Jennifer Dowty
Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
Good Friday morning to you. North American markets are poised to extend Thursday's positive performance, with futures pointing to a higher opening across the board.
The tech heavy Nasdaq is poised to lead the gains among the indexes, with shares of Microsoft, Amazon and Google's new Alphabet holding company all soaring in the premarket after better-than-expected quarterly results. But other sectors are also seeing a lift, fuelled in part by a surprise interest rate cut by the People's Bank of China. It lowered its benchmark lending rate by 25 basis points to 4.35 per cent.
In the U.S., Dow futures are up by 156 points, S&P500 futures are higher by 17 points, and Nasdaq futures are ahead by 66 points. In Canada, S&P/TSX 60 Index futures are up 6 points.
Overseas in the Pacific Rim, is was a sea of green with all major markets closing the week in positive territory. In Japan, the Nikkei 225 advanced 2.1 per cent. In China, the Shanghai composite and Shenzhen composite increased 1.3 per cent and 2.9 per cent, respectively. The Korean Kospi gained 0.9 per cent, and in Australia, the S&P/ASX 200 jumped 1.7 per cent.
Major European markets are also in rally mode. On Thursday, the European Central Bank President, Mario Draghi, hinted at more stimulus measures to come at the December ECB meeting. This sent major European equity markets higher yesterday, and that momentum has extended into today. The Euro fell sharply on Thursday to $1.11 per U.S. dollar but remains stable today, just below $1.11. The London FTSE is up 1.6 per cent, the German DAX is up 2.9 per cent and in France the CAC is up 2.7 per cent.
European economic releases were positive. In Germany, the October Composite Purchasing Manager' Index (PMI) came in at 54.5, above expectations of 53.7 and the prior month's reading of 54.1. In France, the October PMI was 52.3, ahead of forecasts of 51.6, and the prior month's reading of 51.9.The euro zone October PMI also beat expectations coming in at 54.0 versus the Street's forecast of 53.4, and ahead of September's reading of 53.6.
On Thursday, the S&P/TSX composite index climbed 174 points, or 1.3 per cent, with 85 per cent of stocks in the index closing in positive territory. All sectors closed in positive territory, with the sole exception being the Health Care sector.
On the commodities front, West Texas Intermediate oil futures are stable in the mid-$40 (U.S.) range and relatively unchanged this morning. Watch for the Baker Hughes rig data report released today at 1 p.m. (EST). The price of spot gold is also stable near $1,171 (U.S.), up a few dollars this morning. However, the price of natural gas futures continues to decline with the price now at $2.36 (U.S.). On Thursday, the weekly natural gas storage report showed another increase in inventories. However, shares of natural gas levered energy stocks, such as Encana, were relatively unchanged, indicating that we may have seen a potential bottom for energy stocks.
Here is a snapshot as to how this earnings season is faring. In the U.S., 142 companies in the S&P 500 Index have reported quarterly results. 42 per cent of companies have reported better-than-expected sales, and 75 per cent of companies have delivered better-than-expected earnings. In terms of growth, 45 per cent of companies have reported positive year-over-year sales growth and 56 per cent of companies have reported positive year-over-year earnings growth.
Next week, 30 companies in the S&P/TSX composite index will be reporting quarterly earnings.
Bottom line: The key message we are hearing from the major central banks around the world is that accommodating measures will be taken to support and stimulate economic growth. As I mentioned yesterday, I believe market momentum will continue to build as we work our way through the traditionally strong fourth-quarter and that we will see U.S. markets revisit their record highs.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 +1.0 per cent; Dow +1.0 per cent; Nasdaq: +1.6 per cent
Equities
Hong Kong's Hang Seng +1.34 per cent
Shanghai composite index +1.28 per cent
Japan's Nikkei +2.11 per cent
London's FTSE 100 +1.02 per cent
Germany's DAX +2.60 per cent
France's CAC 40 +2.41 per cent
Stoxx 600 +1.89 per cent
Commodities
WTI crude oil (Nymex Dec) 0.42 per cent at $45.57 (U.S.) a barrel
Gold (Comex Dec) +0.95 per cent at $1,177.30 (U.S.) an ounce
Copper (Comex Dec) +1.26 per cent at $2.41 (U.S.) a pound
Currencies
Canadian dollar +0.19 at 76.56 cents (U.S.).
U.S. dollar index +0.088 at 96.46
Bonds
U.S. 10-year Treasury yield 2.07 per cent, +0.04
ECONOMIC INDICATORS:
Canada's inflation rate slowed more than economists forecast in September as a drop in gasoline prices exerted more pressure than rising food costs. The consumer price index rose 1 percent in September from a year earlier, after it rose 1.3 percent in the prior two months, Statistics Canada said Friday from Ottawa. The core rate, which excludes eight volatile products such as gasoline, tobacco and mortgage interest remained at 2.1 percent. Economists surveyed by Bloomberg forecast the total rate would rise 1.1 percent and core by 2.2 percent.
(9:45 a.m. ET) U.S. reports its Markit Flash manufacturing PMI for October.
CORPORATE NEWS:
Procter & Gamble Co reported its biggest drop in quarterly sales in seven quarters, hurt by weak demand across product categories and a strong dollar. The company also cut its full-year revenue growth forecast, saying it now expected the strong dollar to have a bigger impact of 5-6 percentage points than the 4-5 percentage points anticipated earlier. P&G shares fell about 1 percent to $74.02 in premarket trading on Friday.
Thomson Reuters Corp reported higher-than-expected quarterly profit even as revenue dipped, hurt by foreign currency, and the news and information company reaffirmed its full-year forecast. Third-quarter net earnings were $293 million, or 36 cents per share, compared with $250 million, or 28 cents per share, a year ago. Adjusted for special items, earnings were 52 cents per share. Analysts, on average, were looking for 49 cents per share. Revenues from ongoing businesses fell 4 percent to $2.98 billion, but rose 1 percent when factoring out currency. Analysts were expecting $3.04 billion.
American Airlines Group Inc on Friday reported third-quarter profit above analysts' expectations, as cheap fuel continued to help its bottom line.American, the world's largest airline, earned a net income of $1.7 billion in the quarter, up 80 percent from a year ago. Excluding special charges, it earned $1.9 billion, or $2.77 per diluted share, compared with the average analyst estimate of $2.72 a share, according to Thomson Reuters I/B/E/S.
Shares of Alphabet soared 9.7 percent to $746.95 premarket after Google's new holding company beat profit estimates and set its first share buyback on Thursday.
Microsoft rose 8.1 per cent in the premarket after its adjusted revenue beat expectations for the ninth quarter in a row.
Amazon was up 9.4 per cent in the premarket after the e-commerce company posted a surprise profit for the second quarter.
Pandora sank 25.7 per cent in the premarket after the music streaming service provider reported a bigger quarterly loss.
Other earnings include: Barnes Group Inc, Cabot Oil & Gas Corp, Canadian Utilities Ltd, Citizens Financial Group Inc, Donegal Group Inc, Lear Corp, LyondellBasell Industries NV, Prosperity Bancshares Inc, Royal Caribbean Cruises Ltd, Shire PLC, South State Corp, State Street Corp, Thomson Reuters Corp, Westmoreland Coal Co, Whirlpool Corp.
QUOTE OF THE DAY:
"A pessimist is one who make difficulties of his opportunities and an optimist is one who makes opportunities of his difficulties." - Harry S. Truman
Jennifer Dowty