Jennifer Dowty, a Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
Investors will be keen to see if Tuesday's rally on Bay Street will continue into today - and so far the signs are positive. U.S. and Canadian stock futures are up around 0.3 per cent and crude futures are rising. Most commodities are higher, getting a boost from a weaker U.S. dollar this morning against major currencies.
European equities are well in the green today, even though economic data there this morning were mixed. In the United Kingdom, industrial production in April was up 1.2 per cent year over year, higher than the 0.6 per cent gain that was expected. Also positive was that March's figures were revised to 1.1 per cent, up from 0.7 per cent. In France, April's industrial production was lower than expected, down 0.1 per cent year over year, versus expectations of a gain of 1.0 per cent; however, the prior month was revised higher to 1.8 per cent from 1.3 per cent.
The S&P/TSX composite index rose 0.5 per cent Tuesday, despite flat performance on Wall Street. Gains in Toronto were largely due to a rally in oil prices, with the energy sector the top performer – one day after being the biggest decliner.
The U.S. Energy Information Administration (EIA) Tuesday provided its short-term energy outlook. In the report, the EIA forecast West Texas Intermediate prices will average $56 (U.S.) a barrel in 2015 and $62 a barrel in 2016. Given that the price of oil is currently near the $60 level, the report implied little movement in prices in the near-term and that the price of oil could remain range bound. Indeed, the price of oil has been locked in a tight trading range for the past two months, between $57.50 a barrel and $62 a barrel.
However, investors chose to focus on the production forecasts. The EIA stated that it expects total U.S. crude oil production to be roughly 9.6 million barrels in May and to generally decline from June 2015 through early 2016. This declining near-term production forecast gave oil a bid, along with more unrest in the Middle East.
Today at 1030 a.m. (ET) the U.S. EIA will release its crude oil inventory data. The Street is expecting a decline of 1.23 million barrels. A steeper decline in crude supplies will be positive for oil, suggesting that oil supplies are being worked down, and the price of oil could spike back up over $60 a barrel.
While investors are getting a respite from the 4 per cent slide in the S&P/TSX composite index since April 15, this feels like a sucker's rally. Just over 153 million shares traded Tuesday; the daily average volume is typically just under 200 million shares. So while the market saw a decent gain on Tuesday, it was not with much investor conviction. It appears that buyers are still on the sidelines.
In overseas markets today, German bond yields hit 1 per cent for the first time since September on Wednesday as long-term inflation expectations rose, although recent rollercoaster moves in fixed-income markets kept stock markets flat.
In the U.S., the 10-year treasury yield continues to climb, up again today to 2.49 per cent from 2.12 per cent at the end of May. Rates continue to rise as investors bet the Fed will begin raising interest rates sooner rather than later given the positive economic data.
Tuesday, there was yet another bullish employment report out of the U.S. The Department of Labor released the Job Openings and Labor Turnover Survey (JOLTS), which is closely monitored by Fed Chair Janet Yellen. Job openings were at their highest level since the JOLTS report began collecting data in December 2000.
Thursday's U.S. retail sales report, released at 830 a.m. (ET), will be another key indicator investors will be monitoring in order to gauge whether the Fed will be inclined to raise rates this year. The Federal Open Market Committee (FOMC) meeting takes place next Wednesday, and no lift off in rates is expected by most economists. The FOMC also meets on July 29 and September 17.
The ongoing Greek debt drama is also in focus, with a planned meeting between leaders of Germany, France and Greece on Wednesday in doubt after European Union officials said Athens' reform proposals to unlock new funding to ward off a debt default fell well short.
Now, here's a closer look at what's happening this morning and what is to come.
S&P 500 +0.3 per cent; Dow +0.3 per cent; Nasdaq +0.4 per cent
Hong Kong's Hang Seng -1.12 per cent
Shanghai composite index -0.15 per cent
Japan's Nikkei -0.25 per cent
London's FTSE 100 +0.40 per cent
Germany's DAX +0.81 per cent
France's CAC 40 +0.61 per cent
Stoxx 600 +0.82 per cent
WTI crude oil (Nymex Jly) +1.85 per cent at $61.25 (U.S.) a barrel
Gold (Comex Aug) +0.62 per cent at $1,184.70 (U.S.) an ounce
Copper (Comex Jul) +1.49 per cent at $2.75 (U.S.) a pound
Canadian dollar at 81.63 (U.S.), +0.0057
U.S. dollar index -0.502 at 94.66
U.S. 10-year Treasury yield 2.48 per cent, +0.04
No major North American reports scheduled.
STOCKS TO WATCH:
Dollarama reported Q1 EPS of 50 cents vs. the Street estimated 47 cents.
Hudson's Bay reported a net loss of 30 cents (Canadian) per share in its latest quarter, narrower than 97 cents a year earlier. Sales rose 11.7 per cent to $2.07-billion, slightly missing analysts' average estimate of C$2.08 billion.
Other earnings today include: ADF Group; Dominion Diamond Corp.; Enghouse Systems Ltd.; Evertz Technologies Ltd.; Krispy Kreme Doughnuts Inc.; Men's Wearhouse Inc.; North West Company Inc.; ViXS Systems.
Credit Suisse downgraded H&R Block to "neutral" from "outperform" and cut its price target to $35 (U.S.) from $37.
Canaccord Genuity downgraded Loyalist Group to "sell" from "buy" and cut its price target to 10 cents (Canadian) from 90 cents.
With files from wire services.