U.S. and Canadian stocks appear set to open with some decent gains, as encouraging economic reports out of China and the euro zone are lifting spirits this morning.
Gains on the TSX may be uneven, however. Base metal mining stocks may rally sharply, as copper is up nearly 2 per cent this morning on signals the Chinese economy is picking up steam. But interest-rate sensitive sectors, such as real estate investment trusts and dividend-paying stocks such as utilities, will be up against a brisk headwind this morning, as U.S. Treasury yields are back to hitting fresh two-year highs.
The 10-year yield rose as high as 2.94 per cent this morning, up 0.04 of a percentage point from its previous high point earlier this week. Five, seven and 30-year treasuries all climbed to their highest level in two years. Canadian bond yields largely move in lockstep with U.S. issues, and today is no exception, with the 10-year note up 0.07 at 2.75 per cent.
The economic data this morning are adding further fuel on speculation that the Federal Reserve will soon start tapering its $85-billion a month in bond purchases. Wednesday's release of minutes from July's Federal Reserve policy meeting didn't shed a lot of light on the matter, but did show broad support for cutting back on the stimulus measures sometime this year. The minutes left the door open to the tapering process starting in September, but suggested such a move was still very much tied to upcoming economic data.
Today, manufacturing output is in the spotlight. The HSBC Purchasing Managers index for China rebounded to a four-month high of 50.1. Being above the 50 level signifies expansion, and it followed a final reading of 47.7 in July, which had been an 11-month low. That brought it in line with the latest government-sponsored manufacturing index and added credibility to recent data showing that the slowdown in the nation's growth rates has bottomed.
Meanwhile, data from Germany this morning showed its economy continued to expand in August, with the country's composite purchasing managers' index from Markit rising to a seven-month high of 53.4, driven by the fastest rise in manufacturing production in more than two years. A purchasing managers' index for the entire euro zone, meanwhile, bounced to 51.7 from last month's 50.5.
The latest manufacturing index for the U.S. comes out later this morning. U.S. jobless claims data this morning weren't too far off expectations and stock futures held onto gains as the numbers came out.
Now, here's a closer look at what's going on this morning and what's to come.
Futures: S&P 500 +0.37 per cent; Dow +0.26 per cent; Nasdaq +0.54 per cent; S&P Toronto +0.65 per cent
Hong Kong's Hang Seng +0.35 per cent
Shanghai composite index -0.29 per cent
Japan's Nikkei -0.44 per cent
London’s FTSE 100 +0.72 per cent
Germany’s DAX +1.08 per cent
France's CAC 40 +0.99 per cent
WTI crude oil (Nymex Oct) +0.49 per cent at $104.36 (U.S.) a barrel
Gold (Comex Dec) -0.23 per cent at $1,366.90 (U.S.) an ounce
Copper (Comex Dec) +1.72 per cent at $3.37 (U.S.) a pound
Canadian dollar at 95.15 (U.S.), down 0.0026 from yesterday's North American close.
U.S. dollar index up 0.44 at 81.66
U.S. 10-year Treasury yield 2.92 per cent, up 0.02
ECONOMIC INDICATORS TO WATCH:
Canada retail sales fell 0.6 per cent in June from May, a steeper decline than the 0.4 per cent drop that economists were looking for. Floods in Alberta and a construction strike in Quebec impacted sales. Excluding vehicle and auto parts sales, June retail sales fell 0.8 per cent.
U.S. initial jobless claims last week rose 13,000 to 336,000, more than the 329,000 jobless claims predicted by economists.
The U.S. Markit flash purchasing managers’ index rose to 53.9 in August from a final July reading of 53.7. That beat forecasts calling for an index of 53.5.
STOCKS TO WATCH:
Barrick Gold Corp. says it has agreed to sell off three mines in Western Australia to South Africa-based miner Gold Fields Ltd. for $300-million. Shares are up 2 per cent in the premarket.
Sears Holdings Corp. reported an adjusted loss per share of $1.46 on revenues of $8.87-billion. Analysts expected a loss of $1.10 on revenue of $9.01-billion, and shares are down 7 per cent in the premarket.
Hewlett-Packard Co. shares are down 7 per cent in the premarket after its adjusted quarterly earnings came in a penny short of Wall Street estimates and the company signalled weakness in its enterprise division.
Abercrombie & Fitch Co. reported earnings well below Street views as comparable store sales dropped 10 per cent globally. Shares plunged 17 per cent in the premarket.
Yahoo Inc. shares are up 1.3 per cent after Comscore figures showed the Internet giant beating Google in U.S. traffic for the first time since 2011.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Physical gold buying is picking up and leading U.S. banks say prices are bottoming.
Two indicators based on market divergences are flashing caution signs—or worse, writes Mark Hulbert.
Mohamed El-Erian, Pimco chief executive and co-chief investment officer at Pimco, is warning investors not to wait until September to reposition your portfolio.
The S&P 500 is crushing hedge funds this year.
Ron Paul's portfolio embraces gold and hard assets to the extreme.
Where the new safe haven money flows may be going.
The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities. You can also be notified using our dashboard feature when new articles appear from this author. Read more on using this feature here.