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 Thursday morning to you! North American futures are in the green, suggesting a rebound in the markets today, as yesterday's fears are replaced by hopes surrounding China and Greece. Stock futures for the major North American indexes are up around 1 per cent.
European markets, for now, have stabilized despite the ongoing drama with Greece. On Thursday, while Asian and North American markets plunged, major European markets rallied and the strength in European markets is continuing today. The German and French indices are up around 2 per cent, and London's FTSE is up just over 1 per cent.
Greece has applied for a three-year loan from the European Stability Mechanism, along with assurances that the country will implement reforms on taxes and pensions. Meanwhile, the European Central Bank indicated that it will maintain liquidity for Greek banks until Sunday's European leaders summit. However, ECB Board member, Jens Weidmann, expressed his frustrations, stating, "Central banks, although they do have the means, have no mandate, in my view, to safeguard the solvency of banks and governments."
In the meantime, mounting frustrations are being expressed by several leaders. Nigel Farage, the leader of the UK Independence Party, speaking before the European parliament firmly expressed his frustrations with the Greek government, stating, "So your moment has come, and frankly, if you've got the courage, you should lead the Greek people out of the euro zone with your head held high, get back to your democracy, get back control of your country, give your people the leadership and the hope that they crave. Yes, it will be tough for the first few months, but with a devalued currency and with friends of Greece all over the world, you will recover."
Former Belgium Prime Minister, Guy Verhofstadt, echoed the frustrations, saying, "You are talking about reforms, but we never see concrete proposals of reforms."
The Greek Prime Minister, Alexis Tsipras, is anticipated to submit a reform proposal today, and we will wait to see if indeed the proposal includes credible, concrete reforms.
Overseas, Chinese markets rebounded sharply after Wednesday's massive selloff. The Shanghai Stock Exchange composite index gained 5.8 per cent, the largest one-day percentage gain since 2009. The Shenzhen Stock Exchange composite index rallied 3.8 per cent. This renewed confidence comes after China's securities regulator banned major shareholders that own 5 per cent or more in a stock from selling positions for six months. Authorities, it seems, will take necessary actions in order to restore investor confidence and prevent a stock market collapse.
It was exactly one month ago that global index provider, MSCI, decided not to include China for now in the MSCI Emerging Markets Index. In hindsight, the move to wait appears to have been the right call, at least until Chinese markets prove to be more stable and investable.
At 8:30 a.m., the U.S. Department of Labor released its weekly U.S. jobless claims data and continuing claims report, and both came in higher than expected with minor revisions to the prior week. U.S. jobless claims came in at 297,000, increasing 15,000 from the prior week and slowly inching closer to the 300,000 level. U.S. continuing claims came in at 2.334 million, an increase of 69,000 from the previous week. The weekly data can be volatile so the data released had little impact on futures. North American futures continue to indicate a very strong opening in equity markets this morning.
The bottom line: The best decisions are made when one is calm. Staying calm during the market uncertainties is the best measure to take for managing your portfolios. Months from now, I don't know if Greece and China's sliding stock market will be impacting North American markets. What I do believe will impact your portfolio: second-quarter results.
Investors should be shifting their focus to the upcoming second-quarter earnings season in Canada, ensuring they hold stocks within a diversified portfolio that are expected to deliver solid operating results. Stick with the winners. The greatest portfolio gains are realized from avoiding the torpedo stocks. You do not want to be holding stocks that miss expectations and provide bleak near-term outlooks.
Now, here's a closer look at the market numbers and what else is going on this morning.
MARKET DATA:
Futures
S&P 500 +1.1 per cent; Dow +0.9 per cent; Nasdaq: +1.2 per cent
Equities
Hong Kong's Hang Seng +3.73 per cent
Shanghai composite index +5.75 per cent
Japan's Nikkei +0.60 per cent
London's FTSE 100 +1.08 per cent
Germany's DAX +1.66 per cent
France's CAC 40 +1.81 per cent
Stoxx 600 +1.64 per cent
Commodities
WTI crude oil (Nymex Aug) +2.17 per cent at $52.77 (U.S.) a barrel
Gold (Comex Aug) -0.20 per cent at $1,161.20 (U.S.) an ounce
Copper (Comex Sep) +1.52 per cent at $2.54 (U.S.) a pound
Currencies
Canadian dollar at 78.75 (U.S.), +0.0027
U.S. dollar index +0.207 at 96.501
Bonds
U.S. 10-year Treasury yield 2.25 per cent, +0.06
ECONOMIC INDICATORS:
Canada May new home prices were up 0.2 per cent month over month vs. an estimated 0.1 per cent rise. They were up 1.2 per cent year over year, vs. a 1.1 per cent rise in April.
U.S. initial jobless claims were 297,000 last week vs. an estimated 275,000.
STOCKS TO WATCH:
PepsiCo Inc. reported better-than-expected quarterly profit and sales and raised its full-year adjusted earnings forecast as higher prices helped drive revenue growth in its beverages business for just the second time in nearly four years. The company's shares rose 3 per cent in the premarket.
Alcoa Inc. reported a quarterly profit that missed expectations on Wednesday, but its revenues topped estimates even as aluminum prices fell by 20 per cent. Alcoa shares are up 1 per cent in the premarket.
Earnings today include: PostMedia; Sandvine; Velan; AngioDynamics; Barracuda Networks; PepsiCo.
QUOTE OF THE DAY:
"Human behavior flows from three main sources: desire, emotion, and knowledge." - Plato
Jennifer Dowty