Some soothing words from Chinese authorities overnight playing down the nation's liquidity crunch have helped to stabilize overseas markets this morning, and stock futures suggest some decent gains in Canada and the U.S. when exchanges open here.
Major commodities, including gold and copper, are posting a mild recovery after taking a beating over the past several trading sessions, helped by a bit of weakening in the U.S. dollar against major currencies. Yields on long-term government bonds are easing back below the nearly two-year highs reached on Monday.
An onslaught of U.S. data is being released this morning. So far, they show durable goods orders and housing prices rising more than expected. That is positive in that it suggests continued recovery in the U.S. economic picture - but it also keeps alive fears about the looming end of the U.S. Federal Reserve's $85-billion bond-buying program.
An official with the People's Bank of China told a news conference overnight in Shanghai that the central bank will be monitoring money-market rates and guide them to a "reasonable range." He said seasonal factors were behind the rates soaring in value, and that will eventually fade.
The tightening credit conditions in China have been a major factor behind the plunge in stock markets over the past week. Today, there were indeed further signs the credit crunch is easing, with the overnight repurchase rate dropping 47 basis points to 6 per cent, according to Bloomberg. That's less than half of where it stood on June 20.
Meanwhile, U.S. Fed officials are doing their part to try to calm market participants caught up in a frenzy of concern about tightening monetary conditions. On Monday, Minneapolis Fed President Narayana Kocherlakota said the Fed had not become more hawkish, and Dallas Fed President Richard Fisher said in a Financial Times interview that big money is organizing itself like "feral hogs" to test the Fed. The comments helped stocks to end off their lows on Monday - and speculation that the U.S. central bank may try to present itself as a little less hawkish in the days ahead could help to ease the downward pressure on stocks for the moment.
Now, here's a closer look at what's going on this morning and what's to come.
Futures: S&P 500 +0.4 per cent; Dow +0.4 per cent; Nasdaq +0.5 per cent; TSX Toronto +0.6 per cent
Hong Kong's Hang Seng +0.21 per cent
Shanghai composite index -0.16 per cent
Japan's Nikkei -0.72 per cent
London’s FTSE 100 +0.88 per cent
Germany’s DAX +1.61 per cent
France's CAC 40 +1.32 per cent
WTI crude oil (Nymex Aug) +0.88 per cent at $96.01 (U.S.) a barrel
Gold (Comex Aug) +0.46 per cent at $1,283.00 (U.S.) an ounce
Copper (Comex Sep) +1.29 per cent at $3.07 (U.S.) a pound
Canadian dollar up 0.0027, or 0.28 per cent, at $0.9548 (U.S.)
U.S. dollar index down 0.08 at 82.34
U.S. 10-year Treasury yield 2.54 per cent, up 0.03
Canada 10-year government bond yield 2.49 per cent, up 0.04
STOCKS TO WATCH:
Lennar Corp. shares are up more than 5 per cent in the premarket after the homebuilder reported quarterly revenues better than Street expectations and said the housing recovery appears "solid."
Other earnings today include: Barnes & Noble Inc.; Carnival Corp.; Walgreen Co.; Apollo Group Inc.; Smith & Wesson Holding Corp.
TMX Group will be in focus after the Globe and Mail reported that a group including Royal Bank of Canada is launching a competitor to the Toronto Stock Exchange.
Research In Motion Ltd. shares are up 2.4 per cent in the premarket after the company, as expected, launched a service today allowing government agencies and corporate clients to secure and manage devices powered by Google Inc.’s Android platform and Apple Inc.’s iOS operating system.
ECONOMIC INDICATORS TO WATCH:
U.S. durable goods orders in May rose by 3.6 per cent from the previous month, which matched the increase in April, which was revised higher from initial estimates. It also exceeded economists' expectations for a 3.2 per cent rise. Excluding transportation, orders for durables rose 0.7 per cent.
The U.S. S&P/CaseShiller home price index for 20 major cities rose a record 12.1 per cent from a year earlier, stronger than the expected gain of 10.6 per cent. In March in rose 10.8 per cent.
The U.S. Federal Housing Finance Agency's house price index for April rose 7.4 per cent from a year ago.
(10 a.m. ET) The U.S. Commerce Department reports on new home sales in May. Economists expect 460,000 annualized sales.
(10 a.m. ET) The U.S. Conference Board issues its consumer confidence index index for June. Economists expect a reading of 75.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
The upcoming U.S. earnings season is already looking like a train wreck.
Three scenarios for markets this summer - and the one that's most likely to unfold.
Why gold prices could be heading to their pre-quantitative easing days.
Microsoft appears close to announcing a major restructuring.
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.