Colin Cieszynski
The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.
Since the beginning of 2016, bears have had the run of the markets, driving indexes, commodities and some currencies substantially lower. Wednesday's U.S. selloff and rebound had many of the hallmarks of a selling climax, with big plunges followed by a big rebound.
Overnight trading has been mixed. Asia Pacific markets followed the positive U.S. lead in to start but slumped in the afternoon on no news to end with the Nikkei down 2.4 per cent and the Hang Seng down 1.8 per cent. Australian markets managed to hold off the bears' counterattack and finish up about 0.4 per cent, a similar gain to what we have been seeing in Europe so far this morning.
Wednesday's positive reversals suggest that the worst of the recent bear market may be behind us, although the bottoming process could be choppy, continuing to create short-term trading opportunities. After giving up the ghost Wednesday, today looks like a key day for the bears. If they can't muster up enough strength for another big push downward, they may finally be exhausted, which could set the stage for a significant bounce out of deeply oversold conditions in the coming days and weeks.
So far today, U.S. index futures have been trading down about 0.4 per cent and have stabilized over the last few hours, which looks more like normal backing and filling than a renewed bearish push. Gold and the Japanese yen are trading flat, suggesting that capital has stopped flowing into defensive havens.
Crude oil, particularly WTI, is trading lower this morning, stabilizing near $27.00 and above Wednesday's lows, but down from the highs. A bigger-than-expected increase in U.S. API oil inventories took some of the wind out of its sails overnight. Oil, natural gas and gasoline may all be active through this morning, with weekly inventory reports due from the DOE and EIA.
The Canadian dollar continues to strengthen on the back of Wednesday's decision by the Bank of Canada to not cut interest rates as some had been speculating. The loonie is gaining slightly on the greenback today, in contrast to other oil currencies like the Norwegian krone and the Russian ruble, which remains under pressure.
The ECB is not expected to make any changes to interest rates or its QE program, having underwhelmed the Street with a few fixes around the edges at its highly hyped December meeting. Its next significant QE review is not until March. Comments from President Mario Draghi at his press conference on the impact of lower oil prices on the economy and inflation could attract some interest. Once we're past the ECB, with the Bank of Canada done for now and the Fed expected to do nothing at its upcoming meeting, focus could turn to the Bank of Japan and what it may or may not do about the rising yen at its meeting next week.
The number of people seeking unemployment benefits in the United States rose last week to the highest level since July, though applications remained at historically low levels. The Labor Department says weekly applications for jobless aid rose 10,000 to a seasonally adjusted 293,000. The four-week average, a less volatile measure, increased to 285,000, the highest since April.
In addition to energy news, there is another round of earnings reports today for markets to absorb. So far, the highlight has been very strong results out of insurer Travelers. The Philadelphia Fed survey may present a test of bulls conviction with another bearish reading expected in the wake of last week's poor Empire Manufacturing report.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.4 per cent; Dow -0.5 per cent; Nasdaq: -0.4 per cent
TSX 60 -5.6 points
Equities
Hong Kong's Hang Seng -1.82 per cent
Shanghai composite index -3.25 per cent
Japan's Nikkei 225 -2.43 per cent
London's FTSE +0.45 per cent
Germany's DAX +0.61 per cent
France's CAC 40 +0.49 per cent
Commodities
WTI crude oil (Nymex Mar) -1.20 per cent at $28.01 (U.S.) a barrel
Gold (Comex Feb) -0.54 per cent at $1,100.10 (U.S.) an ounce
Copper (Comex Mar) +0.15 per cent at $1.96 (U.S.) a pound
Currencies
Canadian dollar +0.0021 at 69.11 cents (U.S.)
U.S. dollar index -0.031 at 99.060
Bonds
U.S. 10-year Treasury yield -0.02 at 1.96 per cent
KEY ECONOMIC RELEASES
(11 a.m. ET) EIA Petroleum Status Report
KEY CORPORATE NEWS
Royal Bank of Canada is selling RBC General Insurance to Aviva Canada for $582 million. The bank has also signed Aviva Canada to provide a full suite of home and auto insurance to RBC customers under a 15-year strategic agreement. As part of the agreement, about 575 RBC employees will move to Aviva.
Canadian Pacific Railway Ltd, the unwanted suitor of U.S. railroad Norfolk Southern Corp, reported a 29-per-cent decline in fourth-quarter profit as falling prices for commodities such as oil and coal hit freight volumes. Canada's No. 2 railroad said its net income slipped to $319-million, or $2.08 per share, in the three months ended Dec.31, from $451-million, or $2.63 per share, a year earlier. Revenue slipped 4 per cent to $1.68 billion.
Dow components Travelers and Verizon inched up in the premarket after both companies reported a profit that topped expectations.
Kinder Morgan shares were up 2.8 per cent in the premarket at $12.35 after the pipeline company swung to a quarterly loss.
Verizon Communications Inc. on Thursday reported fourth-quarter net income of $5.39 billion, after reporting a loss in the same period a year earlier. On a per-share basis, the New York-based company said it had net income of $1.32. Earnings, adjusted for non-recurring gains, came to 89 cents per share. The results exceeded Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of 88 cents per share.
Other earnings today include: AlarmForce Industries Inc., Alaska Air Group Inc., American Express Co., BB&T Corp.,, Celanese Corp., E*TRADE Financial Corp., Huntington Bancshares Inc., J B Hunt Transport Services Inc., PPG Industries Inc., Schlumberger NV., Southwest Airlines Co., Starbucks Corp., Union Pacific Corp.
Also see: Thursday's small-cap stocks to watch
With files from Reuters and The Canadian Press