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 Tuesday morning to you. Stock futures are suggesting a modestly lower start to trading in North America, as market players continue to worry about the Fed policy implications of Friday's blowout U.S. employment report.
Dow and S&P futures are both down about 0.3 per cent. In Canada, S&P/TSX 60 index futures are down 2 points.
Overseas in the Pacific Rim, equity markets were mixed. Chinese inflation data showed a lack of price pressures, suggesting there is room for the People's Bank of China to take further accommodative actions. October's Consumer Price Index increased 1.3. per cent year-over-year, below forecasts of 1.5 per cent and 1.6 per cent reported last month. The October Producer Price Index was down 5.9 per cent year-over-year, in-line with expectations and the prior month's reading.
In Japan, the Nikkei 225 was up 0.2 per cent. In China, the Shanghai composite and Shenzhen composite were down 0.2 per cent and up 0.8 per cent, respectively. In Hong Kong, the Hang Seng was lower by 1.4 per cent. In Australia, the S&P/ASX 200 was down 0.4 per cent. Lastly, the Korean KOSPI fell 1.4 per cent. On Wednesday, Chinese October retail sales and industrial production data will be released and could create near-term volatility in the markets.
Turning to Europe, equity indexes are lower, and losses have grown during today's trading session, following the lead of U.S. markets, which closed lower on Monday. Currently, the U.K. FTSE, French CAC, and German DAX are all down by less than half a per cent. In economic news, industrial production in France was better-than-expected, increasing 0.1 per cent month-over-month in September, which was ahead of economists' forecasts of a decline of 0.4 per cent. The prior month was revised up to 1.7 per cent from 1.6 per cent.
Commodities have been under recent pressure from the strengthening U.S. dollar. This morning, commodity prices are relatively unchanged. The price of crude oil is holding steady near the $44 (U.S.) level. The International Energy Agency indicated that it expects oil prices to recover to $80 (U.S.), but not until the year 2020. The U.S. Energy Information Administration will be releasing its short-term energy outlook report this afternoon, around noon (ET). Natural gas futures are up two cents to $2.33 (U.S.) and the price of gold is up just under a dollar (U.S.) to $1,093.
In earnings, there are only two companies in the S&P 500 index reporting today: DR Horton and Rockwell Automation. In Canada, nine companies in the S&P/TSX composite index are reporting today: Cineplex, Amaya, Kinross Gold, Whitecap Resources, Element Financial, Extendicare, RONA, Painted Pony Petroleum, and Innergex Renewable Energy. Looking forward, a key challenge for some companies for the fourth-quarter is the above seasonal, warm weather in major cities across the country. This has negative implications for retailers, in particular.
Here is the bottom line. The weakness I was anticipating from a strong U.S. non-farm payroll report arrived 72 hours later, on Monday, rather than on Friday. The strong report suggested that a U.S. rate hike is on the way. Fed fund futures are now pricing in a 68 per cent probability for a Dec. 16 rate hike, and U.S. treasury yields have jumped. A higher rate environment is generally negative for segments such as housing stocks and small-cap stocks, but positive for financial stocks. A less accommodative monetary policy environment will make stock selection increasingly important.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.30 per cent; Dow -0.28 per cent; Nasdaq: -0.48 per cent
Equities
Hong Kong's Hang Seng -1.43 per cent
Shanghai composite index -0.19 per cent
Japan's Nikkei +0.14 per cent
London's FTSE 100 -0.42 per cent
Germany's DAX -0.25 per cent
France's CAC 40 -0.37 per cent
Stoxx 600 -0.23 per cent
Commodities
WTI crude oil (Nymex Dec) +0.27 per cent at $43.96 (U.S.) a barrel
Gold (Comex Dec) +0.36 per cent at $1,092.00 (U.S.) an ounce
Copper (Comex Dec) -0.70 per cent at $2.21 (U.S.) a pound
Currencies
Canadian dollar +0.05 at 75.36 cents (U.S.).
U.S. dollar index +0.169 at 99.148
Bonds
U.S. 10-year Treasury yield 2.33 per cent, -0.02
ECONOMIC INDICATORS:
U.S. import prices fell more than expected in October as the cost of petroleum and a range of goods declined, a sign that a strong dollar and soft global demand continued to exert downward pressure on imported inflation. The Labor Department said on Tuesday import prices dropped 0.5 per cent last month after a revised 0.6 per cent decline in September. Import prices have now fallen in 14 of the last 16 months. Economists had forecast import prices slipping 0.1 percent after a previously reported 0.1 percent fall in September.
CORPORATE NEWS:
Cineplex reported third-quarter EPS of 34 cents, below expectations of 38 cents, but revenues met Street forecasts.
Amaya Inc. has reduced its revenue estimate for 2015 to a range of between $1.289 billion and $1.339 billion — a decline of about 13 per cent at the mid-point. Amaya is also lowering its profit estimates for this year, to a range of between $1.66 and $1.75 per diluted share of adjusted earnings, which is below the previous range of between $1.76 and $2 per diluted share. The revised guidance was included in Amaya's third-quarter financial report, which met analyst estimates in terms of adjusted net earnings per share but fell short on revenue.
Valeant Pharmaceuticals is holding a conference call today at 8 a.m. (ET) to provide investors with a business update. Discussing their current plans, priorities, and providing an operational update.
CT REIT is hosting a conference call this morning at 8 a.m. (ET) to discuss its third-quarter results. The company reported results in-line with expectations, and announced an increase in its annual distribution to 68 cents per unit from 66.3 cents.
Shares in Norfolk Southern soared by as much as 13 per cent on Monday after Bloomberg reported that Canadian Pacific Railway was raising money for a possible deal with Virginia-based Norfolk, citing unnamed sources. Shares in the two railways will continue to be in focus today.
D.R. Horton Inc, the largest U.S. homebuilder, reported a near 44 per cent jump in profit for the fourth quarter as the company sold more homes and it said orders rose 19 per cent. Orders, an indicator of future revenue for homebuilders, rose to 8,477 homes, increasing in all regions except the U.S. Midwest, where they fell by one unit. Shares are up nearly 3 per cent in the premarket.
Other earnings include: Aecom; Alaris Royalty Corp; Alterra Power Corp; Aptose Biosciences Inc; Atna Resources Ltd; Aurinia Pharmaceuticals Inc; CAE Inc; Calian Technologies Ltd; Canadian Solar Inc; Corridor Resources Inc; Element Financial Corp; Energy Fuels Inc; Equity Financial Holdings Inc; Extendicare Inc; GeneNews Ltd; Hydrogenics Corp; uno Therapeutics Inc; K-Bro Linen Inc; Kinross Gold Corp; Innergex Renewable Energy Inc; New Millennium Iron Corp; Olympia Financial Group Inc; Petrowest Corp; Pinetree Capital Ltd; RMP Energy Inc; Rona Inc; Serinus Energy Inc; Shore Gold Inc; Spin Master Corp; St Andrew Goldfields Ltd; Street Capital Group Inc; Timbercreek Senior Mortgage Investment Corp; Wayfair Inc; Westport Innovations Inc; Whitecap Resources Inc; Yangarra Resources Ltd.
QUOTE OF THE DAY:
"It isn't the burdens of today that drive men mad. Rather, it is regret over yesterday or fear of tomorrow. Regret and fear are twin thieves who would rob us of today." - Robert J. Hastings.
Jennifer Dowty