Colin Cieszynski
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.
Sunday's bombshell announcement that the FBI has closed its latest investigation into Hillary Clinton's e-mails with no charges has rocked world markets overnight with traders moving quickly to price a Clinton win back in.
A big relief rally is underway in world markets with capital flowing out of defensive havens and back into risk markets. U.S. index futures are up 1.4 per cent or more with Dow futures pointing toward a 200-plus-point gain on the open today. Overseas, the FTSE, Nikkei and Dax have all gained 1.4 per cent to 1.7 per cent.
In currency markets, the U.S. dollar is back on top with traders speculation a Clinton win in November would be followed by a Fed rate hike in December. Gold is down 1.4 per cent and back under $1,300. The yen, euro and pound are also down sharply. Resource currencies like the Canadian dollar, Norwegian krone and Australian dollar are holding their own boosted by a rally in commodity prices such as today's 1.5 per cent gain in West Texas Intermediate crude oil.
This rally is giving me the feeling, however, of deja-vu all over again, to paraphrase Yogi Berra. Recall back in the spring during the Brexit campaign that traders had seen Leave gaining momentum and had started to price in a Leave win sending the pound to U.S. dollar (also know as Cable) down toward $1.4000. Following the tragic assassination of MP Jo Cox, traders thought a Remain win would then be a sure thing and drove Cable up to $1.5000. This late pre-vote spike sucked in a lot of people who were then caught totally offside and holding the bag when Leave won anyway and the pound abruptly plunged into the $1.3000s initially. Then, as now, traders appeared to prefer the status quo over change.
This is still a really close race and there's no guarantee that Clinton will win -- a lot of political damage has been done already by the ongoing questions about the Clinton's affairs and increased focus on the Clintons' associations with people like disgraced politician Anthony Weiner. One has to wonder if dragging out the Obamas and a litany of celebrities is a sign of strength or desperation, especially since Donald Trump spent several seasons of his TV show firing celebrities for charity. Sunday's news may bring back some independents but is unlikely to cause Trump's committed supporters to waver. On the other hand, it looks like Latin voters are coming out for Clinton big time, but are they enough to tip the balance?
The FBI decision doesn't change the real October surprise, huge increases in Obamacare premiums for many Americans, that had been shifting momentum back to Trump even before the FBI news broke. One of my big rules for investing is follow the dollar not the noise.
This vote looks like it's going to be really close, so whoever wins it's likely to be a surprise to many. Both sides spent time on the weekend in states that have been close for months, like Florida, but they also spent a lot of time in states that have voted solidly Democrat lately like Pennsylvania, Michigan, and even Minnesota which has voted Democrat for President in every election since 1976. The political fault lines appear to be shifting in what could end up being a generational realignment.
Because of the potential for a close race and even a contested result, complacency is particularly dangerous right now and traders need to be ready with a plan to take advantage of whatever happens. The next few days are a time of high risk, but also a time of high opportunity with the potential for high volatility and big swings in both directions.
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 8:30 a.m. ET)
Dow +1.38 per cent; S&P 500 +1.39 per cent; Nasdaq: +1.59 per cent; TSX 60 +0.95 per cent
Equities
Japan's Nikkei +1.61 per cent
Shanghai composite index +0.26 per cent
Hong Kong's Hang Seng +0.70 per cent
Germany's DAX +1.61 per cent
London's FTSE +1.41 per cent
France's CAC 40 +1.67 per cent
Commodities
WTI crude oil (Nymex Dec.) +1.52 per cent at $44.74 (U.S.) a barrel
Gold (Comex Dec.) -1.22 per cent at $1,288.60 (U.S.) an ounce
Copper (Comex Dec.) +0.79 per cent at $2.28 (U.S.) a pound
Currencies
Canadian dollar +0.03 at 74.66 cents (U.S.)
U.S. dollar index +0.52 at 97.57
Bonds
Canada 10-year bond yield +2.39 at 1.18 per cent
KEY ECONOMIC RELEASES
Bank of Japan minutes from Sept. 20-21 meeting
China foreign direct investment and trade surplus
Euro Area retail PMI and retail sales
Germany factory orders
(10 a.m. ET) U.S. Federal Reserve Labour Market Conditions Index for October.
