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 Wednesday morning to you.
North American futures are pointing to a mildly positive opening for major indices amid positive data showing the strength of Chinese consumers. Dow futures are up 50 points, S&P 500 futures are higher by 6 points, and Nasdaq futures are up 12 points, suggesting these markets will each open higher by 0.3 per cent. S&P/TSX 60 index futures are relatively flat, up 1 point.
Overnight in the Pacific Rim, markets were stable to slightly higher with key Chinese economic data coming in relatively in-line with expectations. Chinese retail sales in October increased 11 per cent year-over-year, a nick above expectations of 10.9 per cent and the prior month's reading of 10.9 per cent. Industrial production in October rose 5.6 per cent, slightly below expectations of 5.8 per cent and the prior reading of 5.7 per cent. As well, sales at China's on-line retailer, Alibaba on "Single's Day," equivalent to "Cyber Monday" in North America, was a stellar success with sales surpassing $10-billion. Last year, sales totalled $9.3-billion. Looking at major markets, in Japan, the Nikkei 225 was relatively unchanged, up 0.1 per cent. In China, the Shanghai composite advanced 0.3 per cent and the Shenzhen composite rallied 2 per cent. In Australia, consumer confidence rose to a six month high, coming in at 101.7 points, which helped lift the S&P/ASX 200 and closed higher by 0.5 per cent.
Turning to Europe, major indices are in the green led by the German Xetra DAX, which is up 1.4 per cent. In France, the CAC is up 1.1 per cent, while the London FTSE trails with a gain of 0.6 per cent.
Looking at commodities, the price of gold continues to slowly drift lower and has slipped below $1,090 (U.S.) to $1,089.80. The strengthening U.S. dollar is negative for the yellow metal, which may continue to drift lower. Natural gas futures are steady at $2.31, down just a penny. Meanwhile, the price of oil remains range bound around the mid-$40 (U.S.) levels. Expect to see more intra-day volatility with the release of the weekly oil inventory report from the U.S. Energy Information Administration (EIA) today at 10:30 a.m. (EST). On Tuesday, the EIA released its short-term energy outlook report forecasting West Texas Intermediate oil prices to average $49 in 2015 and $51 in 2016. The EIA anticipates total U.S. oil production will average 9.3 million barrels per day in 2016, declining to 8.8 million barrels per day in 2016. The price of oil remains under pressure and is currently below $44 this morning, to $43.59.
The Canadian dollar is unchanged at 75 cents per U.S. dollar.
In terms of earnings, just one company in the S&P 500 is reporting today, U.S. retailer Macy's, while there are six companies in the TSX index slated to report financial results today, Boyd Group Income Fund, CGI Group, Aecon Group, Franco-Nevada, CAE, and Dream Global REIT.
Here's the bottom line. Equity markets dipped lower on Monday and Tuesday, in a delayed reaction to the blowout U.S. non-farm payrolls report released last Friday. The S&P/TSX composite index has declined 1 per cent over the past two trading days, but on low volumes. In other words, there is no reason for investors to panic. However, rising valuations for many companies are making stock selection more challenging.
During this past earnings season, stocks that did well were those that delivered positive earnings surprises, while investors punished those companies that missed expectations or provided weak guidance. Stick with the market leaders. This past earnings season, leadership was found in financials and technology stocks. These sectors should continue to do well.
Now, here is a closer look at major markets, and corporate and economic news.
S&P 500 +0.31 per cent; Dow +0.33 per cent; Nasdaq: +0.30 per cent
Hong Kong's Hang Seng -0.22 per cent
Shanghai composite index +0.26 per cent
Japan's Nikkei +0.10 per cent
London's FTSE 100 +0.63 per cent
Germany's DAX +1.19 per cent
France's CAC 40 +0.93 per cent
Stoxx 600 +0.99 per cent
WTI crude oil (Nymex Oct) -1.40 per cent at $43.59 (U.S.) a barrel
Gold (Comex Dec) -0.04 per cent at $1,088.10 (U.S.) an ounce
Copper (Comex Dec) -0.36 per cent at $2.21 (U.S.) a pound
Canadian dollar +0.02 at 75.34 cents (U.S.).
