Gold prices are taking a dive this morning, falling below $1,400 (U.S.) an ounce, as haven flows into precious metals lighten up amid more signals that U.S. military action against Syria is not imminent. The TSX is likely to underperform the major U.S. indexes at the open as the resource-heavy stock market struggles against the downdraft in commodity pricing.
Gold is down close to 1.5 per cent, while silver is down nearly 2 per cent. Crude oil, which rallied this week over fears a strike against the Syrian regime could lead to a wider Middle East conflict and disrupt oil supplies, is also under pressure, down nearly 1 per cent.
After North American markets closed Thursday, the U.K. Parliament voted to reject the use of force in Syria. That raises the possibility that President Barrack Obama, already reluctant to intrude in the country's civil war, would have to take unilateral action against the al-Assad regime. According to The Wall Street Journal, the White House Thursday evening told congressional leaders that any strike on Syria would focus on removing chemical-weapons capability - undoubtedly an uneasy task that could take some time to plan out.
Gold marked a return to a bull market this week - defined as a rise of at least 20 per cent from intraday lows in late June. The metal is still up about 7 per cent for the month, despite continued concerns about the end of Federal Reserve stimulus measures that could lower inflationary risks.
U.S. stock futures are edging up amid a series of economic reports this morning that could shed a bit of light on the uneven recovery in the U.S. and prospects that the Federal Reserve's $85-billion-a-month in bond buying will be tapered starting next month.
September is historically a weak month for equities, and with uncertainties over Syria and Fed stimulus, traders will likely be reluctant today to engage in aggressive buying.
Emerging markets overnight continued their tepid recovery for the second day in a row. The MSCI Emerging Markets index rose 0.7 per cent, with the Indian rupee strengthening 0.5 per cent.
European stock markets are lower, however, despite a bit of positive news on the economic front: the European Commission's index of executive and consumer sentiment in the euro zone rose to 95.2 in August, from 92.5 in July, beating economists' forecasts.
Now, here's a closer look at what's going on this morning and what's to come.
MARKETS:
Equities:
Futures: S&P 500 +0.18 per cent; Dow +0.12 per cent; Nasdaq +0.23 per cent; S&P Toronto +0.01 per cent
Hong Kong's Hang Seng +0.12 per cent
Shanghai composite index +0.04 per cent
Japan's Nikkei -0.53 per cent
London's FTSE 100 -0.48 per cent
Germany's DAX -0.59 per cent
France's CAC 40 -0.61 per cent
Commodities:
WTI crude oil (Nymex Oct) -0.88 per cent at $107.84 (U.S.) a barrel
Gold (Comex Dec) -1.32 per cent at $1,394.20 (U.S.) an ounce
Copper (Comex Dec) -0.37 per cent at $3.25 (U.S.) a pound
Currencies:
Canadian dollar at 94.94 (U.S.), up 0.0005 from yesterday's North American close.
U.S. dollar index up 0.04 at 81.99
Bonds:
U.S. 10-year Treasury yield 2.77 per cent, up 0.004
ECONOMIC INDICATORS TO WATCH:
Canada's gross domestic product expanded 1.7 per cent in the second quarter, a touch higher than the market consensus of 1.6 per cent. First-quarter growth was revised down to 2.2 per cent from an earlier estimate of 2.5 per cent. On a month-over-month basis, GDP declined 0.5 per cent in June, driven lower by a labour dispute involving contractors in Quebec.
US personal spending was up 0.1 per cent in July; consensus was +0.3 per cent. Personal income rose 0.1 per cent, a bit below forecasts for a rise of 0.2 per cent.
(945 a.m. ET) The U.S. releases the Chicago PMI for August, with the business barometer index forecast to rise to 53.0 from 52.3.
(955 a.m. ET) U.S. releases the Reuter's/University of Michigan consumer sentiment index, forecast to hold steady at 80.0.
STOCKS TO WATCH:
Laurentian Bank reported third-quarter adjusted earnings per share of $1.31 versus Street expectations for $1.33 estimate
Alimentation Couche-Tard reported first-quarter adjusted earnings per share of $1.16 versus Street forecasts for 95 cents.
General Electric Co. plans to spin off its retail lending and credit-card business in an initial public offering as early as next year, according to The Wall Street Journal. Shares are up 1.2 per cent in the premarket.
Krispy Kreme Doughnuts Inc. said adjusted EPS was 14 cents, versus 16 cents expected by analysts. The company also projected guidance below Street views. Shares are down 11 per cent in the premarket.
Apache Corp. shares are up 6 per cent in the premarket after agreeing to sell a 33 per cent stake in its Egypt business to China Petroleum & Chemical Corp. for $3.1-billion.
Salesforce.com Inc. shares are up 9 per cent in the premarket after its earnings beat Street expectations.
ANALYST ACTIONS:
Desjardins Securities raised its price target on Royal Bank of Canada to $75 (Canadian) from $71.50 and reiterated a "buy" rating.
Desjardins Securities raised its target on Toronto Dominion Bank to $107.50 (Canadian) from $100 and maintained its "top pick" rating. BMO Nesbitt Burns raised its target on TD to $100 from $90.
BMO Nesbitt Burns hikes its target on Canadian Imperial Bank of Commerce to $90 from $87 and reiterated an "outperform" rating.
Stifel Nicolaus raised its price target on Facebook to $50 (U.S.) from $38.01 and reiterated a "buy" rating.
RBC Dominion Securities upgraded Apache Corp. to "outperform" from "sector perform" and raised its price target to $99 (U.S.) from $93.
JPMorgan downgraded Staples Inc. to "neutral" from "overweight" and cut its price target to $15 (U.S.) from $17.
EXPERT VIEWS:
Avery Shenfeld, economist with CIBC World Markets: U.S. consumption and incomes were both softer than expected in July, rising only 0.1 per cent each. The core PCE deflator also surprised by holding at 1.2 per cent vs an expected climb to 1.3 per cent. None of that is decisive for the Fed's thinking on tapering, which relates more to its desire to shift the focus of monetary policy to guidance rather than QE, but it could lean the timing of the first move towards October.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Why low TV ratings for CNBC are a bullish sign for markets.
A look at nine stock market reactions to major U.S. air strikes of the past.
Bond guru Jeff Gundlach on his latest favourites - including mortgage REITs.
Why the U.S. dollar is key to where commodities and emerging markets are heading next.
The easy money to be made in the big move up in gold miners may be over.
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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. You can also be notified using our dashboard feature when new articles appear from this author. Read more on using this feature here.
Darcy Keith