From Tokyo to New York, markets are swimming in a sea of red this morning after minutes released Wednesday from the latest Federal Reserve meeting jolted investors with the prospect that extraordinary stimulus measures may come to an end sooner than most thought.
Chinese stocks overnight fell nearly 3 per cent, leading the losses in Asia, while European stocks this morning are trading down close to 2 per cent. This all follows the tumble in U.S. equities on Wednesday that saw the S&P 500's sharpest decline of the year.
U.S. stock futures are down this morning, albeit not harshly. And commodity prices, especially those that are economically sensitive such as copper and oil, are also lower. It should add up to more losses for the TSX this morning after a nearly 100-point decline on Wednesday.
Wednesday's pullback wasn't entirely a surprise given U.S. stock indexes' persistent rise to more than five-year highs this year. The Fed minutes sent a clear signal that markets can't rely on monetary stimulus measures forever to boost the economic landscape. Some officials believed that asset purchases - or quantitative easing - should be halted or slowed before U.S. employment picks up.
“A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the (policy-setting) committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labour market had occurred,” the minutes said.
Investors had previously believed that the asset purchases – $85-billion (U.S.) a month – were open-ended, and therefore unlikely to end before the U.S. saw meaningful improvement in its labour market.
Today in Europe, new surveys on business conditions in the euro zone unexpectedly worsened, rekindling worries about the economy there.
The Flash Eurozone Services PMI, one of the earliest monthly indicators of economic activity, fell in February to 47.3 from 48.6, marking a year below the 50 threshold for growth and confounding expectations for a rise to 49.0. Conditions were not uniform across the euro zone; while firms in Germany sustained a healthy rate of growth, French companies reported some of the worst conditions since the Great Recession in early 2009.
Today is also a busy day on the corporate earnings front, especially in Canada, with key companies such as Bombardier Inc., Tim Hortons Inc. and Canadian Tire Corp. reporting.
We detail those reports and much more below as we take a closer look at what's going on this morning.
U.S. futures: S&P 500 -0.2 per cent; Dow -0.2 per cent; Nasdaq -0.4 per cent
Hong Kong's Hang Seng index -1.72 per cent
Shanghai composite index -2.97 per cent
Japan's Nikkei -1.39 per cent
London’s FTSE 100 -1.62 per cent
Germany’s DAX -1.84 per cent
France's CAC 40 -1.86 per cent
WTI (Nymex Apr) -1.28 per cent at $93.99 (U.S.) a barrel
Gold (Comex Apr) -0.32 per cent at $1,573.00 (U.S.) an ounce
Copper (Comex May) -1.31 per cent at $3.58 (U.S.) a pound
Canadian dollar down 0.0018, or 0.18 per cent, at $0.9820 (U.S.)
ECONOMIC INDICATORS TO WATCH:
U.S. initial jobless claims for last week rose 20,000 to 362,000, modestly higher than the 359,000 that was forecast.
The U.S. Commerce Department said the consumer price index in January was flat from December, versus an expected rise of 0.1 per cent. They were up 1.6 per cent year-over-year, near economists' forecasts.
(10 a.m. ET) The U.S. National Association of Realtors reports on existing home sales in January. Economists expect 4.9 million annualized sales.
(10 a.m. ET) U.S. releases the Philadelphia Fed Business Outlook Survey for February. Economists look for the index to come in at 1.1, recovering from a contraction of 5.8 in January.
STOCKS TO WATCH:
Bombardier Inc. reported adjusted net profit of 10 cents per share in the fourth quarter, down from 13 cents a year ago. Analysts’ consensus estimate for fourth-quarter EPS was 12 cents.
Tim Hortons Inc. said it will hike its quarterly dividend by 23.8 per cent and also unveiled a new share repurchase plan today. But revenues remain under pressure, with the company reporting Canadian same-store sales growth of 2.6 per cent in the fourth quarter, down from 5.5 per cent a year ago.
Rona Inc. is laying off 200 managers or 15 per cent of its administrative positions across Canada as the hardware specialist attempts to rebuilt itself into a profitable retailer and distributor. The company posted fourth quarter results that “fell short of our expectations,” said Dominique Boies, acting chief executive officer of Rona.
Loblaw Companies Ltd. saw its fourth-quarter profit cut by nearly one-third as it recognized a $61-million restructuring charge that chopped 16 cents per share off the bottom line.
Wal-Mart reported fourth-quarter earnings per share of $1.67 versus the consensus estimate of $1.57, but revenues were a little shy of forecasts and its guidance also missed the Street views. It also boosted its dividend. Shares were up nearly 2 per cent in the premarket.
Investigators are probing SNC-Lavalin Group Inc.’s operations in Algeria in a marked expansion of the bribery scandal that has shaken Canada’s premier engineering firm.
Sony Corp. unveiled the latest edition of its PlayStation console late Wednesday, marking the first major upgrade of the hardware since the PlayStation 3 was released in 2006.
Other earnings out today include: Agrium Inc.; American International Group Inc.; Atco Ltd.; BAE Systems PLC; Ballard Power Systems Inc.; Canadian Tire Corp.; Chorus Aviation Inc.; Dundee International Real Estate; First Capital Realty Inc.; Hewlett-Packard Co.; Imax Corp.; Inmet Mining Corp.; Intuit Inc.; Lundin Mining Corp.; Newmont Mining Corp.; Nordstrom Inc.; Resolute Mining Ltd.; and Teleflex Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Why some Canadian mutual funds still have an edge over ETFs in your portfolio.
Top 10 high-conviction purchases by Morningstar's ultimate stock pickers and some new stocks they've started buying.
With talk of a commodity “supercycle” now seemingly consigned to the history books, are investors losing faith in the asset class?
Bill Gross thrashed the bond indexers in 2012 with his new ETF.
An ETF that tracks the stock market in Vietnam has been on fire so far this year.
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