.) an ounce
Copper (Comex Mar) -0.02 per cent at $2.05 (U.S.) a pound
Currencies
Canadian dollar -0.0031 at 73.74 cents (U.S.).
Bonds
U.S. 10-year Treasury yield 2.22 per cent, -0.0079
ECONOMIC NEWS
Canada October building permits rose 9.1 per cent month over vs. an estimated 2.9 per cent gain.
(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for October
(12:35 p.m. ET) Bank of Canada governor Stephen Poloz speaks to Empire Club of Canada in Toronto
CORPORATE NEWS
Canadian Pacific Railway Ltd. revised its offer to buy U.S. railroad operator Norfolk Southern Corp., less than a week after its previous offer of $28.4 billion was rejected. CP said it was now offering $32.86 in cash and 0.451 of a share in a new holding company that would own both Norfolk and Canadian Pacific. CP had previously offered $46.72 in cash and .348 of its own shares.
Husky Energy said it will keep its 2016 budget nearly unchanged from 2015, joining peers who are reining in spending to cope with a massive fall in oil prices. The company said it would spend $2.9 billion to $3.1 billion in 2016, compared with an estimated $3 billion this year. Husky also said it is looking to sell some of its midstream assets in Alberta's Lloydminster region, to strengthen its balance sheet and meet its debt obligations.
Anglo American will sell more assets, suspend dividends until the end of 2016 and whittle down its business divisions to three from six in the face of severe commodity price falls, the mining company said on Tuesday. Anglo said it would cut its assets by 60 per cent, reduce its work force to 50,000 from 135,000 and form three divisions: De Beers for diamonds, Industrial Metals for platinum and base metals and Bulk Commodities for coal and iron ore. The London-listed company aims to raise $4-billion through assets sales, up from an earlier target of $3-billion, and said it would press ahead with the sale of its Phosphates and Niobium businesses in 2016.
Earnings include: Autozone Inc.; Childrens Place Inc.; HD Supply Holdings Inc.; Smith & Wesson Holding Corp.; Toll Brothers Inc.
QUOTE OF THE DAY
"The greatest way to live with honour in this world is to be what we pretend to be." - Socrate
Jennifer Dowty