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 around the world have continued their retreat overnight and into this morning. U.S. index futures are down 0.25 per cent to 0.3 per cent. Markets in Europe are mixed with Italy's FTSEMIB up 1.4 per cent the FTSE up 0.3 per cent and the Dax down 0.1 per cent. In Asia the Nikkei fell 1.2 per cent. Earnings continue to drive significant trading action. Facebook was up slightly overnight following a positive report while Deutsche Bank has been hammered this morning (dragging on the Dax) on an earnings miss. This trading action confirms that markets had priced in high expectations for results this quarter.
In currency trading, the U.S. dollar continues to get hammered against pretty much everything following the U.S. Federal Reserve's statement that was widely seen as dovish. The central bank maintained its benchmark interest rate with no dissenters, as expected. The statement took a dovish turn with the Fed indicating several times that inflation remains below its 2 per cent objective (despite rising oil prices and growing inflation pressures elsewhere). Federal Open Market Committee members also took time to indicate that no changes are planned for its balance sheet as it plans to keep reinvesting principal payments until rate normalization is well underway.
The U.S. dollar has turned decisively downward following the Fed, which suggests that traders are figuring out that the Fed may not be as aggressively hawkish this year as the Street had been thinking. Gold, the yen and the Australian dollar are the top performers today, all gaining over 1.0 per cent. Political risk concerns continue to grow following what was reported as a tense and shortened conversation between U.S. President Donald Trump and Australia Prime Minister Malcolm Turnbull with the refugee ban and the U.S. pulling out of the Trans-Pacific Partnership causing a lot of friction between the leaders. I think there's a sense that if Mr. Trump can't get along with a natural ally like Australia, there could be a big storm coming which could really disrupt global trade.
There's also a big spotlight on the U.K. today. The Bank of England made no changes to interest rates or quantitative easing (QE), but its statement and outlook took a more hawkish tone. The Monetary Policy Committee raised its 2017 GDP forecast for the U.K. to 2.0 per cent from 1.7 per cent and indicated it sees consumption falling less than previous thought. Because of the stronger growth, members indicated they have less tolerance for rising inflation while others felt that there is room for unemployment to fall further before action is needed. Overall this suggests that the Bank is likely to remain in neutral for a while with neither additional monetary stimulus nor a shift in the hawkish direction tightening likely any time soon.
Sterling has been sliding on the news so far but with the press conference still to come and more Brexit developments on the way, the British pound may remain active through the day. Yesterday, the Brexit bill passed its first stage in the House of Commons while Scottish amendments that could have slowed the process were rejected. Today, the government is expected to release a white paper on its Brexit strategy which could also capture a lot of attention from traders.
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 -0.24 per cent; S&P 500 -0.26 per cent; Nasdaq: -0.29 per cent; TSX 60 -0.08 per cent
Equities
Japan's Nikkei -1.22 per cent
Shanghai composite index +0.31 per cent
Hong Kong's Hang Seng -0.57 per cent
Germany's DAX -0.07 per cent
London's FTSE +0.56 per cent
France's CAC 40 +0.16 per cent
Commodities
WTI crude oil (Nymex March) +0.37 per cent at $54.08 (U.S.) a barrel
Gold (Comex April) +1.21 per cent at $1,222.90 (U.S.) an ounce
Copper (Comex March) -0.61 per cent at $2.70 (U.S.) a pound
Currencies
Canadian dollar +0.21 at 76.86 cents (U.S.)
U.S. dollar index +0.01 at 101.19
Bonds
Canada 10-year bond yield +0.10 at 1.74 per cent
KEY ECONOMIC RELEASES
Japan consumer confidence
Euro Area producer price index and ECB economic bulletin
U.K. construction PMI, Bank of England monetary policy, announcement, minutes and quarterly inflation report (followed by press conference by governor Mark Carney)
China markets closed
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(8:30 a.m. ET) U.S. initial jobless claims for the week of Jan. 28. Estimate is 250,000, a decline of 9,000 from previous week.
Fewer Americans applied for unemployment benefits last week, another sign that U.S. workers are enjoying job security. The Labor Department says claims for jobless aid fell by 14,000 last week to a seasonally adjusted 246,000. Weekly unemployment claims have now come in below 300,000 for 100 straight weeks, longest streak since 1970. The less-volatile four-week average rose by 2,250 to 248,000. Overall, 2.06 million Americans are receiving unemployment benefits, down more than 8 per cent from a year ago.
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(8:30 a.m. ET) U.S. productivity and unit labour costs for Q4 (P). Consensus projections are annualized rate increases of 1.0 per cent and 2.2 per cent from Q3, respectively.
U.S. worker productivity slowed in the fourth quarter, leading to the smallest annual increase in five years. The Labor Department said on Thursday that nonfarm productivity, which measures hourly output per worker, rose at a 1.3 percent annual rate. Productivity in the third quarter was revised up to show a 3.5 percent pace of increase instead of the previously reported 3.1 percent rise. Economists had forecast productivity increasing at a 1.0 percent rate in the fourth quarter. Productivity rose 0.2 percent in 2016, the smallest gain since 2011, after increasing 0.9 percent in 2015.
