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Before the Bell: Markets shaken by Brussels terror attack

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.

News this morning of terrorist attacks in Brussels at the airport and a Metro station have rattled world markets. Initial reports of the blasts sparked a rush of capital from risk markets into defensive havens - in other words out of equity indexes and into gold, the Japanese yen and to a lesser extent, the U.S. dollar and Swiss franc.

As the morning has progressed, the initial moves have subsided a bit, with markets reversing back from their early highs or lows. Belgium's index is down only 0.3 per cent while other European bourses like London's FTSE and German's DAX are down about 0.5 per cent. U.S. index futures for the Dow and S&P are trading down 0.3 per cent to  0.5 per cent so far today.

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We could see a more lasting impact in specific stocks and sectors. Airlines in Europe are falling with Air France down 4.7 per cent and IAG, owner of British Airways down 3.0 per cent. In North America today, American Airlines could come under particular pressure, as one of the airport explosions was reportedly near its departure counter, but other airlines that fly overseas could be impacted as well. In Canada, Transat and Air Canada could see a bigger impact than the more North American-focused Westjet.

One would think that security companies could rally on a day like this, but G4S in the U.K. is trading down about 1.5 per cent on the day. It's possible that considering Brussels has been on high alert for a terrorist attack for some time, forces were likely on alert following the arrest in Brussels of a key terrorist suspect earlier this week. Yet, a big attack still happened. The limits of security appear to have been exposed and traders may be seeing this tragic event as a sign more security may not be the answer.

On the topic of security, Apple could be active again today on reports that government officials may have found a way around iPhone security, putting the current court case demanding the iPhone maker open its security to government agencies on hold. Apple may also continue to see reaction to Monday's new cheaper mainstream product announcements, which underwhelmed traders Monday afternoon.

The economic news of the day has been overshadowed by today's events in Brussels. Overnight news has been mixed. Flash manufacturing PMI reports for Germany, Japan and France were below expectations and some fell below 50, indicating the manufacturing sector may be falling back into recession, but flash service PMI reports beat the Street. In Germany, IFO survey results were better than expected while ZEW survey results were worse than expected, indicating business are more confident about the economy than investors.

Later this morning, US flash PMI is due while comments from Chicago Fed President Evans may give a better indication of how committed the dovish camp at the Fed is relative to other factions who have been trying to suggest April could still be a live meeting for a rate hike, despite last week's dovish signals. In Canada, it's federal budget day, which could impact specific sectors with increased infrastructure spending expected. That could impact the construction and engineering sectors. API crude oil inventories late in the day may influence trading in crude oil.

Now, here is a closer look at key market data, as well as the main corporate and economic news of the morning.

MARKET DATA:

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Futures

Dow -0.25 per cent; S&P 500 -0.38 per cent; Nasdaq: -0.40 per cent; TSX 60 -0.45 per cent

Equities
Japan's Nikkei 225 +1.94 per cent
Shanghai composite index -0.60 per cent
Hong Kong's Hang Seng -0.08 per cent
Germany's DAX -0.44 per cent
London's FTSE -0.61 per cent
France's CAC 40 -0.68 per cent

Commodities
WTI crude oil (Nymex April) -0.26 per cent at $41.41 (U.S.) a barrel
Gold (Comex April) +0.64 per cent at $1,252.20 (U.S.) an ounce
Copper (Comex May) -0.41 per cent at $2.283 (U.S.) a pound

Currencies
Canadian dollar +0.0010 at 76.49 cents (U.S.)
U.S. dollar index +0.279 at 95.567

Bonds
U.S. 10-year Treasury yield -0.01 at 1.91 per cent

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KEY ECONOMIC RELEASES

(9 a.m. ET) U.S. FHFA house price index for January. Consensus is for a 0.5 per cent rise on a month-over-month basis, or a gain of 5.9 per cent from a year ago.

(945 a.m. ET) U.S. Markit flash manufacturing PMI.

(10 a.m. ET) U.S. Richmond Fed manufacturing index.

KEY CORPORATE NEWS

The Brussels terror attack is moving travel stocks in the premarket. Shares of cruise operator Carnival Corp were down 3.7 per cent at $47.93, while travel-website operator Expedia was off 1.7 per cent at $109 and peer Priceline fell 1 per cent to $1336.60. American Airlines was off 1.1 per cent at $43.

Canadian miner Eldorado Gold's Greek unit Hellas Gold said on Tuesday it was granted a license from Greece's environment and energy ministry for its Olympias mine project.

Earnings today include: Cintas Corp.; Five Below Inc.; Nike Inc.; Red Hat Inc.; Worthington Industries Inc.

Also see: Tuesday's small-cap stocks to watch

With files from wire services

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