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 Wednesday morning to you on this final trading day of the month and the quarter.
Overseas markets are seeing solid gains today, and that upbeat tone is helping to improve market sentiment so far in North America. Dow futures are up 191 points, S&P 500 futures are higher by 24 points, and Nasdaq futures are up a solid 58 points. In Canada, S&P/TSX 60 Index futures are higher by 10.7 points.
Overseas in the Pacific Rim, major equity markets closed out September on a positive note. In Japan, the Nikkei 225 rallied 2.7 per cent, and is almost back in positive territory for the year, as investors overlooked weaker-than-expected industrial production and retail data. August Industrial production increased 0.2 per cent year-over-year, well below expectations of 1.8 per cent. Shares of industrial equipment manufacturers, Komatsu and Hitachi, both edged higher despite the weak industrial production data. August retail trade advanced 0.8 per cent year-over-year, below expectations of 1.2 per cent. However, the prior month was revised up to 1.8 per cent from 1.6 per cent. August retail sales were unchanged month-over-month, below expectations of a gain of 0.5 per cent. However, the prior month was revised higher to 1.4 per cent from 1.2 per cent. Turning to China, the Shanghai Composite and the Shenzhen Composite both closed higher by 0.5 per cent and 0.3 per cent, respectively. In Australian markets, the S&P/ASX finished higher by 2.1 per cent.
The positive momentum has spilled over into major European markets. The U.K., FTSE, German DAX, and France's CAC are all seeing gains of more than 2 per cent. In the U.K., second-quarter gross domestic product (GDP) was higher by 0.7 per cent quarter-over-quarter, in-line with expectations, but fell shy of expectations of a year-over-year basis, climbing 2.4 per cent - below forecasts of 2.6 percent. In Germany, weaker-than-expected retail sales were reported in August. Retail sales fell 0.4 per cent month-over-month, below forecasts of a 0.2 per cent gain. On a year-over-year basis, retail sales were higher by 2.5 per cent, below expectations of a gain of 3.3 per cent. However, the prior month was revised sharply higher to 3.8 per cent year-over-year from 3.3 per cent. Meanwhile, the unemployment rate was steady at 6.4 per cent in September. Lastly, in France, August consumer spending was just shy of expectations, unchanged month-over-month, but higher by 1.6 per cent year-over-year. The French government announced its 2016 budget with plans to cut spending by 16 billion Euros and forecasting economic growth of 1.5 per cent.
European stocks making a move today are shares of Glencore, up 11 per cent. U.K. supermarket Sainsbury announced that it expects to beat the consensus profit forecasts for this year with its turnaround strategy despite competitive market conditions. Shares are soaring, up 14 per cent so far in trading action today.
European car manufacturers are also rallying, aided by positive news that China will reduce the tax rate on small car. An early rally also appears to be materializing in the North American auto sector, with General Motors up 3 per cent in the premarket and Ford 2.6 per cent.
In commodities markets, the price of gold is down this morning by a few dollars to $1,122 (U.S.), and West Texas Intermediate oil futures are stable in near the $45 (U.S.) level. Watch for the weekly oil inventory data today from the U.S. Energy Information Administration due out at 10:30 a.m. (EST), which could create intra-day volatility for the price of oil.
Overall, historically, September is a weak month for the S&P/TSX composite index and this month continued that trend. Month-to-date, the index has lost 5.9 per cent. Quarter-to-date, the index fell by 10.4 per cent, and year-to-date, the index is down by a similar level, 10.9 per cent. Canadian July GDP will be released at 8:30 a.m. (EST), giving investors a glimpse of hopefully a third-quarter economic recovery.
Here is the bottom line: Today, the markets look to end this terrible month and quarter on a positive note, although this isn't much solace to investors who have seen their equity portfolio values slashed. Watch for Chinese Purchasing Managers' Index data tomorrow and on Friday the U.S. non-farm payroll data.
The month of October may start off on a neutral to positive note with Chinese markets closed for holidays from October 1 through to October 7. The focus will then shift to the third-quarter earnings season, which kicks off in the U.S. on October 8.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 +1.3 per cent; Dow +1.2 per cent; Nasdaq: +1.4 per cent
Equities
Hong Kong's Hang Seng +1.41 per cent
Shanghai composite index +0.49 per cent
Japan's Nikkei +2.70 per cent
London's FTSE 100 +2.31 per cent
Germany's DAX +2.56 per cent
France's CAC 40 +2.77 per cent
Stoxx 600 +2.29 per cent
Commodities
WTI crude oil (Nymex Nov) -0.27 per cent at $45.11 (U.S.) a barrel
Gold (Comex Dec) -0.44 per cent at $1,121.80 (U.S.) an ounce
Copper (Comex Dec) +2.51 per cent at $2.51 (U.S.) a pound
Currencies
Canadian dollar +0.0007 at 74.52 cents (U.S.).
U.S. dollar index +0.244 at 96.09
Bonds
U.S. 10-year Treasury yield 2.10 per cent, +0.04
ECONOMIC INDICATORS:
U.S. ADP national employment report for September. Private sector jobs increased by 200,000, compared to an increase of 188,000 expected by the Street.
Canada real GDP in July was up 0.3 per cent from June. Consensus was for a rise of 0.2 per cent.
(9:45 a.m. ET) U.S. Chicago PMI for September. Consensus is 53.1, down 1.3 from August
(10:30 a.m. ET) EIA petroleum status report
(3 p.m. ET) Fed Chair Janet Yellen is scheduled to speak at a conference in St. Louis, along with St. Louis Fed President James Bullard. Yellen said last week the central bank remained on track to raise rates this year.
CORPORATE NEWS:
Fiat Chrysler Automobiles NV leaped 5.6 per cent and Ford Motor Co. gained 1.8 per cent in early trading after China halved the purchase tax on small cars. General Motors shares are up 3 per cent.
Costco Wholesale Corp. reported fourth-quarter earnings that topped analysts' estimates as the warehouse-club chain continues to attract new members.Net income rose 10 per cent to $767 million, or $1.73 a share. Analysts' estimated $1.66 a share on average. Shares are up about 1.5 per cent in the premarket.
Tesla Motors Inc. added 2.2 per cent after Chief Executive Officer Elon Musk said he delivered the first six Model X SUVs to owners in California.
The announcement of a new CEO at Ralph Lauren Corp. boosted its stock by 5.6 per cent after Ralph Lauren said he will step down. His successor will be Stefan Larsson, who is credited with reviving the Old Navy brand at Gap Inc., which fell 4.1 per cent.
Pfizer raised its 2015 earnings guidance, expecting adjusted profit per share of $2.04-2.10 from its previous forecast $2.01-$2.07.
Earnings include: Actuant Corp.; Paychex Inc.
QUOTE OF THE DAY:
"The two most important requirements for major success are: first, being in the right place at the right time, and second, doing something about it." - Ray Kroc
Jennifer Dowty