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Before the Bell: Big oil sands deal can't lift TSX futures

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.

The big plunge in crude oil prices has continued overnight and into this morning. West Texas Intermediate is down 2.3 per cent breaking under $50 (U.S) while Brent is down 2 per cent falling below $52 after breaking $55.

Through the winter, traders had held up oil hoping that OPEC production cuts would offset the return of U.S. shale production as prices increased. Big buildups in U.S. inventories over the winter were seen as temporary. A week ago it looked like the big build phase was over but this week it roared back to life causing traders to throw in the towel. Between reports suggesting that U.S. oil production could break their 1970s record next year and talk that Russia has been slow to keep its promises, the oversupply issues that sparked the market share war of recent years could be heading back to square one.

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Plunging oil prices have pulled the prices of energy stocks and resource currencies down the drain as well. Oil sensitive currencies like the Canadian dollar and Norwegian krone have been hit particularly hard but other resource dollars like the Australian and New Zealand dollars have been impacted as well.

Big news in Canada Thursday is an oil-sands deal under which Royal Dutch Shell is reducing its in-situ and undeveloped oil-sands holdings in Alberta with a net $7.25-billion (U.S.) pair of agreements that will see it sell most those interests to Canadian Natural Resources Ltd. in exchange for cash and a nearly 9-per-cent stake in the company, one of Canada's largest energy firms. In the second agreement, Shell and Canadian Natural intend to jointly buy Marathon Oil Canada Corp. from an affiliate of Marathon Oil Corp. for $1.25-billion each in cash. Marathon Oil Canada owns a 20-per-cent interest in the Athabasca Oil Sands Project. Shell's U.S.-listed shares were down 2.21 per cent in premarket trading.

This morning finds U.S. index futures trading down 0.1 per cent with the oil light and technology heavy Nasdaq down less than the Dow and S&P. In Europe, the FTSE with its higher energy weighting is down 0.7 per cent while the Dax is down 0.2 per cent.

In currency action, the U.S. dollar remains well supported between yesterday's very strong ADP payrolls report and tomorrow's nonfarm payrolls. The British pound has stabilized while gold remains under pressure with traders fully expecting a rate hike next week and increasing speculation another increase could come in June.

The European Central Bank announcement is out with no changes. A one and done taper to QE (quantitative easing) is expected for April with interest rate and QE levels expected to hold through the rest of the year after that. The ECB seems to want to stay the course until the elections due in the Netherlands, France, Germany and Italy over the next year are done. It will be interesting to see if rising inflation or external events force them to change their plans in the coming months. Euro pairs could be active around the decision and the press conference by ECB President Mario Draghi.

Now, here is a closer look at key market data, and corporate and economic news.

MARKET DATA:

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Futures (as of about 7:30 a.m. ET)

Dow -0.12 per cent; S&P 500 -0.11 per cent; Nasdaq: -0.07 per cent; TSX 60 -0.14 per cent

Equities
Japan's Nikkei +0.43 per cent
Shanghai composite index -0.74 per cent
Hong Kong's Hang Seng -1.18 per cent 
Germany's DAX -0.22 per cent
London's FTSE -0.76 per cent
France's CAC 40 -0.19 per cent

Commodities
WTI crude oil (Nymex April) -2.3 per cent at $49.12 (U.S.) a barrel
Gold (Comex April) -0.21 per cent at $1,206.90  (U.S.) an ounce
Copper (Comex May) -1.29 per cent at $2.57 (U.S.) a pound

Currencies
Canadian dollar -0.22 at 73.93. cents (U.S.)
U.S. dollar index -0.04 at 102.03

Bonds
Canada 10-year bond yield -0.04 at 1.78 per cent

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KEY ECONOMIC RELEASES

China CPI, PPI, aggregate yuan financing and new yuan loans
Euro Area - ECB monetary policy meeting and E.U. leaders meet in Brussels

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(8:30 a.m. ET) Canada capacity utilization for Q4. Estimate is 82.5 per cent, up from 81.9 per cent in Q3.

Canadian industries ran at 82.2 percent of capacity in the fourth quarter of 2016, up 0.6 percentage points from the third quarter, Statistics Canada said on Thursday. The manufacturing sector fell slightly to 81.7 percent of capacity from 81.8 percent in the third quarter, due to a decrease in durable goods manufacturing.
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(8:30 a.m. ET) Canada new housing price index for January. Estimate is an increase of 0.1 per cent from December and up 3.0 per cent year over year.
(8:30 a.m. ET) U.S. initial jobless claims for week of March 4. Estimate is 238,000, an increase of 15,000 from previous week.
(8:30 a.m. ET) U.S. import prices for February. Consensus is an increase of 0.1 per cent from January and 4.4 per cent year over year.

KEY STOCKS TO WATCH

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

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Western Energy Services Corp. (WRG-T) is buying  Savanna Energy Services Corp. (SVY-T) for about $533-million, creating the second largest drilling and well servicing contractor in Canada.

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Shares of e.l.f Beauty (ELF-N) jumped 19 percent premarket after the cosmetics maker reported quarterly revenue that beat analysts' average estimate.

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Tailored Brands (TLRD-N) tumbled nearly 28 percent after the Jos. A. Bank brand's owner reported a wider-than-expected loss in the fourth quarter.

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Sears Holdings Corp. (SHLD-Q) on Thursday reported a loss of $607 million in its fiscal fourth quarter.

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Staples (SPLS-Q) earned an adjusted 25 cents per share for its latest quarter, a penny a share below estimates. Sales also fell short of forecasts. It's shares fell 6.8 per cent in premarket trading.

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Earnings include: Canadian Energy Services & Technology Corp.; Cargojet Inc.; Element Financial Corp.; Hardwoods Distribution Inc.; High Arctic Energy Services Inc.; Intertape Polymer Group Inc.; KP Tissue Inc.; Lumenpulse Inc.; Pretium Resources Inc.; Pure Technologies Ltd.; Tahoe Resources Inc.; Timmins Gold Corp.

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With files from wire services

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