The Before the Bell report is constantly updated to reflect the latest news developments and market moves in the premarket. Check back later for updates.
Stocks are heading for a steep selloff at the start of the North American trading day, as investors brace for what could be the first U.S. government shutdown in 17 years. A flare-up in political tensions in Italy over the weekend, and a disappointing economic report out of China overnight, are further undermining investors' confidence just as early October - one of the most seasonal weakest periods of the year - gets underway.
The selloff started in Asia overnight, led by a more than 2-per-cent drop in Japan's Nikkei index, as broad-based weakness in the U.S. dollar pointed to trouble ahead for the export-dependent economy. Stocks in Shanghai bucked the trend ahead of the start of week-long holidays. A final reading of the HSBC China Purchasing Managers' index for September came in a 50.2, down from a preliminary reading of 51.2. The data suggest economic growth may have slowed in late September, even though the index was still higher than August's reading of 50.1.
European stocks are down sharply this morning, hammered by both the budgetary mess in Washington and renewed chaos in Italian politics. Over the weekend, former Prime Minister Silvio Berlusconi's party said all five members of its cabinet members will resign. Mr. Berlusconi said he engineered the crisis because he opposes a planned increase in the sales tax. Italian President Giorgio Napolitano and Italian Prime Minister Enrico Letta have devised a plan to try to avoid snap elections in the wake of the resignations, but the outcome is unclear. Italy's FTSE MIB index is down 1.8 per cent.
But the main focus is on the stalemate in the U.S. Congress as the country braces for a possible shutdown that threatens to significantly slow the world's biggest economy. The Republican-led House of Representatives this weekend passed a funding bill that included a one-year delay to the implementation of the so-called Obamacare health reforms and it also repealed a tax that would pay for it. The bill now goes to the Democrat-controlled Senate where it's almost certain to get rejected. A spending bill must get passed by midnight tonight to prevent a partial government shutdown that see 800,000 workers go on furlough.
Neither side wants a shutdown but there are few signs so far this morning of a concrete plan from either side to avoid one. While it's possible emergency legislation to avoid a shutdown could still get passed today, markets would still be left with an ever bigger fiscal concern ahead: the dispute over raising the $16.7-trillion debt ceiling.
The Treasury expects the limit will be reached Oct. 17. Failure to raise the limit would raise the prospect of a sovereign default on U.S. debt - a most unwelcome prospect by market players. Yet, U.S. debt is still an attraction for safety-oriented investors, with the yield on the 10-year Treasury this morning at its lowest level in seven weeks.
Now, here's a closer look at what's going on this morning and what is to come.
MARKETS:
Equities:
Futures: S&P 500 -0.83 per cent; Dow -0.81 per cent; Nasdaq -0.72 per cent; S&P Toronto -0.72 per cent
Hong Kong's Hang Seng -1.50 per cent
Shanghai composite index +0.69 per cent
Japan's Nikkei -2.06 per cent
London's FTSE 100 -0.81 per cent
Germany's DAX -0.86 per cent
France's CAC 40 -1.12 per cent
Commodities:
WTI crude oil (Nymex Nov) -1.16 per cent at $101.68 (U.S.) a barrel
Gold (Comex Dec) -0.61 per cent at $1,331.10 (U.S.) an ounce
Copper (Comex Dec) -0.20 per cent at $3.32 (U.S.) a pound
Currencies:
Canadian dollar at 97.20 (U.S.), up 0.0022 from Friday's North American close.
U.S. dollar index down 0.25 at 80.27
Bonds:
U.S. 10-year Treasury yield 2.60 per cent, down 0.02
ECONOMIC INDICATORS TO WATCH:
Statscan said gross domestic product in July grew 0.6 per cent from June, slightly higher than the 0.5 estimate by economists. On an annualized basis, it grew 1.4 per cent.
Canada's industrial product price index rose 0.2 per cent in August, matching market expectations. Prices for raw materials used by manufacturers increased 0.9 per cent in August, above the market consensus of a 0.3 per cent rise but slower than the revised 4.3 per cent increase in July.
STOCKS TO WATCH:
Brookfield Property Partners has offered to buy Brookfield Office for $19.34 a share, above its closing price on Friday of $17.29 (Canadian).
Canadian Natural Resources Ltd. says its partnering with a subsidiary of Total SA in an offshore exploration program in South Africa.
SNC-Lavalin has begun a process to sell an equity stake in AltaLink, a regulated electricity transmission company in Alberta.
Earnings today include Walgreen Co.
ANALYST ACTIONS:
Canaccord Genuity cut its price target on BlackBerry to $7 (U.S.) from $9 and maintained a "hold" rating, while Goldman Sachs cut its price target to $9 from $10 and maintained a "neutral" rating. Nomura cut its target to $8 from $9. Bernstein upgraded BlackBerry to "market perform" from "underperform."
Canaccord Genuity downgraded Martinrea International Inc. to "hold" from "buy" and cut its price target to $11.50 (Canadian) from $14.75.
Desjardins Securities reiterated a "buy" rating and $27.50 (Canadian) price target on Bell Aliant, commenting that the recent pullback in its share price offers dividend investors "a good entry point in a well-managed company."
Global Equities Research raised its price target on Apple to $725 (U.S.) from $650 and reiterated an "overweight" rating.
Maxim Group downgraded J.C. Penney to "hold" from "buy" and suspended its prior price target of $22 (U.S.).
Citigroup upgraded J.M. Smucker Co. to "buy" from "neutral" with a price target of $119 (U.S.), up from $115.
Canaccord Genuity raised its price target on Pandora Media to $30 (U.S.) From $25.
Industrial Alliance Securities upgraded Orbit Garant Drilling to "buy" from "hold" but cut its price target to $1.45 from $1.75. CIBC World Markets cut its price target to $1.15 from $1.70 and maintained a "sector underperformer" rating.
CIBC World Markets cut its price target on Mirabela Nickel Ltd. to 4 cents a share from 10 cents and maintained a "sector underperformer" rating.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Why you should invest in whatever Wall Street hates.
It's extremely premature to declare it's the end of the commodities bull market.
Remember that the seasonal weak period does not end until late October.
How market bubbles get created and how to avoid the next one.
Be cautious about jumping into the crowdfunding investment trend.
Reasons for not selling stocks even if you think a crash is looming.
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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