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 head into this Thanksgiving long weekend.
The global rally continues and this morning, North American markets are looking to close out this positive week with another gain. In the U.S., Dow futures are higher by 23 points, S&P 500 futures are up 3 points, and Nasdaq futures are flat. In Canada, the S&P/TSX 60 Index futures are up 3 points.
On the data front Friday, the Canadian unemployment rate ticked up in September to 7.1 per cent from 7 per cent last month. The net change in employment was better-than-expected at 12,000 jobs versus expectation of an increase of 10,000. However, the gains were in part-time employment, which increased by 74,000. Full-time employment fell by 62,000. The Canadian dollar declined slightly on the news but remains above 77 cents per U.S. dollar.
Overseas in the Pacific Rim, most major markets closed the day with solid gains. In Japan, the Nikkei 225 climbed nearly 300 points, or 1.6 per cent to 18,438. In China, the Shanghai Stock Exchange composite index advanced 1.3 per cent and the Shenzhen composite gained 1.5 per cent. The Korean Kospi gained 0.7 per cent, and down under in Australia, the S&P/ASX 200 increased 1.3 per cent.
Major European markets are also in positive territory. The U.K. FTSE is up by and France's CAC are higher by just under 1 per cent, and the German DAX is higher by 1.1 per cent.
Stocks with major moves in European markets include shares of mining giant, Glencore, which are up 8 per cent after the company announced that it will be reducing its zinc production due to weakness in the commodity price. Meanwhile, shares of Alcoa are trading down 4 per cent in German markets after the company reported third-quarter earnings of 7 cents per share, below the Street's expectations of a gain of 13 cents per share. Lower aluminum prices, the strong dollar and weakness in some key markets in China were cited as reasons for the weak earnings.
In commodity news, oil, gold, and yes, even natural gas, are all having a positive month, boosted by a declining U.S. dollar. West Texas Intermediate oil futures are up over the $50 (U.S.) a barrel level this morning. Watch for Baker Hughes rig count data released today at 1 p.m. (EST). Last week, there was a bullish report with the U.S. rig count declining by 29 rigs to 809. As well, there will be a technical meeting with OPEC and non-OPEC countries on Oct. 21, which may create further volatility in the price of oil. Meanwhile, the price of gold has broken through the $1,150 (U.S.) level this morning, currently at $1,154, and even the price of natural gas is back up to $2.50 (U.S.). Also recovering is the Canadian dollar, which is currently at 77.5 cents (U.S.).
The declining U.S. dollar is giving commodities a lift given rising expectations that the U.S. Federal Reserve will not be raising interest rates this year. Fed Funds futures are pricing in a March, 2016, increase. The minutes from the September Federal Open Market Committee (FOMC) meeting released on Thursday indicated that members may not be quick to pull the trigger and raise rates due to the lack of inflation, as well as global economic growth concerns. An increase in interest rates appears to be on hold until members are clear that weakness in overseas markets is indeed transitory.
Here is the bottom line. The S&P/TSX composite index is up over 5 per cent month-to-date on strong volumes - a stellar return in just six trading days, which makes me nervous. In fact, over the past 15 years, only once has the TSX Index experienced a price gain of over 5 per cent for the month.
The VIX index, which measures nervousness in the markets, is down to 17, a level not seen since mid-August as there is complacency in the markets ahead of the third-quarter earnings reporting season.
Meanwhile, companies such as Yum Brands, and last night, Alcoa, highlight weakness in China and yet, this has not created concerns for the broader market.
On Thursday, Christine Lagarde, the head of the International Monetary Fund (IMF) spoke at a news conference at the IMF's annual meeting and indicated that Chinese economic growth, while decelerating, is still expanding at a healthy rate. The IMF forecasts China's economy to grow by 6.8 per cent this year.
Next week, among the key reports to watch for will be the slew of Chinese economic releases with trade data, retail sales, industrial production, and third-quarter gross domestic product figures released, to see if investors shrug off any disappointments.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 +0.15 per cent; Dow +0.18 per cent; Nasdaq: +0.03 per cent
Equities
Hong Kong's Hang Seng +0.47 per cent
Shanghai composite index +1.26 per cent
Japan's Nikkei +1.64 per cent
London's FTSE 100 +1.04 per cent
Germany's DAX +1.13 per cent
France's CAC 40 +1.03 per cent
Stoxx 600 +0.66 per cent
Commodities
WTI crude oil (Nymex Nov.) +2.35 per cent at $50.58 (U.S.) a barrel
Gold (Comex Dec) +0.82 per cent at $1,153.60 (U.S.) an ounce
Copper (Comex Dec) +3.20 per cent at $2.42 (U.S.) a pound
Currencies
Canadian dollar +0.54 at 77.39 cents (U.S.).
U.S. dollar index -0.53 at 94.79
Bonds
U.S. 10-year Treasury yield 2.108 per cent, +0.0460
ECONOMIC INDICATORS:
China new yuan loans and aggregate financing
(8:30 a.m. ET) Canada employment for September. Consensus is an increase of 10,500 jobs or 0.05 per cent from August.
(8:30 a.m. ET) Canada unemployment rate for September. Consensus is 6.9 per cent, down from 7.0 per cent in August
(8:30 a.m. ET) Canada average hourly wages for September. Estimate is an increase of 3.2 per cent year over year.
(8:30 a.m. ET) U.S. import prices for September. Estimate is a decline of 0.5 per cent from August.
CORPORATE NEWS:
London's Standard Chartered's new chief executive Bill Winters plans to cut up to a quarter of the bank's most senior staff to reduce costs, according to a memo sent to staff, Reuters reported, which is likely to see about 1,000 top jobs go.
Glencore Plc surged to more than double from last week's record low after saying it will cut zinc production by a third, sparking the biggest-ever rally in the metal's price.
Sears Canada Inc. has come down to the wire in finding a new partner to operate its lucrative credit card operations. The retailer has been looking for a new financial services partner since last year when JPMorgan Chase & Co. said it wouldn't renew its 10-year agreement, which expires on Nov. 15.
Clearwater Seafoods is buying Macduff Shellfish Group for about $195-million.
ANALYST ACTIONS:
UBS upgraded Weyerhaeuser (WY-N) from "sell" to "neutral."
Needham & Co. maintained a "buy" rating on Yahoo! (YHOO-Q), and cut the price target to $40 (U.S.) from $55, ahead of the company's third-quarter earnings release.
JPMorgan upgraded Wells Fargo (WFC-N) from "neutral" to "overweight."
Mizuho Securities initiates coverage on Valeant Pharmaceuticals (VRX-N) with a "neutral" rating and a price target of $155, saying there is "too much risk" surrounding the company right now.
BMO Capital initiates coverage on Netflix (NFLX-Q) with a "market perform" rating and a price target of $115.
QUOTE OF THE DAY:
"Tell your heart that the fear of suffering is worse than the suffering itself. And no heart has ever suffered when it goes in search of its dream." Paulo Coelho