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 Monday morning to you. Equity markets are looking to be off to a shaky start, with North American futures in negative territory.
In the U.S., Dow futures are down by 86 points, S&P 500 futures are lower by 10 points, and the Nasdaq composite futures are down 24 points. Here in Canada, the S&P/TSX 60 index futures are lower by 7 points.
The VIX index, which measures fear in the marketplace, is steady, currently at 24, suggesting that the pressure on equity markets is not due to panic in the marketplace, but rather a lack of enthusiasm.
Overseas in the Pacific Rim, the Shanghai Stock Exchange composite index inched higher by 0.3 per cent and the Shenzhen Stock Exchange composite index rose by 2.4 per cent. China released another weak data report, with the country's industrial profits in August falling 8.8 per cent from a year ago, underscoring concerns that growth in the world's second-largest economy is slowing faster than expected. Investors will be watching China's September purchasing managers' index data due out later this week. In Japan, the Nikkei 225 declined by 1.3 per cent and the Australian S&P/ASX 200 advanced by 1.4 per cent.
Major European markets are sliding lower during today's trading session. The U.K, FTSE, German DAX, and France CAC are lower by 1.6 per cent, 1.3 per cent, and 1.8 per cent, respectively. Volkswagen remains in the headlines as reports emerge that suggest the diesel emissions scandal may have been going on for years. According to a report by Reuters, the VW Board has suspended the heads of the research and development departments at Audi and Porsche. Shares of Volkswagen have declined by 19 per cent in the past week.
On the commodities front, while there has been significant intra-day swings, commodity prices have been relatively flat overall in recent weeks. The price of gold is exactly where it closed one week ago at $1,133 (U.S.) an ounce. As well, West Texas Intermediate futures remain in the mid-$40s, currently near $45 (U.S.) for the November contract.
Month-to-date, it has been a challenging month for investors to make money. The S&P/TSX composite index is down 3.5 per cent. Four of the 10 sectors are in positive territory for the month, led by defensive sectors. Consumer Staples takes top place, followed by Telecom with its attractive yields. Leading the declines are the Healthcare, Energy and Materials sectors. On a stock basis, the top performers are Transcontinental, Bombardier, Dollarama, Home Capital Group, Centerra Gold and CCL Industries, all achieving double-digit price returns month-to-date. In the worst performers category, eight of the 10 worst performing stocks are energy stocks, led by Enerplus and Precision Drilling.
Here is the bottom line. Overall, it is a light week in terms of corporate news and economic releases. As we exit the third-quarter on Wednesday, look for trading volumes to lighten up, which could put downward pressure on stocks simply due to the lack of buyers in the market. As well, investors will be waiting for the release of the upcoming U.S. non-farm payroll data on Friday.
A solid non-farm payroll number would lend support for the Federal Reserve to raise interest rate. Last week, Fed Chair Janet Yellen clearly indicated that a rate hike is still in the cards for later this year, stating, "Most FOMC participants, including myself, we currently anticipate that achieving these conditions will likely entail increasing the Federal Funds rate later this year followed by a gradual pace of tightening thereafter, but if the economy surprises us, our judgments about appropriate monetary policy will of course change. " A rising interest environment would support be supportive for banks and insurance companies.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.5 per cent; Dow -0.5 per cent; Nasdaq: -0.5 per cent
Equities
Hong Kong's Hang Seng Closed for holiday
Shanghai composite index +0.28 per cent
Japan's Nikkei -1.32 per cent
London's FTSE 100 -1.41 per cent
Germany's DAX -1.34 per cent
France's CAC 40 -2.11 per cent
Stoxx 600 -1.23 per cent
Commodities
WTI crude oil (Nymex Nov) -1.82 per cent at $44.87 (U.S.) a barrel
Gold (Comex Dec) +0.04 per cent at $1,146.10 (U.S.) an ounce
Copper (Comex Dec) -1.66 per cent at $2.25 (U.S.) a pound
Currencies
Canadian dollar -0.0023 at 74.80 cents (U.S.).
U.S. dollar index +0.071 at 96.34
Bonds
U.S. 10-year Treasury yield 2.14 per cent, -0.02
ECONOMIC INDICATORS:
Household spending climbed more than forecast in August and incomes also rose as the biggest part of the U.S. economy continued to power past a global slowdown. Consumer purchases climbed 0.4 per cent, matching the gain in July that was larger than previously reported, Commerce Department figures showed. The median forecast of economists in a Bloomberg survey called for a 0.3 per cent August increase. Incomes advanced 0.3 per cent.
(10 a.m. ET) U.S. pending home sales for August. Consensus is an increase of 0.5 per cent from previous month.
CORPORATE NEWS:
DHX Media reported fiscal Q4 revenues of $71.2-million, ahead of the consensus estimate of $64.4-million. Adjusted EBITDA was $22.8-million, better than the Street's expectation of $21.7-million. However, adjusted earnings came in at 4 cents per share, slightly below the consensus estimate of 5.5 cents per share. Management announced a 7 per cent increase to the quarterly dividend to 1.5 cents per share from 1.4 cents per share. In addition, the company announced that it received Board approval to repurchase up to 10 per cent of the public float under its share buyback program.
Glencore slumped more than 21 per cent to a new all-time low in London trading after a bearish note from broker Investec that raised doubts over the mining and commodities company's valuation and high debt levels. The stock was set for its worst one-day drop ever.
Shares of Alcoa were up 6.2 per cent in the premarket after the metals company said it would split into two publicly-traded companies.
Energy Transfer Equity LP won its bid to take over Williams Cos., agreeing to pay $37.7 billion for control of pipelines and plants that handle almost a third of rising U.S. natural gas demand. Williams investors will get $43.50 a share either in cash or stock of Energy Transfer Corp. LP, an affiliate of Energy Transfer Equity.
Media General soared 26 per cent after Nexstar offered to buy the company in a deal valued at $4.1 billion.
Sprint jumped 8 per cent after the carrier said it would not join the U.S. government's auction of airwaves set for early 2016.
Earnings include: Advanced Drainage Systems Inc.; Synnex Corp.; Vail Resorts Inc.
QUOTE OF THE DAY:
"If we keep doing what we're doing, we're going to keep getting what we're getting." - Stephen Covey
Jennifer Dowty