North American markets appear set for a flat open this morning, as the clock ticks down to the nearly $600-billion (U.S.) in tax hikes and spending cuts set to take hold at the start of next year.
U.S. stock index futures had been modestly in positive territory earlier this morning, but weaker-than-expected readings on U.S. personal income and spending later shifted them into neutral.
Markets have shown considerable sensitivity this week to every sign of progress or lack thereof in the negotiations to avert the so-called fiscal cliff, which threatens to significantly slow the world's biggest economy at a time when it's still trying to recover from the last recession. Trading volatility may only increase as the deadline approaches.
On Thursday, House Speaker John Boehner said that there had been "no substantive" progress in the budget talks, sparking immediate selling in markets. But other key figures in Washington were more optimistic, with Democratic Senator Chuck Schumer later saying progress was being made and White House spokesman Jay Carney said the Barack Obama administration remained optimistic. The White House reportedly called for $1.6-trillion in new tax revenue and an unlimited debt ceiling.
With more substantive talks still to come, markets may be overreacting to the daily comments coming out of the Beltway. Most feel an agreement will be reached and the Republicans will have to cave in eventually on tax increases of some kind for the wealthy, given that the Democrats campaigned on doing exactly that. But with the euro zone crisis settling down for now, and corporate earnings season over, it's been the clear focus and Washington is notorious for being unpredictable.
Overnight, German lawmakers approved the latest bailout for Greece by a large majority and euro zone unemployment rose again in October to 11.7 per cent from 11.6 per cent. In Asia, Japan's cabinet approved a $10.7-billion economic stimulus package just weeks before an election the ruling party is expected to lose.
The Canadian dollar, which had been up a little bit early this morning, is now lower on the day, after Statistics Canada reported very modest gross domestic product growth of 0.6 per cent, annualized, in the third quarter.
Now, here's a look at what else you need to know this morning.
MARKETS:
Equities:
U.S. futures: DJIA unchanged; S&P 500 unchanged; Nasdaq unchanged
Hong Kong's Hang Seng index +0.49 per cent
Shanghai composite index +0.84 per cent
Japan's Nikkei +0.48 per cent
London's FTSE 100 +0.18 per cent
Germany's DAX +0.31 per cent
France's CAC 40 +0.17 per cent
Commodities:
WTI (Nymex Jan) -0.22 per cent at $87.88 (U.S.) a barrel
Gold (Comex Feb) -0.31 per cent at $1,724.10 (U.S.) an ounce
Copper (Comex Mar) +0.15 per cent at $3.61 (U.S.) a pound
Currencies:
Canadian dollar down 0.0007, or 0.07 per cent, at 1.0062 (U.S.)
STOCKS AND ECONOMIC INDICATORS TO WATCH:
Statscan said annualized gross domestic product in the third quarter grew only 0.6 per cent. Economists were looking for a rise of 0.8 per cent.
The U.S. Commerce Department said personal income in October was flat, weaker than the 0.2 per cent increase expected by economists. Personal spending declined 0.2 per cent, also a little softer than expected.
(0945 a.m. ET) U.S. releases Chicago Purchasing Manager Index data, forecast to rise to 50.5 in November from 49.9 in October. That would signify expansion.
Zynga Inc. shares are down 6 per cent in the premarket after Facebook changed its agreement with ap developers, opening the way for more competition for Zynga.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
The Pimco new bond ETF from Bill Gross - which Canadians can invest in - has been performing better than Pimco's giant Total Return Fund. And this is likely to continue.
A look at low-volatility strategies by studying the techniques of ETFs from BMO and PowerShares.
Hedge funds are increasing exposure to equities. But watch out. When these funds get bullish en masse, new research shows that the market heads south.
Just as China's stock market continues its grind downwards, India's is looking up. The country's Sensex index has climbed to a new 2012 high.
The strong results posted by Royal Bank of Canada on Thursday illustrate how the banking industry is managing to maintain profitability despite extremely difficult conditions for core lending. But as good as Royal's bottom line looks now, investors should expect some rough seas ahead.
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For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities
Darcy Keith