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Before the Bell: Stocks set to rise as U.S. banks beat Street

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 around the world have been trading higher overnight and into this morning. U.S. and Canadian index futures are up 0.4 per cent, while the German Dax is up 1.6 per cent and London's FTSE and Hong Kong's Hang Seng are up 0.8 per cent. The first positive producer price report from China in over four years has been getting the credit for the rally, with rising inflation in China seen as a sign of an improving economy, offsetting some of the negativity surrounding yesterday's trade reports.

Another focus for North American traders has turned to U.S. bank earnings, with big hitters JPMorgan, Citigroup and Wells Fargo all largely beating Street expectations this morning (See more details below in the Key Stocks to Watch section). Meanwhile, U.S. retail sales data is out - and it matched analysts forecasts, and thus had little impact on index futures trading. U.S. producer prices came in a little hotter than expected. Comments from Fed Chair Janet Yellen  and Boston Fed President Eric Rosengren may also attract attention later today.

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Crude oil has been trading higher this morning, with West Texas intermediate up 1.0 per cent and Brent up 0.7 per cent. Although headline crude oil inventories rose more than expected yesterday, traders have responded favourably to distillate and gasoline inventories falling more than expected and a report showing U.S. crude oil production down 0.7 million barrels from a year ago.

The Canadian dollar has started to catch up to rising oil prices overnight, rising against the U.S. dollar along with other resource currencies like the Australian dollar. It's a mixed day for the greenback, underperforming against resource currencies but continuing to climb against the euro, British pound, and Japanese yen. Interestingly, the loonie is particularly strong against the euro amid reports that Belgium has voted to block the EU-Canada free trade deal.

Traders may look to Canadian existing home sales data for more insights into the uneven Canadian real estate market where some cities have been overheating while others have been really struggling. Yesterday's big increase in average house prices makes it more difficult for the Bank of Canada to cut rates even if they wanted too, providing support to the loonie.

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 7 a.m. ET)
Dow +0.49 per cent; S&P 500 +0.45 per cent; Nasdaq: +0.43 per cent; TSX 60 +0.49 per cent

Equities
Japan's Nikkei +0.49 per cent
Shanghai composite index +0.08 per cent
Hong Kong's Hang Seng +0.88 per cent 
Germany's DAX +1.64 per cent
London's FTSE +0.90 per cent
France's CAC 40 +1.95 per cent

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Commodities
WTI crude oil (Nymex Nov.) +1.09 per cent at $50.99 (U.S.) a barrel
Gold (Comex Dec.) -0.24 per cent at $1,254.60 (U.S.) an ounce
Copper (Comex Dec.) -0.07 per cent at $2.12 (U.S.) a pound

Currencies
Canadian dollar +0.22 at 75.95 cents (U.S.)
U.S. dollar index +0.282 at 97.798

Bonds
Canada 10-year bond yield +0.034 at 1.21 per cent

KEY ECONOMIC RELEASES

U.S. September retail sales rose 0.6 per cent from August, matching estimates.

Wholesale prices in the U.S. rose by more than projected in September, helped by higher costs for energy and food and indicating inflation may be picking up. The producer-price index increased 0.3 per cent, the first gain in three months, after being little changed in August, a Labor Department report showed Friday. The median forecast of economists surveyed by Bloomberg called for a 0.2 per cent gain.

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Still to come:
(10 a.m. ET) U.S. business inventories for August (final). Estimate is an increase of 0.1 per cent.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for October.
(1 p.m. ET) Baker-Hughes rig count
(1:30 p.m. ET) Fed chair Janet Yellen speaks on "Macroeconomic Research After the Crisis" at the Boston Fed's annual research conference.

KEY STOCKS TO WATCH

JPMorgan Chase & Co. posted profit that beat analysts' estimates on a 48 percent surge in fixed-income revenue, fueled by trading of government bonds after the U.K. voted to leave the European Union. Third-quarter net income declined to $6.29 billion, or $1.58 a share, from $6.8 billion, or $1.68, a year earlier, when results got a boost from $2.2 billion in tax benefits. Earnings excluding legal and accounting adjustments were $1.59 a share, topping the $1.39 average estimate.

Wells Fargo & Co., the lender whose chief executive officer stepped down this week amid a scandal in its branch network, said third-quarter profit fell 2.6 percent as expenses climbed and the bank set aside more money for soured loans. Net income slid to $5.64 billion, or $1.03 a share, from $5.8 billion, or $1.05, a year earlier. That beat the $1.01 average estimate of 28 analysts surveyed by Bloomberg. Total revenue increased 1.8 percent to $22.3 billion, exceeding analysts' expectations.

Citigroup Inc. posted third-quarter profit that beat analysts' estimates as bond-trading revenue surged 35 percent from a year earlier, helped by interest-rate and currencies trading. Net income slid 11 percent to $3.84 billion, or $1.24 a share, from $4.29 billion, or $1.35, a year earlier. The average estimate for adjusted earnings per share was $1.15. Revenue fell 5 percent to $17.8 billion, topping the $17.3 billion that analysts predicted.

Advanced Micro Devices Inc. rose 2.5 percent after saying Alibaba Group Holding Ltd. plans to provide cloud-computing services based on its graphics semiconductors.

HP Inc. slipped 1.7 percent after the computer maker said it will cut as many as 4,000 jobs in the next three years, forecasting charges of as much as $500 million in connection with the plan.

With files from wire services

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