(3 p.m. ET) U.S. consumer credit for September. The consensus projection is an increase of $17.5-billion.
KEY STOCKS TO WATCH
Air Canada reported a better-than-expected quarterly profit on Monday as it flew more passengers, including on new international routes, and the airline forecast lower costs for the current quarter.
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Canadian workers at Ford Motor Co. voted to approve a new four-year contract with the automaker, the Unifor union said on Sunday, wrapping up months of contract talks. Its shares were up 1.5 per cent in premarket trading.
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NetSuite jumped 20.7 percent after more than half of its eligible shareholders backed Oracle's $9.3-billion-bid for the cloud storage company.
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Berkshire Hathaway reported adjusted quarterly profit of $2,951 per share, missing estimates of $3,058 a share, though revenue beat forecasts. Its shares were up 1.1 per cent in premarket trading.
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Chipotle Mexican Grill and investor Bill Ackman have assigned a confidentiality pact, according to Reuters, agreeing to engage in discussions about possible changes at the restaurant chain. Its shares were up 2.1 per cent in premarket trading.
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HSBC said the retail banking profits in the U.K. would be "challenging" for the next year, and also reported a jump in its capital levels to 13.9 per cent. Its shares were up 4.4 per cent in premarket trading.
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Chemical maker Chemours reported adjusted quarterly profit of 61 cents per share, beating estimates of 34 cents a share. Revenue was essentially in line. The DuPont spin-off said its results were helped in part by improving chemical market conditions. Its shares were up 7 per cent in premarket trading.
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ON Semiconductor reported adjusted quarterly profit of eight cents per share, a third of the 24-cent consensus estimate, while revenue also fell short. Its shares were up 5 per cent in premarket trading.
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Volkswagen's Audi unit is the target of yet another cheating probe, according to Dow Jones, which reports that California regulators recently discovered software in some Audi models that allows cars to evade emission testing standards.
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Cloud services provider Cognizant Technology beat estimates by two cents a share, with adjusted quarterly earnings of 86 cents per share. Revenue was in line. Its shares were up 3.4 per cent in premarket trading.
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Southwest Airlines reported a 5.2 percent increase in revenue passenger miles in October, compared to a year earlier. Its shares were up 1.5 per cent in premarket trading.
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Auction house Sotheby's lost 78 cents per share for its latest quarter, 16 cents a share wider than expected. Revenue was above forecasts.
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Telecom equipment company Windstream is buying its rival Earthlink in an all-stock transaction valued at about $1.1-billion, including debt. Earthlink's shares were up 1.1 per cent in premarket trading.
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Morgan Stanley downgraded Xerox to "underweight" from "equal-weight," expressing concerns about the cost of a restructuring and its planned split into two separate public companies. Its shares were up 0.3 per cent in premarket trading.
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SunTrust began coverage on snack maker Hostess Brands (TWNK-Q) with a "buy" rating, saying it had made an impressive turnaround following its 2012 bankruptcy filing. The company is expected to start trading on the Nasdaq exchange today.
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Earnings include: Absolute Software Corp.; Air Canada; Align Technology Inc.; Asanko Gold Inc.; Atlantic Power Corp.; Cardiome Pharma Corp.; Centerra Gold Inc.; Chinook Energy Inc.; Concordia International Corp.; Copper Mountain Mining Corp.; CST Brands Inc.; Dean Foods Co.; Diamondback Energy Inc.; Emera Inc.; Ferrari NV; Firm Capital Mortgage Investment Corp.; First Data Corp.; Fortuna Silver Mines Inc.; Franco Nevada Corp.; Golden Queen Mining Co Ltd.; Gran Tierra Energy Inc.; IAMGOLD Corp.; Journey Energy Inc.; Nautilus Minerals Inc.; Oasis Petroleum Inc.; Rockwell Automation Inc.; Senvest Capital Inc.; Sysco Corp.; Toromont Industries Ltd.; TSO3 Inc.; Tucows Inc.; WestRock Co.; Yangarra Resources Ltd.
With files from wire services, CNBC.com