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(10:30 a.m. ET) EIA natural gas report.
(4:30 p.m. ET) U.S. money supply
KEY STOCKS TO WATCH
Also see: Thursday's small-cap stocks to watch
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BCE Inc. reported a smaller-than-expected quarterly profit as it paid more to win wireless customers, and it forecast a 2017 profit that was below analysts' estimates. BCE said net income attributable to its shareholders rose to $657-million, or 75 cents per share, in the fourth quarter, from $496-million, or 58 cents per share, a year earlier. Operating revenue rose 1.8 per cent to $5.70-billion. On an adjusted basis, the company earned 76 cents per share, missing the average analyst estimate of 78 cents. However, the company boosted its annual dividend 5.1 per cent to $2.87. BCE forecast adjusted earnings of $3.42 to $3.52 per share for 2017, lower than analysts' average estimate of $3.62, according to Thomson Reuters I/B/E/S.
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Facebook edged up 1.4 per cent to $135.03 in heavy premarket trading following the company's strong quarterly earnings and revenue.
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Shutterfly dropped nearly 20 per cent to $41.50 after the digital imaging company reported a 30.6 per cent decline in quarterly profit.
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Mead Johnson jumped 25 percent to $87 after Reckitt Benckiser said it was in advanced talks to buy the baby formula maker for $16.7 billion.
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Ralph Lauren Corp. said Stefan Larsson, its chief executive for just over a year, will step down on May 1 following disagreements with chairman Ralph Lauren over the direction of the company. The company also reported a 12 percent fall in holiday quarter revenue to $1.71 billion, hurt by a slump in wholesale shipments to customers as consumer demand weakened. Ralph Lauren's shares fell 7.5 per cent to $78.3 in premarket trading.
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Delphi Automotive Plc's fourth-quarter earnings widely beat Wall Street expectations, as the automotive supplier continued to benefit from automaker interest as it helps develop technology in the evolution toward self-driving vehicles. Delphi reported a fourth-quarter profit of $1.83 per share, excluding one-time items, versus expectations of $1.60 per share by analysts polled by Thomson Reuters I/B/E/S. Its shares were up 3.95 per cent in premarket trading.
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ConocoPhillips reported a smaller-than-expected loss, helped by higher oil prices and lower costs. Its net loss narrowed to $35 million, or 3 cents per share, in the quarter, from $3.45 billion, or $2.78 per share. The year-ago quarter included a $2.74 billion charge, while the latest quarter included a gain of $52 million. On an adjusted basis, ConocoPhillips reported a loss of 26 cents per share, much smaller than the 42 cents analysts estimated. Revenue rose 7.2 percent to $7.25 billion, but missed the average analysts' estimate of $7.30 billion. ConocoPhillips said its production in the first quarter of 2017 would be between 1.54 million-1.58 million barrels of oil equivalent per day. Its shares were up 0.93 per cent in premarket trading.
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Merck & Co. Inc.'s quarterly revenue narrowly missed Wall Street expectations, hurt by lower-than-expected sales of its key immuno-oncology drug, Keytruda, and its diabetes medicines. Its shares were up 0.16 per cent in premarket trading.
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The New York Times Co. reported a 28.1 percent fall in quarterly profit, hurt by higher operating costs as the newspaper publisher ramps up its digital business. Net income attributable to the company fell to $37.1 million, or 24 cents per share, in the fourth quarter, from $51.7 million, or 31 cents per share, a year earlier. The company's revenue fell to $439.7 million from $444.7 million. Its shares were up 0.37 per cent in premarket trading.
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Earnings include: A. O. Smith Corp.; Amazon.com Inc.; Amgen Inc.; Apartment Investment and Management Co.; athenahealth Inc.; Autoliv Inc.; Ball Corp.; BCE Inc.; Becton Dickinson and Co.; Boston Scientific Corp.; Callaway Golf Co.; CMS Energy Corp.; Computer Sciences Corp.; ConocoPhillips; Daimler AG; Deutsche Bank AG; Eaton Corporation PLC; EQT Corp.; Essex Property Trust Inc.; Estee Lauder Companies Inc.; Ferrari NV; Genworth MI Canada Inc.; Harris Corp.; International Paper Co.; Kimco Realty Corp.; Kingsway Financial Services Inc.; Magellan Midstream Partners LP; Manitoba Telecom Services Inc.; MEG Energy Corp.; Merck & Co Inc.; Motorola Solutions Inc.; New York Times Co.; Nokia Corp.; Open Text Corp.; Parker-Hannifin Corp.; Philip Morris International Inc.; Ralph Lauren Corp.; Sirius XM Holdings Inc.; Snap-On Inc.; Valero Energy Partners LP; Visa Inc.; Wi-Lan Inc.; Xcel Energy Inc.; Xylem Inc.
With files from wire services