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Inside the Market

Premarket: U.S. budget worries continue to nag Add to ...

The S&P 500 squeaked out enough of a gain on Friday to reach a five-year high, but there are few signs this morning that hitting that threshold will ignite a lot of further buying interest. Instead, traders remain concerned about how U.S. budget talks will shape up in the coming months - and are bracing for a new round of political brinkmanship.

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U.S. stock index futures are slightly lower, and oil and copper prices are weaker, pointing to a soft but rather flat start to TSX trading today.

The deal to avoid the "fiscal cliff" last week helped to settle the issue of tax hikes on high income earners, but simply kicked the can down the road on key decisions on spending cuts and the U.S. debt ceiling. Both the Republicans and Democrats over the weekend resumed pouring on the rhetoric, blaming each other for the lack of progress on a spending agreement. The two sides will need to find common ground before the end of February or risk another round of fiscal calamity that could dampen the U.S. and global economies.

This is a light week of U.S. economic reports, but the health of the corporate sector will once again return to focus, with Alcoa set to kick off the fourth-quarter earnings season after markets close on Tuesday. Analysts expect fourth-quarter earnings for the Standard & Poor’s 500 index to increase 3.28 per cent, said Christine Short, a senior manager at S&P Global Markets Intelligence. That’s an improvement from essentially flat profits in the third quarter.

In news out of Europe this weekend, regulators agreed to postpone the imposition of Basel III rules for another year, allowing banks more time to reach liquidity ratios. There were warnings the proposal would hurt lending and set back the economic recovery. The watering down of liquidity rules spurred a rally in European bank stocks this morning.

Elsewhere today, look for the latest gadgets to be on display at the Consumer Electronics Show in Las Vegas. Today is the officially designed "press day" at CES, with several media speeches planned by companies including Cisco Systems and Qualcomm.

Now, here's a closer look at what else you need to know this morning:

MARKETS:

Equities:

U.S. futures: S&P 500 -0.2 per cent; Dow -0.2 per cent; Nasdaq -0.1 per cent

Hong Kong's Hang Seng index unchanged

Shanghai composite index +0.35 per cent

Japan's Nikkei -0.83 per cent

London’s FTSE 100 -0.39 per cent

Germany’s DAX -0.57 per cent

France's CAC 40 -0.64 per cent

Commodities:

WTI (Nymex Feb) -0.50 per cent at $92.62 (U.S.) a barrel

Gold (Comex Feb) +0.30 per cent at $1,653.80 (U.S.) an ounce

Silver (Comex Mar) +0.55 per cent at $30.11 (U.S.) an ounce

Copper (Comex Mar) -0.96 per cent at $3.66 (U.S.) a pound

Currencies:

Canadian dollar down 0.0002, or 0.02 per cent, at $1.0131 (U.S.)

ECONOMIC INDICATORS TO WATCH:

No major reports scheduled.

STOCKS TO WATCH:

Bank of America Corp said it will pay $3.6-billion (U.S.) to Fannie Mae to settle claims related to residential mortgage loans for the nine years to the end of 2008. Shares are up 1 per cent in the premarket.

Shares in U.S. genetics company Illumina Inc. are down 8 per cent in premarket trading after Roche Holding AG said it's not considering a bid for the company.

Air Canada and WestJet Airlines Ltd. said their load factors were at records in December and for all of 2012 on better traffic and capacity results.

THIS MORNING'S TOP INVESTING READS ON THE WEB:

Almost all of Wall Street got 2012 market calls wrong.

Disney was one of the biggest gainers on the Dow last year. Barron's takes a look at whether that trend will continue into 2013.

Why it may be worth following the stock picks by the big hedge fund managers that are disclosed quarterly.

Hardly anybody launched a new commodity exchange traded fund last year. And that may be a signal to buy into the resources sector.

What the end of quantitative easing may mean for emerging markets.

Goldman Sachs has issued a big warning to clients hiding out in bond funds: You're about to lose your shirt. 

A look at what may happen to the the oil market if ailing Venezuelan President Hugo Chavez is no longer the country's leader.

The payout on the U.S. high-yield index dropped below 6 per cent last week for the first time in history.

________

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

Follow on Twitter: @eyeonequities

 

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