U.S. dollar index -0.12 at 99.17
U.S. 10-year Treasury yield 2.32 per cent, -0.02
China retail sales, industrial production and fixed asset investment
Canada Remembrance Day and U.S. Veterans Day (stock markets open, bond markets closed)
Boyd Group Income Fund reported third-quarter results this morning and announced a 2.4 per cent increased to its annual distribution to 50.4 cents per unit from 49.2 cents per unit. Sales increased 38 per cent year-over-year to $301 million. Same-store sales grew 7.3 per cent. The payout ratio was 17.5 per cent based on adjusted distributable cash. According to Bloomberg, there are currently eight buy recommendations, and one hold recommendation, with an average one-year price target of $69.86.
CGI Group (GIB.A- TSX) reported fourth-quarter results ahead of expectations. Revenue was $2.59 billion, surpassing the consensus estimate of $2.53 billion. Adjusted earnings was 82 cents per share, ahead of the consensus estimate of 80 cents.
Alamos (AGI-TSX) announced Alan Edwards has resigned as Chair of the company's Board of Directors. Paul Murphy has been appointed as the new Chair. Management also announced that Claire Kennedy has joined the Board of Directors.
Other earnings expected today include: ADT Corp; Advantage Oil & Gas Ltd; Aecon Group Inc; Aquila Resources Inc; Birchcliff Energy Ltd; Burcon Nutrascience Corporation; Caldwell Partners International Inc; Caledonia Mining Corp; Canadian Zinc Corp; Canlan Ice Sports Corp; Cara Operations Ltd; Cascades Inc; Dillard's Inc; Dynacor Gold Mines Inc; Dynasty Metals & Mining Inc; EcoSynthetix Inc; Exchange Income Corp; Fennec Pharmaceuticals Inc; Franco-Nevada Corp; Gran Colombia Gold Corp; Innova Gaming Group Inc; Kelt Exploration Ltd; Klondex Mines Ltd; Macy's Inc; Mood Media Corp; Opta Minerals Inc; Orbit Garant Drilling Inc; Pilot Gold Inc; Polaris Infrastructure Inc; ProMetic Life Sciences Inc; Seabridge Gold Inc;Shell Midstream Partners LP; Sienna Senior Living Inc; Silvercorp Metals Inc; Spectral Medical Inc; Sprott Inc; SunOpta Inc; Synacor Inc; Titan Pharmaceuticals Inc; TORC Oil & Gas Ltd; Touchstone Exploration Inc;Tuckamore Capital Management Inc; TVI Pacific Inc; Twin Butte Energy Ltd; Yellow Pages Ltd
Norbord (NBD-TSX) was raised to a "top pick" from an outperform recommendation at RBC Capital Markets. The analyst raised his target price to $38 from $32. According to Bloomberg, there are currently three buy recommendations and four hold recommendations with the average one-year price target at $29.46, implying a potential price return of 12 per cent.
Piper Jaffray reiterated a "neutral" rating on Westport Innovations (NASDAQ: WPRT), and cut the price target to $3 (U.S.) from $4.50.
TD Securities maintained a "Buy" rating on Valeant Pharmaceuticals (NYSE: VRX) but lowered its price target to $160 (U.S.) from $260. Analyst Lennox Gibbs lowered his fourth quarter earnings per share estimate to $3.74 from $4.11 and his full year EPS to $16.16 from $16.84 to reflect the business disruptions triggered by the discontinuation of its Philidor relationship. But Nomura Securities analyst Shibani Malhotra lowered her price target on Valeant to $175 (U.S.) from $220 but reiterated a "Buy" rating, saying her "conservative base case" suggests a 109-per-cent upside to current levels. Meanwhile, JPMorgan cut its price target on Valeant to $225 (U.S.).
Morgan Stanley maintained an "overweight" rating on Amazon.com (NASDAQ: AMZN) and raised its price target to $800 (U.S.) from $750.
RBC Capital analyst David Palmer reiterated an "outperform" rating and boosted his price target on McDonald's (NYSE: MCD) to $125 (U.S.).
QUOTE OF THE DAY:
"Saying nothing…sometimes says the most." Emily Dickinson