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. The rally in North American equity markets appears set to pause today, with futures down slightly.
In the U.S., Dow futures are down 55 points, S&P 500 futures are down 7 points, and Nasdaq futures are lower by 14 points. Here in Canada, the S&P/TSX 60 Index futures are lower by 6 points.
Overseas markets in the Pacific Rim were mixed. In Japan, the Nikkei 225 took a breather after a six-day rally, declining 1 per cent. August machine orders were significantly below expectations, declining 5.7 per cent month-over-month, compared to an anticipated gain of 2.3 per cent. On a year-over-year basis, machine orders fell 3.5 per cent, below forecasts of a 3.5 per cent increase.
Chinese markets re-opened on a strong note after a week long holiday. The Shanghai composite and Shenzhen composite gained 3 per cent and 4 per cent, respectively. Canadian-based IMAX had it debut of IMAX China on the Hong Kong stock exchange. The stock was well received, gaining over 10 per cent from its initial public offering price.
The Korean Kospi closed higher by 0.7 per cent and in Australia the S&P/ASX 200 edged higher by 0.2 per cent.
Major European markets are currently relatively unchanged from the prior day.
On Wednesday, the TSX index gained 221 points, or 1.6 per cent, on high volume, led by stocks in the Energy and Materials sectors. Morgan Stanley upgraded its recommendations on global miners, BHP Billiton and Rio Tinto, to overweight.
In commodities, gold and oil prices are holding on to most of their gains from earlier in the week. Gold is trading just below resistance of $1,150 (U.S.) at $1,145, and the price of West Texas Intermediate oil futures are holding steady around $48 (U.S.) after breaking through a key resistance level of $47 earlier this week. The price of natural gas futures are also holding at the $2.47 (U.S.) level.
Here is the bottom line. Yes, equity markets have staged solid gains in recent trading days and on decent volumes, but we have yet to enter the earnings season, when cautious outlooks may cool investor enthusiasm and market momentum. Next week will be an active period for Chinese economic releases, with trade data, retail sales data, industrial production, and third-quarter gross domestic product figures being released. Any disappointing reports could rattle the markets.
In addition, investor complacency and optimism has increased, which makes me cautious. The AAI Investor Sentiment Survey for the week ending Oct. 7, showed an increase in bullish market sentiment. The percentage of bullish investors climbed 9.4 per cent to 37.5 per cent from 28.1 per cent last week. The percentage of bearish investors declined 11.7 per cent to 28.2 per cent from 39.9 per cent last week. Lastly, the percentage of neutral investors was up 2.3 per cent to 34.3 per cent, from 32 per cent last week.
Month-to-date, the S&P/TSX composite index is up 4.2 per cent and may be too swift of a move, especially if this earnings season delivers rather muted earnings and outlooks.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.3 per cent; Dow -0.3 per cent; Nasdaq: -0.3 per cent
Equities
Hong Kong's Hang Seng -0.71 per cent
Shanghai composite index +2.96 per cent
Japan's Nikkei -0.99 per cent
London's FTSE 100 +0.29 per cent
Germany's DAX +0.09 per cent
France's CAC 40 -0.09 per cent
Stoxx 600 -0.26 per cent
Commodities
WTI crude oil (Nymex Nov) +0.56 per cent at $48.08 (U.S.) a barrel
Gold (Comex Dec) -0.36 per cent at $1,144.60 (U.S.) an ounce
Copper (Comex Dec) -1.52 per cent at $2.33 (U.S.) a pound
Currencies
Canadian dollar +0.0025 at 76.75 cents (U.S.).
U.S. dollar index -0.223 at 95.27
Bonds
U.S. 10-year Treasury yield 2.04 per cent, -0.02
ECONOMIC INDICATORS:
Canada August new housing price index rises 0.3 per cent from July vs. 0.2 per cent estimates.
U.S. initial jobless claims fell 13,000 last week to 263,000. The Street was expecting 275,000.
(2 p.m. ET) U.S. FOMC minutes from Sept. 16-17 meeting
CORPORATE NEWS:
Encana Corp. has struck a deal to sell a Colorado property to a group led by the investment arm of the Canada Pension Plan for $900-million (U.S.). The Canada Pension Plan Investment Board will hold 95 per cent of a new concern, and The Broe Group the remaining 5 per cent.
Yellow Pages announced it is cutting 300 jobs in Canada.
Power producer Talen Energy Corp said it would sell three plants in Pennsylvania for $1.51 billion (U.S.) to meet regulatory requirements related to its formation in 2014. Talen said on Thursday it would sell a natural gas-fired plant to TransCanada Corp for $654 million and two hydroelectric projects to Brookfield Renewable Energy Partners LP for $860 million.
Iamgold Corp. will be reducing the workforce at one of its biggest mines by 10 per cent to reduce costs amid low gold prices. The cuts are at the Rosebel mining operations in South America. Iamgold says the job cuts are necessary for the long-term viability of the Rosebel operation in Suriname.
Dell Inc, the world's third largest personal computer maker, is in talks to buy data storage company EMC Corp, a person familiar with the matter told Reuters, in what could be one of the biggest technology deals ever.
U.S. banks will be in focus as Democratic presidential candidate Hillary Clinton plans to unveil a plan today to curb what she has called the "abuses of Wall Street."
Alcoa will report after the close, officially kicking off the earnings season. Alcoa's shares were down 0.64 per cent in the premarket.
Other earnings today include: Domino's Pizza Inc; International Speedway Corp; Ruby Tuesday Inc.
QUOTE OF THE DAY:
"How people treat you is their karma; how you react is yours" - Wayne Dyer
Jennifer Dowty