Japanese stocks got whacked for a second day, with the yen rising against the U.S. dollar, as markets continued to react with disappointment over the Bank of Japan's policy overhaul on Tuesday.
The Nikkei lost more than 2 per cent, as the bank's promised "bold" moves didn't go as far as many market participants had hoped. It's shaping up to be a nervous time for Canadians who made a contrarian bet that the rally in Japanese stocks in 2012 would continue this year.
The Bank of Japan announced it would switch to an open-ended commitment to buying assets next year as it doubled its inflation target to 2 per cent. But many analysts said the moves didn't go far enough, as the bank didn't set a time-frame to achieve the inflation target and the size of its asset purchases were not increased for this year.
The yen is up about 0.5 per cent this morning to 88.31 per U.S. dollar, moving in the opposite direction of what would help the country's export sector.
The disappointment in Japan also spilled over to other major stock markets in Asia overnight, although losses were much more subdued.
European stocks are mixed to slightly higher and U.S. stock futures this morning are nearly unchanged. There's another onslaught of earnings today that will help guide market sentiment.
So far, the fourth-quarter U.S. earnings season is shaping up quite well, with 75 per cent of the 84 companies in the S&P 500 that have released results exceeding their earnings projections, according to Bloomberg data. And as David Berman noted at Inside the Market on Tuesday, 63 per cent of companies in the S&P 500 have beaten expectations on sales. That marks a big reversal from the previous two quarters, when about two-thirds of companies missed sales expectations.
Still, stocks have been steadily racking up modest gains in recent weeks, and some market strategists are calling for a pullback, especially with U.S. budgetary matters not settled. The Republican-controlled House of Representatives early this afternoon will vote on a temporary debt-ceiling hike until May 19. It's widely expected to pass, postponing the threat of a debt default. If the vote doesn't go as expected, however, equities could head south.
Now, here's a closer look at what's going on this morning and what's to come:
MARKETS:
Equities:
U.S. futures: S&P 500 -0.1 per cent; Dow -0.1 per cent; Nasdaq +0.1 per cent
Hong Kong's Hang Seng index -0.10 per cent
Shanghai composite index +0.25 per cent
Japan's Nikkei -2.08 per cent
London's FTSE 100 +0.09 per cent
Germany's DAX +0.24 per cent
France's CAC 40 -0.24 per cent
Commodities:
WTI (Nymex Mar) +0.03 per cent at $96.71 (U.S.) a barrel
Gold (Comex Feb) -0.05 per cent at $1,692.30 (U.S.) an ounce
Copper (Comex Mar) -0.01 per cent at $3.70 (U.S.) a pound
Currencies:
Canadian dollar up 0.0005, or 0.05 per cent, at $1.0085 (U.S.)
ECONOMIC INDICATORS TO WATCH:
(10 a.m. ET) Bank of Canada announces interest rate decision and releases monetary policy report. No change in rates is expected.
(10 a.m. ET) The U.S. Federal Housing Finance Agency issues its house price index for November. Economists expect a monthly rise of 0.7 per cent.
STOCKS TO WATCH
Google shares are up 5 per cent in the premarket after reporting adjusted earnings of $10.65 a share, beating forecasts for $10.47. Revenues also beat the Street consensus.
IBM shares are up 4 per cent in the premarket after it reported a 10 per cent boost in fourth quarter income to $5.39 a share, beating forecasts. It also beat revenue forecasts.
McDonald's posted earnings of $1.38 a share, beating estimates by 5 cents. Revenue of $6.95-billion beat estimates of $6.89-billion. But shares are down 0.4 per cent in the premarket.
Rare earth producer Molycorp Inc. expects significantly lower-than-estimated revenue and cash flow for the first half of 2013 and said it might have a cash shortfall of about $250-million for the year. Fourth-quarter revenue and cash flow were also significantly less than expected. Shares are down nearly 10 per cent in the premarket.
Motorola Solutions Inc. reported adjusted earnings of $1.10 a share, beating expectations for $1.02.
Coach Inc shares are down 12 per cent in the premarket after the retailer posted disappointing same-store sales for the holidays.
Diversified U.S. manufacturer United Technologies Corp. reported a 26 per cent decline in profit, with per-share profit from continuing operations coming in at $1.04, down from $1.42 a year earlier.
Other earnings today include: Abbott Laboratories; Apple Inc.; General Dynamics Corp.; Novartis AG; Netflix Inc.; Textron Inc.; and Unilever PLC;
THIS MORNING'S TOP INVESTING READS ON THE WEB:
The market's unrelenting cheer of late is making some nervous.
Why the low volatility index lately may not be so low after all.
Fund flows into equities have surged over the last couple of weeks. But a closer look at the data seems to point to a more cautious view on equities.
Successful market participants gravitate towards technical analysis for good reason: It provides them with an edge.
The co-founder and CEO of Stocktwits outlines his nine stock market investing lessons.
________
The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities
Darcy Keith