Stock futures are suggesting significant losses when U.S. and Canadian markets open this morning, but not nearly to the same degree as what was seen overnight in Asia and so far this morning in Europe.
Japan's Nikkei took a brutal fall overnight, losing more than 7 per cent in heavy volumes, as the value of the yen spiked as much as 2.3 per cent against the U.S. dollar. It was the biggest one-day loss in Japanese equities in more than two years, but still only represents a fraction of that market's rally so far this year as investors bid up stocks in the wake of Prime Minister Shinzo Abe's massive stimulus program. Japanese 10-year bond yields surged to their highest level in more than a year.
Investors were initially spooked Wednesday afternoon after minutes released from the latest Federal Reserve policy meeting showed some members in favour of tapering the central bank's bond-buying program - and Chairman Ben Bernanke's testimony in front of Congress seemed to leave that door open. That stimulus measure has been key to the market's post-recession recovery.
Then overnight, China released surprisingly weak manufacturing data, with factory output shrinking for the first time in seven months. The flash HSBC Purchasing Managers' Index for May fell to 49.6, slipping under the 50-point level separating expansion from contraction for the first since October. It was one of the more worrisome signals of late that growth rates in the vital Chinese economy were starting to slow.
Europe's own factory data released this morning weren't terribly uplifting, either. Markit's composite purchasing managers index for the euro zone for May rose 47.7 in May from 46.7 in the previous month, but remained in contraction territory.
Both U.S. and Canadian stock futures are down in the 0.5-per-cent to 0.9-per-cent range, off their earlier lows from earlier this morning of more than 1 per cent, suggesting that the worst of the selloff overnight will remain contained overseas. U.S economic data so today came in modestly better than expected.
The TSX will face the headwind of lower prices for economically sensitive commodities this morning, with both oil and copper both racking up losses in electronic trading. But gold futures are up sharply, thanks to the U.S. dollar's fall against the yen and the flight to safety overnight as equity markets tanked.
Now, here's the rundown of what else is happening this morning and what's to come.
MARKETS:
Equities:
Futures: S&P Toronto -0.79 per cent; S&P 500 -0.94 per cent; Dow -0.78 per cent; Nasdaq -0.93 per cent
Hong Kong's Hang Seng -2.54 per cent
Shanghai composite index -1.34 per cent
Japan's Nikkei -7.32 per cent
London's FTSE 100 -1.98 per cent
Germany's DAX -2.72 per cent
France's CAC 40 -2.35 per cent
Italy's FTSE MIB -2.55 per cent
Commodities:
WTI crude oil (Nymex Jly) -0.88 per cent at $93.45 (U.S.) a barrel
Gold (Comex Jun) +1.78 per cent at $1,391.80 (U.S.) an ounce
Copper (Comex July) -1.97 per cent at $3.31 (U.S.) a pound
Currencies:
Canadian dollar up 0.0039, or 0.41 per cent, at $0.9680 (U.S.)
ECONOMIC INDICATORS TO WATCH:
U.S initial jobless claims for last week fell 23,000 to 340,000, better than the drop to 345,000 that was expected.
The U.S. May flash manufacturing PMI fell to 51.9, weakening from April's 52.1 but better than economists' forecast for 50.8.
(10 a.m. ET) U.S. releases new home sales for April, predicted to rise to 425,000 from March's 417,000.
STOCKS TO WATCH:
Toronto-Dominion Bank reported second-quarter profit of $1.78 a share, short of forecasts for $1.86.
Hewlett-Packard Co. shares are up 12 per cent in the premarket after late Wednesday reporting better-than-expected quarterly earnings and guidance.
Other earnings today include Dollar Tree Inc.; Gap Inc.; Hormel Foods Corp.; ING US Inc.; Pandora Media Inc.; Ralph Lauren Corp.; salesforce.com; Sears Holdings Corp.; Tata Steel Ltd.; and Williams-Sonoma Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
History suggests the current rally in U.S. stocks doesn't have to end anytime soon.
This chart of the portfolio manager strategy cycle says it all.
Three things investors should NOT be worried about right now.
The Mexican stock market is struggling.
An outlook for U.S. real estate investment trusts.
This quarter, junk stocks are leading the market's rally.
The 10 stocks that hedge funds love the most.
-----
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