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.
Stock markets have bounced back overnight amid a flurry of earnings and manufacturing PMI reports. In the U.S. this morning, Nasdaq futures are up 0.5 per cent propelled higher by positive earnings reports out of Apple and Electronic Arts while Dow and S&P futures are up 0.2 per cent . In Europe, the Dax is up 1.0 per cent and the FTSE is up 0.6 per cent while in Asia, the Nikkei gained 0.5 per cent and the Hang Seng fell 0.2 per cent on its return to trading from Lunar New Year holidays.
Currency markets are mixed today. Sterling is rallying on indications that opposition to Prime Minister Theresa May's Brexit bill is in disarray and that it is expected to pass the House of Commons perhaps as soon as today. Sentiment toward Brexit has been changing with each step closer and additional clarity being seen as a positive particularly since U.K. economic data has been so strong since the vote. On the other hand, the yen has come under renewed pressure with Bank of Japan Governor Haruhiko Kuroda being forced to defend his policies from accusations by U.S. President Donald Trump that the Bank of Japan has been manipulating its currency lower. Gold and most of the other major currencies are consolidating yesterday's gains against the U.S. dollar at a higher level.
There is a lot of news due in the U.S. today that could potentially move the markets. The main event is this afternoon's U.S. Federal Reserve decision and statement. The central bank is not expected to change interest rates having announced a 0.25-per-cent increase at its last meeting in December. This time around there are three new regional Fed Presidents who have never voted before (Patrick Harker, Robert Kaplan and Neel Kashkari), but dissent is unlikely this time out.
The statement is likely to attract the most attention with traders looking for signs of whether the Fed is thinking about raising interest rates in March or not. With the new administration accusing China, Japan, Germany and others of currency manipulation and complaining about the high dollar, political pressure on the Fed from the campaign to raise rates aggressively appears to be fading heading into Chair Janet Yellen's last full year of her term.
For traders, the number of increases is important because at 100 and over the U.S. dollar is pricing in four or more increases this year. To get to four, and keep to gradual increases, the Fed would need to raise rates in March. If the Fed passes on March, the party line of three increases would still be possible, but my forecast of two would become more likely. A move away from March for the next hike would be seen as dovish (or at least less hawkish) and could decrease dollar support.
Also keep an eye on the statement for any discussion of the Fed's balance sheet. There has been chatter the Fed is starting to think about starting to slowly unwind the massive QE (quantitative easing) stimulus of the last several years. Any hints toward shrinking the balance sheet could be seen as hawkish and could offset one or more rate hikes and support the dollar.
Ahead of the Fed decision, there are a number of significant U.S. economic reports including ADP payrolls and Manufacturing PMI. ADP is expected to come in just below 170,000. The ISM PMI report could attract interest following yesterday's big miss in Chicago PMI. Both of these reports may be viewed through the lens of whether they increase or decrease pressure on the Fed to raise interest rates soon.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures (as of about 7:30 a.m. ET)
Dow +0.21 per cent; S&P 500 +0.21 per cent; Nasdaq: +0.52 per cent; TSX 60 +0.09 per cent
Equities
Japan's Nikkei +0.56 per cent
Shanghai composite index closed
Hong Kong's Hang Seng -0.18 per cent
Germany's DAX +0.97 per cent
London's FTSE +0.57 per cent
France's CAC 40 +1.28 per cent
Commodities
WTI crude oil (Nymex March) +0.70 per cent at $53.18 (U.S.) a barrel
Gold (Comex April) +1.40 per cent at $1,212.80 (U.S.) an ounce
Copper (Comex March) -0.62 per cent at $2.71 (U.S.) a pound
Currencies
Canadian dollar +0.08 at 76.53 cents (U.S.)
U.S. dollar index +0.01 at 101.19
Bonds
Canada 10-year bond yield -0.14 at 1.77 per cent
KEY ECONOMIC RELEASES
Japan manufacturing PMI
Euro Area and UK manufacturing PMI
China PMI and markets closed
**
(8:15 a.m. ET) U.S. ADP national employment report for January. Consensus is an increase of 165,000 from previous month
U.S. private employers added 246,000 jobs in January, above economists' expectations, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 165,000 jobs, with estimates ranging from 140,000 to 200,000. Private payroll gains in the month earlier were revised down to 151,000 from an originally reported 153,000 increase.
**
(10 a.m. ET) U.S. manufacturing ISM for January. Consensus is 55.0, up from 54.5 in December.
(10 a.m. ET) U.S. construction spending for December. Consensus is an increase of 0.2 per cent from November.
(10 a.m. ET) U.S. mortgage delinquencies for Q4
(9:30 a.m. ET) Canada market manufacturing PMI for January
(10:30 a.m. ET) EIA petroleum status report
(2 p.m. ET) U.S. Federal Open Market Committee announcement
Also: Canada auto sales for January; U.S. Ward's Total Vehicle Sales for January
KEY STOCKS TO WATCH
Also see: Wednesday's small-cap stocks to watch
**
Apple is set to open at its highest level since July, 2015, and shares of other technology heavyweights also rose. Facebook, which is expected to report after markets close, was up 0.90 percent. Alphabet, Microsoft and Nvidia gained.
**
Cloud-based communication platform Twilio rose 4 per cent to $30 after JMP Securities upgraded the stock to "outperform" from "market perform."
**
Mobileye was down 4.6 percent at $41 after Morgan Stanley downgraded the stock to "equal weight" from "overweight."
**
Canadian uranium producer Cameco Corp. said on Wednesday that Tokyo Electric Power (Tepco) , the operator of Japan's wrecked Fukushima nuclear plant, had scrapped its uranium supply contract with the company. Cameco, one of the world's largest uranium producers, said it considered Tepco's move to terminate the contract unfair and that it would pursue legal action. Cameco said Tepco cited a force majeure for ending the contract as it had been unable to operate its nuclear plants for 18 straight months due to Japanese regulations arising from the 2011 Fukushima nuclear accident.
**
Investment gains by Altria swelled profits during the fourth quarter, though the continuing decline of cigarette sales weighed on revenue and shares fell Wednesday Cigarette sales fell 1.9 per cent to $5.45 billion as shipment volume of Altria's cornerstone brand, Marlboro, declined 4.8 per cent. Overall cigarette shipments slumped 4.8 per cent. Its shares fell 1.3 per cent in premarket trading.
**
Aircraft parts maker Spirit AeroSystems Holdings Inc. reported a 21.8 percent fall in quarterly profit, hurt in part by lower production deliveries on the Boeing 747 and 777 programs. Its shares fell 0.08 per cent in premarket trading.
**
Multi-industry U.S. manufacturer Johnson Controls International Plc reported an 11.1 per cent rise in quarterly profit, helped by strength in its power solutions business. It also reiterated its 2017 earnings per share forecast of $2.60-$2.75. However, its shares fell 4.5 per cent in premarket trading.
**
Earnings include: Allstate Corp.; Altria Group Inc.; Anthem Inc.; ATS Automation Tooling Systems Inc.; Baxter International Inc.; Cabot Corp.; Calian Group Ltd.; Celanese Corp.; Dominion Resources Inc.; Edwards Lifesciences Corp.; Exco Technologies Ltd.; Facebook Inc.; Fidelity National Financial Inc.; Ingersoll-Rand PLC; Johnson Controls International PLC; Marathon Petroleum Corp.; Metlife Inc.; Owens-Illinois Inc.; Pitney Bowes Inc.; PPL Corp.; Siemens AG; Symantec Corp.
**
With files from wire services