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 Monday morning to you on this final trading day of November.
It is the calm before a flurry of data this week. Market activity is likely to remain subdued until later this week as investors await key announcements. On Thursday, the European Central Bank (ECB) interest rate decision will be announced, and on Friday we have U.S. November non-farm payroll data released, as well as the Organization of the Petroleum Exporting Countries (OPEC) meeting taking place. Currently, U.S. futures are implying a relatively quiet, but positive, opening for equity markets. Dow futures are up 28 points or 0.2 per cent. S&P 500 futures are up 3 points or 0.1 per cent. Nasdaq futures are ahead by 13 points, or 0.3 per cent. In Canada, the S&P/TSX 60 index futures are up 3 points.
Overseas in the Pacific Rim, Japanese October retail sales were stronger-than-expected, up 1.8 per cent year-over-year, ahead of expectations of a 0.9-per-cent increase. However, October industrial production declined 1.4 per cent year-over-year, below expectations of a decline of 0.9 per cent and below the decrease of 0.8 per cent reported last month. The Nikkei 225 fell 0.7 per cent in overnight trading. In China, the Shanghai composite and Shenzhen composite both advanced 0.3 per cent and 0.9 per cent, respectively, as investors await confirmation that the International Monetary Fund (IMF) will be including the yuan in its special drawing rights (SDR) basket of reserve currencies. If approved, the yuan would join the U.S. dollar, the euro, the Japanese yen, and the pound sterling in the SDR basket. The inclusion is important as it acknowledges the yuan as a reserve currency. Tonight, Chinese November purchasing managers' index data will be released. In Australia, the ASX 200 declined 0.7 per cent. Shares of Australian-based miner, BHP Billiton weighted on the index, declining 3.6 per cent as the company faces a fine from Brazilian authorities.
Turning to major European markets, expectations of more easing measures by the ECB are giving equity markets a boost. The German DAX is up 1.1 per cent, despite weaker-than-expected economic data. October retail sales increased 2.1 per cent, below the consensus estimate of 2.9 per cent. Month-to-date, the DAX is up 5 per cent and is up approximately 16 per cent year-to-date. The French CAC continues its gains. It is ahead by 0.7 per cent in today's trading session, and is up 1- per cent month-to-date, and over 16 per cent year-to-date. The London FTSE is unchanged in today's trading session.
Spain, the euro zone's fourth-largest economy, reported strong retail sales data in October. Retail sales grew 5.8 per cent year-over-year, ahead of expectations of 4.3 per cent, and the prior month was revised higher to 4.7 per cent from 4.3 per cent. In other European news, Turkey has reached a deal with the European Union. Turkey has agreed to heightened security to contain refugee migration into Europe. In exchange, Turkey will receive monetary assistance to help Syrian refugees in Turkey, and in addition, Turkey will receive assistance in joining the European Union bloc. In addition, Russian President, Vladimir Putin, announced sanctions against Turkey.
Looking at commodities, we are seeing some stability this morning in major commodities. The price of gold is down less than a dollar to $1,055.30 (U.S.) to its lowest level since 2009. Month-to-date, the price of gold has tumbled nearly 8 per cent. The price of West Texas Intermediate oil futures are up 38 cents to $42.09 (U.S.). The price of natural gas futures are stable, up a penny to $2.23 (U.S.).
The Canadian dollar is down to 74.7 cents per U.S. dollar with an interest-rate hike expected by the U.S. Federal Reserve on December 16. Fed fund futures are pricing in a 76 per cent probability of a rate hike. The Canadian dollar is at 70.6 cents relative to the euro. The euro also continues to slide lower relative to the U.S. dollar, currently at 1.0577.
Here's the bottom line. This week may be volatile for commodities. It would not surprise me to see the price of gold return to triple-digits, sub $1,000, in the coming months, and oil prices could drift back down closer to the $40 level in the near-term. Banks stocks will also be active this week with all the major banks reporting fourth-quarter results. On Tuesday, the Bank of Nova Scotia and the Bank of Montreal both report financial results.
Quote of the day: "Every child is an artist. The problem is how to remain an artist once we grow up." Pablo Picasso
MARKET DATA:
Futures
S&P 500 +0.2 per cent; Dow +0.2 per cent; Nasdaq: +0.3 per cent
Equities
Hong Kong's Hang Seng -0.3 per cent
Shanghai composite index +0.3 per cent
Japan's Nikkei -0.7 per cent
London's FTSE 100 unchanged
Germany's DAX +1.1 per cent
France's CAC 40 +0.7 per cent
Commodities
WTI crude oil (Nymex Jan) +0.9 per cent at $42.09 (U.S.) a barrel
Gold (Comex Feb) -0.09 per cent at $1,055.30 (U.S.) an ounce
Copper (Comex Mar) +0.7 per cent at $2.07 (U.S.) a pound
Currencies
Canadian dollar -0.0006 at 74.73 cents (U.S.).
Bonds
U.S. 2-year Treasury yield 0.94 per cent
U.S. 10-year Treasury yield 2.23 per cent
Jennifer Dowty