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 Friday morning to you as we wrap up another week in the markets.
North American futures are in negative territory. In the U.S., Dow futures are down 48 points, implying the markets will open lower by approximately half a per cent. S&P 500 futures are down 7 points and Nasdaq futures are down 19 points. In Canada, S&P/TSX 60 Index futures are down 5 points.
While there have been highly volatile intra-day swings in global equity markets, overall, the week has been rather neutral to slightly positive. The Nikkei 225 gained over 2 per cent this week. In Europe, the German DAX and French CAC have advanced nearly 1 per cent. In the U.S., the S&P 500 Index has gained 1.6 per cent, and in Canada, the S&P/TSX composite index has climbed 0.68 per cent for the week. The days ahead will also likely be relatively subdued, as investors sit on the sidelines ahead of the U.S. Federal Open Market Committee meeting and its interest rate decision, which will be made public on Thursday. Volumes in the S&P/TSX composite index were light on Thursday.
Overseas in the Pacific Rim, markets were relatively neutral. The Nikkei 225 closed down 0.2 per cent, the Shanghai Composite was up 0.1 per cent, the Hang Seng Index was down 0.3 per cent, the Korean Kospi Index declined 1.1 per cent and the Bank of Korea left interest rates unchanged.
Major European markets are giving back some of the weekly gains today, but shedding less than a percentage point. In economic news, U.K. July construction output data was disappointing, declining 1 per cent month-over-month, below expectations of an increase of 0.5 per cent, and down 0.7 per cent year-over-year, versus forecasts of a gain of 0.9 per cent.
On the commodity front, the price of gold is off a few dollars but holding above $1,100 (U.S.), while West Texas Intermediate oil futures are down but remaining near the $45 (U.S.) level. The price of oil continues to consolidate in the mid $40's.
Today, the Monthly Oil Market Report from the International Energy Agency was released with a slightly bearish tone, showing supply outstripping demand in 2016. Non-OPEC supply is expected to decline in 2016 by nearly 0.5 million barrels per day (md/d) to 57.7 mb/d with lower production forecasts from the U.S., Russia, and the North Sea. The lower price of crude oil continues to put pressure on high-cost producers. However, OPEC oil inventories are anticipated to rise by 1.6 mb/d to 31.3 mb/d in 2016. The report expects overall oil supply to grow stating, "Inventories are continuing to build with global supply - towering 2.4 mb/d above a year ago - outpacing demand. Our balances show the world only starting to siphon off record-high stocks in the second half of 2016. At that point Iran could be producing more oil, provided sanctions are lifted following implementation of the nuclear pact it secured."
With respect to China, the world's second largest consumer, oil demand was expected, "to keep up its crude purchases despite the recent stock market collapse, currency devaluation, and steady stream of negative macroeconomic news. Beijing could also buy extra crude to fill up its strategic reserves."
Goldman Sachs reduced its Brent oil forecast to $49.50 (U.S.) from $62 for 2016, and its WTI forecast to $45 from $57, citing higher oil supply. "The oil market is even more oversupplied that we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth," the bank stated.
Later today, watch for the weekly Baker Hughes rig count figures at 1 p.m. (ET).
Investors holding fertilizer stocks such as Potash and Agrium will want to watch the U.S. Department of Agriculture's release today at 12 noon (ET) of the World Agricultural Supply and Demand Estimates Report (WASDE), which will provide an update on the current crop season.
Here's the bottom line: Watch for Chinese economic data - retail sales, fixed asset investment, and industrial production - this weekend. Next week, the key report will be the interest rate decision from the U.S. Federal Reserve. The U.S. 10-year Treasury yield is back up over 2.2 per cent, as speculation builds about whether or not the U.S. Federal Reserve will hike interest rates. Fundamental investors will likely sit on the sidelines ahead of these reports.
Now, here is a closer look at major markets and corporate news.
MARKET DATA:
Futures
S&P 500 -0.35 per cent; Dow -0.33 per cent; Nasdaq: -0.48 per cent
Equities
Hong Kong's Hang Seng -0.27 per cent
Shanghai composite index +0.07 per cent
Japan's Nikkei -0.19 per cent
London's FTSE 100 -0.52 per cent
Germany's DAX -1.16 per cent
France's CAC 40 -0.97 per cent
Stoxx 600 -0.93 per cent
Commodities
WTI crude oil (Nymex Oct) -2.31 per cent at $44.83 (U.S.) a barrel
Gold (Comex Dec) -0.32 per cent at $1,105.70 (U.S.) an ounce
Copper (Comex Dec) -0.84 per cent at $2.43 (U.S.) a pound
Currencies
Canadian dollar -0.06 at 75.48 cents (U.S.).
U.S. dollar index +0.21 at 95.66
Bonds
U.S. 10-year Treasury yield 2.22 per cent, +0.041
ECONOMIC INDICATORS:
U.S. August producer prices were flat month over month vs. expectations for a 0.1 per cent drop. From a year earlier, prices fell 0.8 per cent, as expected.
(10 a.m. ET) U.S. University of Michigan consumer sentiment for September (preliminary). Consensus is 91.4, or a decline of 0.5 points from August
CORPORATE NEWS:
BRP Inc. reported a surprise adjusted profit for the second quarter, helped by higher sales of propulsions engines, accessories and clothing. The company, which makes Ski-Doo snowmobiles and Sea-Doo watercraft, said total revenue rose 4 per cent to $812.1-million (Canadian). Adjusted earnings of 3 cents beat the Street expectation of 2 cents. The company also raised its full-year adjusted earnings per share to $1.55-$1.70 per share from $1.50-$1.65 as it expects depreciation costs to decline. Analysts were expecting an adjusted profit of $1.60.
Bank of Montreal has agreed to buy GE Capital's transportation finance unit, boosting the Canadian lender's U.S. commercial banking business and adding one more Canadian name to the list of buyers for GE Capital's assets. Terms were not disclosed.
Canyon Services Group late Thursday announced the acquisition of a private fluid-hauling company located in Grand Prairie, in addition to a 60 per cent cut to its quarterly dividend to 3 cents.
Other earnings today include: Adf Group Inc; COM DEV International Ltd; Kroger Co; North West Company Inc
ANALYST ACTIONS:
Lululemon was upgraded to "outperform" from "neutral" at RW Baird.
Dollarama was raised to a "buy" from a "hold" at Desjardins, with a one-year price target of $93 (Canadian).
QUOTE OF THE DAY:
"Cherish your visions and your dreams as they are the children of your soul, the blueprints of your ultimate achievements." - Napoleon Hill
Jennifer Dowty