Market sentiment has shifted to a more cautious stance this morning after the Dow Jones industrial average last week enjoyed four record high closes in a row.
U.S. stock futures are a little weaker and European equities are posting modest losses, as traders grow more reluctant to bid up stocks as budget matters in the U.S. remain unsettled and the European debt crisis remains a threat to the global economy. Late Friday, there was a reminder about how precarious Italy's governing situation has become after Fitch Ratings cut the country's credit rating one notch to BBB-plus. Italian bond yields edged higher in the wake of the downgrade, an action that was tied to the country's inconclusive elections last month.
In Asia overnight, Japanese stocks rose about 0.5 per cent as the yen weakened against the U.S. dollar. Chinese stocks were lower as the country released data showing a rise in inflation to 3.2 per cent in February from a year earlier, the highest bump since April of last year. The rise from inflation of 2 per cent in January was likely tied to a short-term increase in prices during the Lunar New Year holiday. Meanwhile, industrial production in China grew 9.9 per cent in January and February, slowing from a 10.3 per cent gain in December. Year-over-year retail sales during that two-month period also slowed to 12.3 per cent from 15.2 per cent in December.
There is no such market-moving economic data due for release here in North America today. That's likely to turn the focus back to fiscal battles in Washington. Automatic spending cuts are taking hold in the U.S. after the Democrats and Republicans failed to reach a budget deal at the start of this month. Economists warn U.S. gross domestic product growth will be under pressure later this year if the spending cuts stay in place.
Officials from the House and Senate budget committees this week will release proposals that are aimed at averting a partial shutdown of the government by March 27. Right now, it appears acrimonious negotiations lie ahead, a recipe for market instability.
Now, here's a closer look at what is going on this morning.
MARKETS:
Equities:
U.S. futures: S&P 500 -0.2 per cent; Dow -0.1 per cent; Nasdaq -0.2 per cent
Hong Kong's Hang Seng index Unchanged
Shanghai composite index -0.33 per cent
Japan's Nikkei +0.53 per cent
London's FTSE 100 +0.01 per cent
Germany's DAX -0.38 per cent
France's CAC 40 -0.50 per cent
Italy's FTSE MIB -0.88 per cent
Commodities:
WTI (Nymex Apr) -0.26 per cent at $92.19 (U.S.) a barrel
Gold (Comex Apr) +0.04 per cent at $1,577.60 (U.S.) an ounce
Copper (Comex May) -0.78 per cent at $3.48 (U.S.) a pound
Currencies:
Canadian dollar up 0.0002, or 0.02 per cent, at $0.9724 (U.S.)
ECONOMIC INDICATORS TO WATCH:
No major reports scheduled.
STOCKS TO WATCH:
Research In Motion Ltd. shares are down 1 per cent in the premarket. The first of its new BlackBerry smartphones could hit U.S. store shelves at the end of this week, reports the Wall Street Journal, as T-Mobile USA business customers can begin ordering the Z10 model today.
Earnings today include: Com Dev International Ltd.; Fortress Paper Ltd.; and Urban Outfitters Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Australia's equity market has significantly outperformed Canada's over the last two years, based on the returns of ETFs that track them. It may be time to go long Canada, and short Australia, in anticipation that this spread will revert to the mean.
Why the U.S. unemployment rate is so misleading.
No downturn in Warren Buffett's favorite economic indicator. Rail traffic has now reached its highest 12 week moving average since 2011.
Dr. Doom economist Nouriel Roubini says U.S. fiscal drag will eventually catch up with the stock market in the second half of 2013. But the chairman of Goldman Sachs, Jim O'Neill, is sounding more optimistic, believing stocks around the world are still cheap.
Owners' equity in American real estate—the value of real estate that households actually own—has really surged this year after spending quite some time in the doldrums.
How Disney bought Lucasfilm - and its plans for Star Wars.
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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
Darcy Keith