Colin Cieszynski
The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.
For the last couple of weeks, trading has been dominated by dramatic readjustments in the markets following the U.S. election. Although by last week, these moves were looking a bit overdone the honeymoon was extended through the U.S. Thanksgiving holiday because traders didn't want to rock the boat. With the big Turkey, football and Black Friday shopping festival now over, the reality of an uncertain world appears to be setting back in and corrections starting.
Despite the positive news of the OECD raising its growth forecasts for many countries. Stock markets around the world are in retreat this morning with U.S. index futures for the Dow and S&P trading down 0.3 per cent. The FTSE is down 0.3 per cent and the Dax is down 0.7 per cent. Italy's FTSEMIB is down 1.3 per cent on anticipation that this coming weekend's constitutional referendum could end in a No vote leading PM Matteo Renzi to resign and throwing the country into political turmoil.
Crude oil is down 0.2 per cent with WTI trading just above $45 (U.S.) heading in to Wednesday's big OPEC meeting. With negotiations coming to a head, the knives are starting to really come out. A meeting between OPEC and non-OPEC producers that has been set for today was cancelled on Friday with Saudi Arabia wanting OPEC to get its act together first before meeting with others. Over the weekend the Saudis suggested the oil market could rebalance in 2017 even without a deal. Overall, it looks like the Saudis are prepared to cut but want Russia, Iran and Iraq to cut as well -- not just freeze production. For the last several months oil has been trading in a $40 to 50 range. Currently, it's sitting near the middle but whether we end up with a deal or not could send oil to one end of the range or the other later in the week.
The U.S. dollar has started to backslide a bit following a major rally against major currencies with gold, yen, euro and Canadian dollar all on the rebound this morning and British pound (which has outperformed the others lately) holding steady. Signs have started to emerge that the free ride for U.S. president-elect Donald Trump's economic program that markets have been pricing in may encounter more bumps and opposition from both sides of the floor. On Friday, the Green Party filed for a recount in Wisconsin and has indicated plans to file for recounts in Pennsylvania and Michigan this week. So far this has attracted more press coverage outside the U.S. than within it but that could change at any time, particularly if the Democratic candidate Hillary Clinton`s campaign were to get more directly involved. At this point it looks more like a nuisance but if this snowballs, it could quickly restore risk, uncertainty and volatility to overcomplacent markets.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA:
Futures (as of about 8 a.m. ET)
Dow -0.28 per cent; S&P 500 -0.28 per cent; Nasdaq: -0.17 per cent; TSX 60 -0.34 per cent
Equities
Japan's Nikkei -0.13 per cent
Shanghai composite index +0.46 per cent
Hong Kong's Hang Seng +0.47 per cent
Germany's DAX -0.80 per cent
London's FTSE -0.60 per cent
France's CAC 40 -0.73 per cent
Commodities
WTI crude oil (Nymex Jan.) -0.22 per cent at $45.96 (U.S.) a barrel
Gold (Comex Feb.) +1.00 per cent at $1,192.80 (U.S.) an ounce
Copper (Comex March) +0.90 per cent at $2.71 (U.S.) a pound
Currencies
Canadian dollar +0.14 at 74.10 cents (U.S.)
U.S. dollar index +0.01 at 101.48
Bonds
Canada 10-year bond yield +0. at 1.5 per cent
KEY ECONOMIC RELEASES
China industrial profits
Euro Area M3 money supply
(7:45 p.m. ET) Bank of Canada governor Stephen Poloz speaks in Toronto at the CD Howe Institute on "The Ascent of Services and the Rise of Canada's New Economy." Press conference to follow at 9 p.m..
KEY STOCKS TO WATCH
Also see: Monday's small-cap stocks to watch
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ConocoPhillips was up 1.1 percent at $46.24 in premarket trading after Goldman Sachs raised its price target on the stock.
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Amazon was down 0.3 percent at $778 after Citigroup reduced its price target on the stock.
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Panera Bread was downgraded to "neutral" from "outperform" at Wedbush, although the firm kept the price target at $220. The stock is up 13.5 per cent over the past month.
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Robert Half was downgraded to "sector perform" from "outperform" at RBC Capital, but RBC raised its price target to $46 from $41.
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Piper Jaffray downgraded Hasbro to "neutral" from "overweight," saying the stock is fairly valued.
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With files from wire services