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Premarket: Stocks heading for another sell-off

Traders are feeling grumpy this morning and not in the mood for a lot of risk, with euro zone leaders' failure  to agree on the release of more aid for Greece, as well as the looming "fiscal cliff," undermining confidence.

U.S. stock index futures are well into the red after Asian markets tumbled overnight, and major commodities are also lower, pointing to a weaker start for the TSX.

A clash between Greece's international lenders over how the country can bring its debts down to a sustainable level has reignited fears that the European crisis could flare up again. Euro zone finance ministers suggested that Athens should be given until 2022 to lower its debt/GDP ratio to 120 per cent, but International Monetary Fund chief Christine Lagarde insisted the existing target of 2020 should remain.

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Also in Europe overnight, German investor confidence unexpectedly declined, according to a November reading from the ZEW Center for European Economic Research. Its index of investor and analyst expectations fell to minus 15.7 from minus 11.5 in October

Meanwhile, the uncertainty over whether Washington can reach a quick agreement to keep $607-billion (U.S.) in tax increases and spending cuts from taking effect at the start of 2013 continues to keep would-be buyers out of the stock markets. Since President Barack Obama was re-elected on Nov. 6, more than $1-trillion has been erased from the value of equities worldwide, according to Bloomberg data. The U.S. elections also kept Congress divided between Republicans and Democrats, making it difficult for legislation to get passed.

Also this morning, the Canadian dollar slipped slightly below parity. Currency players will be keeping a close eye on what Canadian Finance Minister Jim Flaherty has to say in his fiscal update today. He may project a deficit that's a little higher than the original budget forecast.

Now, here's the rundown of what else you need to know this morning.



Futures: Dow -0.5 per cent, S&P 500 -0.5 per cent, Nasdaq -0.6 per cent

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Hong Kong's Hang Seng index -1.13 per cent

Shanghai composite index -1.50 per cent

Japan's Nikkei -0.18 per cent

London's FTSE 100 -0.52 per cent

Germany's DAX -0.69 per cent

France's CAC 40 -0.37 per cent

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WTI (Nymex Dec) -0.13 per cent at $85.46 (U.S.) a barrel

Gold (Comex Dec) -0.07 per cent at $1,729.70 (U.S.) an ounce

Copper (Comex Dec) -0.30 per cent at $3.46 (U.S.) a pound


Canadian dollar down 0.0003, or 0.03 per cent, at 0.9996 (U.S.)


Quebecor Inc. said net income was down to $18.6-million or 30 cents per share compared to $26.1-million or 41 cents per share in the same period last year.

Sears Canada Inc. reduced its net loss in the third quarter to $21.9-million, about half what the department store chain racked up last year.

Home Depot said net earnings rose to $947-million, or 63 cents per share, in the third quarter ended on Oct. 28 from $934-million, or 60 cents per share, a year earlier. That beat expectations and shares are up nearly 2 per cent in the premarket.

Shoppers Drug Mart Corp. saw its third-quarter net profit slip as it took a $13-million restructuring charge. Its adjusted net earnings per share was 81 cents, in line with analyst estimates.

Other earnings include: Catalyst Paper Corp.; Cisco Systems Inc.; Iamgold Corp.; Niko Resources Ltd.; TJX Cos. Inc.; and Xerox Corp.


At its current level of profitability, it will take Facebook Inc. until mid-2013 at the earliest to earn enough operating income just to offset its annual stock-compensation costs.

New speculation is already circulating that Apple is planning a trial production of an "iPhone 5S" — just as the paint is barely dry on new updates of the iPhone and iPad.

Prices for front-month natural gas futures have gained a healthy 24 per cent so far in 2012. But if you bought units in the United States Natural Gas Fund at the start of the year, you would instead have lost one-fifth of your investment. Here's the reason for the disconnect.

Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.

Is the transportation sector gearing up for a big move? It is trading in the tightest six-month range since 1965.

The CBOE's VIX index gets a lot of attention, but using absolute values of the VIX to trigger investments is almost certainly useless.  On the other hand, volatility prices over different time frames, often called the term structure, do show significant predictive value.

Widespread talk that a recession won't happen because residential real estate is appreciating is a myth.


For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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