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.
The impact of yesterday's one-time cut to the pace of the European Central Bank's asset purchases appears to have completed working its way through global markets overnight. Stocks and currencies have now paused, awaiting the next round of big meetings and announcements.
U.S. index futures, the FTSE, and the Dax are all flat to up 0.2 per cent. The euro continues to fall dropping another 0.5 per cent after an attempt to stabilize at a lower level failed amid weaker German trade and French industrial production. The pound is rebounding moderately on stronger than expected U.K. trade and construction reports. Currency traders appear to be turning their focus to next week's U.S. Federal Reserve meeting.
A December rate hike still looks like a done deal, the big question for traders is how many increases we could see in 2017. The U.S. dollar is currently pricing in four increases, I still think two is more likely. The U.S. dollar index has been on the rise today with the euro weakening. This has knocked gold back again but traders should note that inflation reports from the U.K. and China show inflation pressures are increasing which could attract interest to gold in the longer term.
Crude oil has resumed its uptrend following a correction with WTI up 0.6 per cent and Brent up 0.3 per cent. Brent is likely lagging due to its exposure to the struggling European economy and its political risk exposure. Natural gas is up 1.2 per cent in a seasonal rally as temperatures fall in consuming regions. The Canadian dollar continues to climb today with a boost from high energy prices.
Energy traders appear to be awaiting the results of Saturday's meeting between OPEC and non-OPEC producers which is expected to nail down 0.6-million barrels (mmbbls) in cuts from outside OPEC including a 0.3-million-barrel cut from Russia.
The results of tomorrow's meeting may have a short-term impact on oil into early next week but the longer term direction still depends more on the U.S. market. U.S. inventories continue to fall which provides support to the price at higher levels.
Fear of U.S. shale production coming back on, however continues to cast a cloud over oil, limiting WTI rallies to the low $50s (The recent OPEC rally peaked about $52 U.S.). Some agencies have suggested it could take a price of up to $60 to make shale profitable enough to return so the question of where the tipping point is on the upside may be the bigger question for oil traders in the coming weeks.
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 7:30 a.m. ET)
Dow +0.15 per cent; S&P 500 +0.04 per cent; Nasdaq: +0.13 per cent; TSX 60 +0.06 per cent
Equities
Japan's Nikkei +1.23 per cent
Shanghai composite index +0.52 per cent
Hong Kong's Hang Seng -0.44 per cent
Germany's DAX +0.26 per cent
London's FTSE +0.17 per cent
France's CAC 40 +0.59 per cent
Commodities
WTI crude oil (Nymex Jan.) +0.77 per cent at $51.23 (U.S.) a barrel
Gold (Comex Feb.) -0.61 per cent at $1,165.30 (U.S.) an ounce
Copper (Comex March) +0.76 per cent at $2.65 (U.S.) a pound
Currencies
Canadian dollar +0.06 at 75.80 cents (U.S.)
U.S. dollar index +0.192 at 100
Bonds
Canada 10-year bond yield +3.89 at 1.70 per cent
KEY ECONOMIC RELEASES
China November CPI, Yuan financing, loans, money supply
U.K. October trade deficit
(10:00 a.m. ET) U.S. October wholesale inventories. Consensus -0.4 per cent.
(10:00 a.m. ET) U.S. December University of Michigan consumer sentiment. Consensus 94.5.
KEY STOCKS TO WATCH
Also see: Friday's small-cap stocks to watch
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American Airlines Group Inc. raised its current-quarter forecasts for pre-tax margin and a key profitability metric, citing an improvement in average fares. The company said it now expects fourth-quarter unit revenue to range between a decline of 1 percent and an increase of 1 percent, compared with its previous forecast of a decline of 2.5-0.5 percent. Unit revenue compares sales to how many seats an airline flies and how far it flies them. Its stock was up 1.6 per cent in premarket trading.
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The airline now expects pre-tax margin excluding items to be between 6 percent and 8 percent, up from its previous range of 5 percent to 7 percent.
Canadian Imperial Bank of Commerce is widely expected to raise its $3.8-billion (U.S.) bid for Chicago-based PrivateBancorp Inc., and the question now is whether CIBC can close the ground-breaking deal without overpaying.
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Hamblin Watsa, a subsidiary of Fairfax Financial Holdings, one of the shareholders who helped keep Bank of Ireland out of state hands in 2011, is selling half of its remaining stake in the Irish lender, the bank managing the sale said on Friday. The subsidiary will sell €415-million worth of stock at 0.23 euros per share via a placement, Deutsche Bank said, cutting its holding from 2.9 per cent to around 1.5 per cent.
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Canada's BRP Inc., the maker of Ski-Doo snowmobiles and Sea-Doo watercraft, reported a better-than-expected quarterly profit as it sold more year-round products. The company's net profit attributable to shareholders rose 20 per cent to $78.7-million, or 70 cents per share, in the quarter ended Oct. 31 from a year earlier. It reported adjusted earnings of 93 cents per share. Analysts on average had expected 75 cents, according to Thomson Reuters I/B/E/S. The company also raised its current-year adjusted earnings forecast to $1.86 to $1.96 per share, from $1.82 to $1.92.
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Citi Research replaced Amazon.com with Alphabet as its favourite stock in the U.S. Internet sector, citing a slew of positive catalysts that could take shares of the search giant to new highs. Amazon's shares were up 0.22 per cent in premarket trading while Alphabet was up 0.3 per cent.
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Restoration Hardware plunged 18.5 percent to $31.76 in thin premarket trading after the furniture retailer lowered its fourth-quarter profit forecast, citing slow sales in the holiday period.
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Wynn Resorts rose 4.7 percent to $95 after Macau, the world's biggest gambling hub, clarified it had not tightened daily cash withdrawal limits for Chinese gamblers.
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Biogen rose 3.3 percent to $299 after a study showed higher doses of the company's Alzheimer's drug appeared to reduce the risk of brain swelling.
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Disability insurer Aflac was cut to "underperform" from "market perform" at RBC, based on RBC's outlook for sluggish sales growth and various earnings headwinds.
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Vail Resorts lost $1.70 per share for its latest quarter, 13 cents wider than anticipated, and its revenue also came in below analyst estimates. However, Vail did raise its 2017 resort earnings outlook.
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Duluth Holdings reported a profit of 1 cent per share, compared to forecasts of a breakeven quarter, but the casual clothing maker saw revenue miss forecasts and it gave weak full-year guidance.
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Bristol-Myers Squibb raised its quarterly dividend by 1 cent to 39 cents per share, starting in the first quarter of 2017.
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Broadcom results came in 9 cents above estimates with adjusted quarterly profit of $3.47 per share, while revenue also beat forecasts. Broadcom also doubled its quarterly dividend to $1.02 per share.
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Annuity provider Athene priced its initial public offering at $40 per share, in the middle of the expected $38 to $42 range, raising $1.1-billion.
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3M has sold its identity management business to Amsterdam-based Gemalto for $850 million. The deal is expected to close in the first half of 2017.
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Earnings include: BRP Inc.; Helix Biopharma Corp.; Transat AT Inc.; Vail Resorts Inc.; Wall Financial Corp.
With files from wire services