European markets are rallying this morning and U.S. stock futures suggest a solidly higher start for the TSX and Wall Street, as investors breathe a sigh of relief that Cyprus has secured a bailout.
Similar to Friday, however, Research In Motion Ltd. may weigh on the TSX. In the premarket, RIM shares are down 5 per cent as Goldman Sachs downgraded the stock to "neutral" amid early signs that the Z10 has been slow to spark much buying excitement in the U.S.
Late Sunday, Cyprus agreed to raise €4.2-billion (or $5.5-billion U.S.) in return for a €10-billion rescue from European regulators. The deal does come at quite a cost for Cyprus, however: the country's large banking sector will be shrunk considerably, and depositors holding more than €100,000 will be slapped with a substantial levy.
The deal pushes the country back from a banking collapse and its likely exit from the euro zone, but the strict capital controls - and the rejected proposal from last week that would have hit even smaller depositors with a levy - will undermine confidence in the island nation for years to come.
Moody's this morning is saying just that, commenting that the new deal may not be enough to secure the country's future in the euro zone. "These measures have already damaged the financial sector’s reputation and business model, and the system’s profile as an offshore financial centre is unlikely to survive this crisis," the credit agency said.
But the good news for markets is that the country doesn't face immediate financial collapse, which could have reverberated across the euro zone at time when the region was just starting to recover from the more broader debt crisis.
Not surprisingly, the euro strengthened overnight and bond yields declined in Europe, with Spain's 10-year bond yield falling about five basis points to 4.80 per cent.
The celebration of the deal was a little more muted in Asia, although Japan's Nikkei index jumped 1.68 per cent, aided by expectations that the Bank of Japan's new governor will outline new stimulus measures during testimony to parliament on Tuesday.
There are no major economic reports planned for today, although markets will be monitoring Federal Reserve Chairman Ben Barnanke for any fresh clues on the direction of monetary policy as he appears at a panel discussion at the London School of Economics.
Now, here's a closer look at what else is going on this morning and what's to come.
U.S. futures: S&P 500 +0.3 per cent; Dow +0.2 per cent; Nasdaq +0.4 per cent
Hong Kong's Hang Seng index +0.61 per cent
Shanghai composite index -0.05 per cent
Japan's Nikkei +1.68 per cent
London’s FTSE 100 +0.85 per cent
Germany’s DAX +1.32 per cent
France's CAC 40 +1.69 per cent
Italy's FTSE MIB +0.29 per cent
WTI (Nymex May) +0.50 per cent at $94.18 (U.S.) a barrel
Gold (Comex Jun) -0.25 per cent at $1,603.90 (U.S.) an ounce
Copper (Comex May) -0.22 per cent at $3.46 (U.S.) a pound
Canadian dollar up 0.0041, or 0.42 per cent, at $0.9814 (U.S.)
ECONOMIC INDICATORS TO WATCH:
No major reports scheduled.
STOCKS TO WATCH:
Research In Motion Ltd. shares are down 5 per cent in the premarket after the stock fell about 8 per cent on Friday amid early reports that its new Z10 smartphone wasn't generating a lot of excitement among U.S. consumers. Goldman Sachs today downgraded the stock to "neutral" and removed the company from its "Americas buy list." It also cut its 12-month price target to $17 (U.S.) from $19 and reduced its estimated probability of success for the new BB10 smartphones to 20 per cent. It said its retail checks of retail stores "revealed a surprising lack of marketing support and poor positioning of the product."
Blackstone Group LP and activist investor Carl Icahn have submitted proposals that would exceed the $24.4-billion offer from Dell and SIlver Lake Partners to take Dell Inc. private. Shares in Dell are up nearly 3 per cent in the premarket.
Dollar General Corp. said its sales growth this year could surpass the strength it saw in 2012, as its fourth-quarter profit came in well ahead of analysts’ expectations despite lighter-than-anticipated sales growth. Shares are up 5 per cent in the premarket.
Other earnings today include Apollo Group Inc.
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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