With less than a month to go before the U.S. could fall off its fiscal cliff, investors are bracing for what will likely be a volatile few weeks amid few signs of an imminent deal in Washington.
Over the weekend, interviews on the Sunday morning talk shows with both Republicans and Democrats further illustrated the divide between the parties on how to avert the more than $600-billion (U.S.) in spending cuts and tax increases set to take hold Jan. 1. Many economists expect the U.S. economy to fall back into recession without an agreement.
Republican speaker of the House of Representatives John Boehner said "we're nowhere" in the negotiations so far, and ridiculed the initial White House proposal tabled late week that seeks $1.6-trillion (U.S.) in new tax revenue. That's twice as much as what Republicans say is acceptable and Mr. Boehner said "there's clearly a chance" that the U.S. won't have an agreement in time.
Despite the political brinkmanship, U.S. stock index futures are up modestly this morning, pointing to a likely higher start for the TSX. A number of manufacturing reports across the globe are being revealed today, creating a sense that the economy does have some forward momentum. Markit's euro zone manufacturing Purchasing Managers index rose to 46.2 in November from 45.4. While an improvement, it was the 16th straight time it came in below 50, the point that separates expansion from contraction.
More uplifting were the manufacturing readings out of China, where an official state measure reached 50.6, a seven-month high, while a separate rally by HSBC hit a 13-month high, at 50.5. The U.S. releases its manufacturing index later today.
European stock markets are higher this morning but Asian stocks were lower for the most part, illustrating the nervousness about the fiscal cliff even as the massive Chinese economy shows more signs of being on the mend.
Now, here's a look at what else you need to know this morning.
MARKETS:
Equities:
U.S. futures: S&P 500 +0.4 per cent; DJIA +0.4 per cent; Nasdaq +0.6 per cent
Hong Kong's Hang Seng index -1.19 per cent
Shanghai composite index -1.02 per cent
Japan's Nikkei +0.13 per cent
London's FTSE 100 +0.29 per cent
Germany's DAX +0.45 per cent
France's CAC 40 +0.67 per cent
Commodities:
WTI (Nymex Jan) -0.01 per cent at $88.90 (U.S.) a barrel
Gold (Comex Feb) +0.32 per cent at $1,718.10 (U.S.) an ounce
Copper (Comex Mar) +0.08 per cent at $3.65 (U.S.) a pound
Currencies:
Canadian dollar up 0.0006, or 0.06 per cent, at 1.0073 (U.S.)
STOCKS AND ECONOMIC INDICATORS TO WATCH:
Canadian Pacific Railway said it will take a $180-million non-cash charge as it shunts aside plans to extend its network into a coal-producing region on the western U.S.
Saputo said it will acquire Morningstar Foods from Dean Foods for $1.45-billion.
Canaccord Genuity had downgraded Research In Motion to "sell" and reiterated a $10 price target.
Dell shares may rise after Goldman Sachs upgraded it to "buy" from "sell" and raised its price target to $13 (U.S.) from $9.
Yahoo shares are down nearly 2 per cent in the premarket after a civil court in Mexico entered a preliminary $2.7-billion (U.S.) judgment against the Internet giant for breach of contract involving a yellow pages listings service.
(1000 a.m. ET) The U.S. Institute for Supply Management publishes its manufacturing index for November. Economists expect a reading of 51.5.
(1000 a.m. ET) U.S. releases construction spending figures.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
American companies are supplanting China from the world's 500 biggest stocks faster than at any time in the past decade, as an improving U.S. economy and investor confidence in free markets overcomes the lure of equities offering twice the profit growth.
Goldman Sachs outlines five strategies for 2013 and issues some rosy S&P 500 targets.
Four stocks hedge funds just bought.
China is moving forward in opening up its gold market.
Yield-hungry ETF investors are getting crafty.
The strongest area of the U.S. economy has been the U.S. consumer - and three recent signs don't look good.
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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