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Before the Bell: Futures turn positive after strong data

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.


Stock markets in continental Europe are getting hammered again today. Deutsche Bank remains under fire with its shares falling under €10 before rebounding amid reports hedge funds have started to pull excess cash out of the Bank which faces up to $14-billion in U.S. fines. The Dax is down 1.1 per cent today with the FTSE down 0.9 per cent. The euro has also been falling as sentiment toward the continent's banking system sours with the euro falling relative to the U.S. dollar, British pound, and yen.

Citigroup was down 0.66 per cent premarket, while U.S.-listed shares of RBS fell by a similar margin. Stocks of other big U.S. banks were little changed.

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U.S. index futures have stabilized following Thursday's selloff trading higher on strong economic data after falling earlier despite losing energy sector support. West Texas Intermediate and Brent Crude are down 0.4 per cent and 0.5 per cent, respectively, as the bullish OPEC and inventory news subsides and traders take profits ahead of the weekend.

It's the last day of the quarter so we may see general repositioning of trades and portfolios today and traders positioning ahead of next week's Purchasing Managers Index and payrolls reports.

There also is a lot of economic news for the markets to digest today. ‎Japanese data was mixed with deflation deepening but industrial production beating expectations. China manufacturing PMI was just above 50 and in line. In the U.K., the services sector grew strongly in July and house prices were slightly above expectations.

Canada GDP for July may attract significant attention from traders today, as data from Statistics Canada showed the Canadian economy got off to a stronger-than-expected start in the third quarter, fueled by a rebound in oil and gas extraction that had been disrupted by wildfires in Alberta earlier this year. Gross domestic product grew 0.5 per cent in July, topping analysts' forecasts for a gain of 0.3 per cent. June's growth was unrevised at 0.6 per cent.

The Bank of Canada has been hoping for a summer rebound in Canada from the spring wildfire disruptions. This strong data may reduce pressure on Governor Stephen Poloz to cut interest rates this year.

The Canadian dollar rose after the report was released, gaining 0.19 to 76.24 cents (U.S.).

In the U.S., Chicago PMI may attract some attention as a leading indicator for manufacturing PMI reports due over the weekend and into Monday. There are fewer Fed speakers today but this week's comments indicated that hawkishness at the Fed goes far beyond the three members who actually dissented at the last meeting. Traders may continue to look at incoming data in terms of how it may impact the prospects of a December rate increase but there's still the matter of the election campaign first.

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Now, here is a closer look at what's going on this morning and what is still to come.

MARKET DATA:

Futures (as of about 8:50 a.m. ET)

Dow +0.06 per cent; S&P 500 +0.12 per cent; Nasdaq: +0.05 per cent; TSX 60 +0.07 per cent

Equities
Japan's Nikkei -1.46 per cent
Shanghai composite index +0.23 per cent
Hong Kong's Hang Seng -1.86 per cent 
Germany's DAX -.37 per cent
London's FTSE -0.60 per cent
France's CAC 40 -0.99 per cent

Commodities
WTI crude oil (Nymex Nov.) -0.40 per cent at $47.64 (U.S.) a barrel
Gold (Comex Dec.) +0.29 per cent at $1,329.90 (U.S.) an ounce
Copper (Comex Dec.) +0.30 per cent at $2.20 (U.S.) a pound

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Currencies
Canadian dollar +0.19 at 76.24 cents (U.S.)
U.S. dollar index +0.28 at 95.82

Bonds
Canada 10-year bond yield -0.3316 at 0.9446 per cent

KEY ECONOMIC RELEASES

Japan CPI, industrial production, jobless rate and household spending
China Caixin manufacturing PMI
Euro area CPI and jobless rate
Germany retail sales

(8:30 a.m. ET) Canada real GDP at basis prices for July. Estimate is an increase of 0.3 per cent from June.

The Canadian economy got off to a stronger-than-expected start in the third quarter, fueled by a rebound in oil and gas extraction that had been disrupted by wildfires in Alberta earlier this year, data from Statistics Canada showed on Friday. Gross domestic product grew 0.5 per cent in July, topping analysts' forecasts for a gain of 0.3 per cent. June's growth was unrevised at 0.6 per cent.


(8:30 a.m. ET) Canada industrial product price index and raw materials price index for August. Estimates are declines of 0.3 per cent and 2.0 per cent from July, respectively.


(8:30 a.m. ET) U.S. personal spending and personal income for August. Consensus is increases of 0.2 per cent from July for both.

U.S. consumer spending in August turned in the weakest performance in five months, reflecting a drop in spending on autos. Income growth also slowed in August as wages and salary gains were smaller following four strong months.

The Commerce Department says that consumer spending was unchanged last month after solid gains of 0.4 per cent in July and 0.3 per cent in June. It was the poorest showing since a flat reading in March.

Personal incomes rose 0.2 per cent last month, just half the gain in July. It was the weakest showing since a 0.1 per cent drop in February. Wages and salaries, the biggest income category, were up just 0.1 per cent after two months of 0.5 per cent increases.


(8:30 a.m. ET) U.S. core PCE Price Index for August. Consensus is an increase of 0.2 per cent from July and 1.7 per cent year over year.
(9:45 a.m. ET) U.S. Chicago PMI for September. Consensus is 52.0, up from 51.5 in August.
(10 a.m. ET) U.S. University of Michigan consumer sentiment for September. Consensus is 90.0, up from 89.8 in August.
(1 p.m. ET) Baker-Hughes rig count

Also: Ottawa budget balance for July

KEY STOCKS TO WATCH

See also:  Friday's small-cap stocks to watch

CalAmp was down 17.7 per cent after the wireless device maker reported quarterly revenue that missed analysts' estimates.

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Extended Stay America was down 3.7 per cent after the company priced a secondary offering below the Thursday closing price of its stock.

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Enbridge Inc. will sell a key Saskatchewan pipeline system for $1.075-billion as it looks for financial room to help it proceed with its massive takeover of Houston-based Spectra Energy Corp. The deal announced late Thursday will see private midstream firm Tundra Energy Marketing Ltd. buy Enbridge's South East Saskatchewan pipeline system.

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Malaysian state oil firm Petroliam Nasional Bhd is considering selling its majority stake in a $27-billion Canadian liquefied natural gas (LNG) plant, three people familiar with the matter said this week. Petronas, as the company is known, is weighing options for the project as a more than 50 percent slide in crude oil prices since the middle of 2014 has hit the group's profits and prompted cuts to capital expenditure and jobs.

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Printer maker Lexmark's pending acquisition by an Asia-based consortium was cleared by the Committee on Foreign Investment in the United States after a 30-day review.

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Spice maker McCormick reported adjusted quarterly profit of $1.03 per share, nine cents a share above estimates. Revenue also beat forecasts.

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Warehouse retailer Costco reported quarterly profit of $1.77 per share for its latest quarter, beating estimates by four cents a share. Revenue was very slightly below forecasts, however. Comparable-store sales were flat.

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Susquehanna upgraded footwear maker Skechers to "positive" from "neutral," saying any bad news is priced into the stock and that it expects new offerings to drive "material improvement" in 2017.

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Alcoa's board of directors approved the company's planned split into two separate publicly traded entities, with the split expected to be effective November 1. One unit will contain the traditional aluminum business, the other will operate the jet and auto parts business.

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Mizuho upgraded chip maker Qualcomm to "buy" from "neutral," following reports that it is in talks to buy NXP Semiconductors. Mizuho said such a deal would make significant strategic and financial sense.

With files from wire services

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