U.S. equity futures are edging up this morning after the U.S. employment report came in largely as expected, showing steady, albeit modest growth in the labour market. Gold and silver prices are down sharply, although are off their lows from earlier this morning.
Selling momentum quickly accelerated in precious metals a day after minutes were released from the latest U.S. Federal Reserve meeting that revealed it is eyeing the possible end to quantitative easing measures before the end of 2013. Gold futures are down just over 2 per cent, and silver is off 3.5 per cent.
The extraordinary economic stimulus over the last four years has fuelled much of gold's rally, making it appear more attractive as an inflation hedge. Gold is also priced in U.S. dollars, which makes it cheaper to buy in foreign currency terms when the U.S. dollar is under pressure. The lifting of the Fed's bond buying program could very well lead to a stronger greenback.
Quantitative easing, or creating money to buy financial assets, could end "well before the end of 2013" because of concerns by several policy makers over financial stability, and that the Fed's portfolio of assets – now over $2-trillion (U.S.) – is becoming too large, according to minutes of the central bank's December policy meeting.
The minutes said "almost all" members of the policy committee were wary that the benefits of ongoing asset purchases no longer outweigh the potential costs, suggesting the Fed will reverse course on QE at the earliest opportunity.
The Fed statements have also given equity traders something new to ponder, just days after the resolution to the "fiscal cliff" crisis also left a lot of open-ended questions about the U.S. debt ceiling and future spending cuts.
The U.S. employment report showed job gains of 155,000 in December, which has been the average monthly pace of growth over the past two years.
Given the latest revelations out of the Fed, a stronger number may not have been necessarily cheered by equity investors, as it could have been perceived as another indication that the Fed will end quantitative easing measures sooner rather than later.
The Canadian employment report came in much stronger than expected, with 40,000 new job gains. Economists were looking for only 5,000 new jobs, and the unemployment rate dipped to a four-year low of 7.1 per cent. That news ignited a rally in the Canadian dollar, which is now up for the day after earlier sliding against the greenback.
Elsewhere, European markets are down modestly this morning, after a final purchasing managers' index for the month was released showing that the euro zone downturn eased in December. The Markit composite output index rose to a nine-month high of 47.2 from 46.5 in November, although that came in below an earlier preliminary estimate of 47.3 and is still well below the 50 level that would signify expansion.
Asian stocks were mixed overnight, with the Nikkei seeing a catch-up rally to Wall Street after being closed the first two trading days of 2013.
Now, here's a closer look at how the data came in, the latest market figures, and what else you need to know this morning.
MARKETS:
Equities:
U.S. futures: S&P 500 +0.2 per cent; Dow +0.1 per cent; Nasdaq +0.3 per cent
Hong Kong's Hang Seng index -0.29 per cent
Shanghai composite index +0.35 per cent
Japan's Nikkei +2.82 per cent
London's FTSE 100 +0.46 per cent
Germany's DAX +0.08 per cent
France's CAC 40 -0.06 per cent
Commodities:
WTI (Nymex Feb) -0.66 per cent at $92.31 (U.S.) a barrel
Gold (Comex Feb) -2.03 per cent at $1,640.60 (U.S.) an ounce
Silver (Comex Mar) -3.58 per cent at $29.62 (U.S.) an ounce
Copper (Comex Mar) -0.74 per cent at $3.69 (U.S.) a pound
Currencies:
Canadian dollar up 0.0010, or 0.09 per cent, at $1.0126 (U.S.)
ECONOMIC INDICATORS TO WATCH:
Statistics Canada said 40,000 new jobs were created in December, mostly full time, far surpassing the 5,000 job gains that economists had predicted. The jobless rate slipped to 7.1 per cent, the lowest in four years, from 7.2 per cent.
Statscan reported industrial prices fell 0.3 per cent in November from October, near expectations. Raw material prices fell 1.9 per cent, steeper than the 1 per cent that was forecast.
The U.S. Labour Department reported 155,000 net job gains in December, close to economists' expectations, as the unemployment rate rose slightly to 7.8 per cent.
(1000 a.m. ET) The U.S. Institute for Supply Management issues its non-manufacturing index for December. Economists expect a reading of 54.3.
(1000 a.m. ET) U.S. releases factory orders for November. Economists expect a 0.3 per cent rise, slowing from the previous month's gain of 0.8 per cent, although estimates range widely.
STOCKS TO WATCH:
Shares in Lululemon Athletica Inc. are down 3.5 per cent in the premarket after Credit Suisse downgraded the stock to "neutral" from "outperform" and cut its price target to $80 from $86. It cited concerns over slowing comparable-store sales growth in Canada and margin pressures.
Mosaic Co. shares are up 1.3 per cent in the premarket after reporting it earning adjusted earnings per share of $1.05 in its latest quarter, beating the average analyst forecast of 94 cents. Revenues of $2.54-billion missed expectations for $2.57-billion.
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THIS MORNING'S TOP INVESTING READS ON THE WEB:
U.S. dividend growth soared an amazing 22.8 per cent in the fourth quarter.
U.S. small- and mid-cap stocks are at all-time highs.
From a longer-term perspective, the market remains overvalued, according to leading investment indicators.
Are Google and Apple preparing for the death of smartphones?
With Apple's shares down 24 per cent since Sept. 19, the challenge of predicting where the stock goes next has produced wildly varying forecasts.
Harvard Business Review's list of the 100 best-performing CEOs in the world.
The media's top stock picks for 2013. This year, they are rooting for the underdogs.
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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