There's a lot of red in markets this morning as a new month gets underway, with investors feeling unease over automatic U.S. budget cuts set to kick in and weaker-than-expected economic data this morning out of Europe and Asia. The TSX should open lower, coming under pressure not only from weak sentiment for equities today but a steep decline in commodities, especially industrial metals and crude oil.
The Dow on Thursday came within 15 points of a record high before pulling back to close the session modestly lower. The retracement didn't have a clear catalyst, but with the U.S. budget cuts threatening to curb economic growth and a lot of market noise suggesting stocks are getting overextended, investors are growing increasingly cautious.
There is a barrage of economic data out of the U.S. this morning that could influence trading today. We detail those reports below. In the meantime, there's been little headway in efforts to avoid the $85-billion (U.S.) in spending cuts that officially start kicking in tonight. The U.S Senate Thursday rejected a pair of partisan proposals to replace the automatic cuts. Today, President Barack Obama is meeting with Congressional leaders but no significant progress is expected.
In the U.K. today, a gauge of factory activity sank to 47.9, down from a revised 50.5 in January and well below expectations for 51, which would have signified expansion. Meanwhile, inflation in the euro zone in February fell and joblessness rose to an all-time high of 11.9 per cent, data showed.
In China, a purchasing managers' index eased to 50.1 after seasonal adjustments in February, the weakest reading in five months and just above the 50-point level separating growth from contraction on a monthly basis. January’s reading was 50.4. The data suggested economic growth this year in China would be mild.
U.S. futures: S&P 500 -0.5 per cent; Dow -0.4 per cent; Nasdaq -0.5 per cent
Hong Kong's Hang Seng index -0.61 per cent
Shanghai composite index -0.24 per cent
Japan's Nikkei +0.40 per cent
London’s FTSE 100 -0.50 per cent
Germany’s DAX -0.87 per cent
France's CAC 40 -1.13 per cent
Italy's FTSE MIB -1.72 per cent
WTI (Nymex Apr) -1.06 per cent at $91.07 (U.S.) a barrel
Gold (Comex Apr) -0.74 per cent at $1,566.20 (U.S.) an ounce
Copper (Comex May) -1.78 per cent at $3.49 (U.S.) a pound
Canadian dollar down 0.0015, or 0.15 per cent, at $0.9688 (U.S.)
ECONOMIC INDICATORS TO WATCH:
Motor vehicle sales to be released throughout the day.
Statistics Canada said gross domestic product grew 0.6 per cent in the fourth quarter, in line with forecasts, as December’s output shrank by 0.2 per cent from the previous month.
U.S. personal income fell 3.6 per cent in January, falling by the most in two decades, as higher tax rates hiked in. That was steeper than the 2.5 per cent economists expected. U.S. personal spending rose 0.2 per cent, matching expectations.
A final reading of the Markit manufacturing purchasing managers index fell to 54.3 in February from 55.8 in January.
(955 a.m. ET) U.S. releases Reuter's/University of Michigan consumer confidence survey. A reading of 76.0 is expected, down a little from 76.3 previously.
(10 a.m. ET) The U.S. Institute for Supply Management issues its manufacturing index for February. Economists expect a reading of 52.5.
(10 a.m. ET) U.S. releases construction spending for January. Economists look for growth of 0.6 per cent, lower than growth in December of 0.9 per cent.
STOCKS TO WATCH:
Talks between Best Buy Co. founder Richard Schulze have ended for a private takeover of the retailer after failing to line up debt and equity financing, Bloomberg News is reporting. Shares are up 5 per cent in the premarket after the company reported better-than-expected quarterly results.
Groupon shares are up 4 per cent in the premarket after the company fired CEO Andrew Mason Thursday.
Magna International Inc. hiked its dividend 16 per cent and boosted its sales outlook.
Other earnings today include: Best Buy; GMP Capital Inc.; Lloyds Banking Group PLC; Mega Brands Inc.; TransForce Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
The "greedometer" indicator - with its strong track record of predicting big market pullbacks - is flashing red.
A careful review of historical data suggests that the bull market would still have a long way to go if and when the Dow reaches a new all-time high.
Given February's stock market gains, history suggests a good year for the bulls.
How global stock markets have performed so far this year. Canada's return, you'll see, isn't much to celebrate.
Bond managers are fretting that the junk bond market rally is finally losing steam.
Vanguard has cut costs on some U.S.-listed funds.
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