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Premarket: Stocks on a weak footing amid economic gloom

A little heartburn this morning after the weekend's big feast? The markets may not make you feel much better. But at least they offer a relatively gentle start to a week that will be dominated once again by worries about global economic growth.

U.S. stock futures are slightly in negative territory, pointing to minor losses as the North American trading day gets underway. The TSX should see some added pressure from the fact it was closed on Monday, when the Dow Jones industrial average lost 26 points and the S&P 500 lost 5 points.

There are no major economic figures today to roil markets; instead, the focus is on third-quarter corporate earnings, as Alcoa prepares to officially kick off the season after the 4 p.m. (ET) market close. Alcoa is seen as a barometer on the health of global manufacturing and the demand for those goods. Wall Street expects the aluminum giant to break even or maybe post a penny in profit, not very rosy projections given it earned 15 cents in last year's third quarter before aluminum demand began to taper off.

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Indeed, expectations are low for the earnings season in general, with S&P 500 companies expected to post an overall decline in profits for the first time in 11 quarters.

A lot is made of Alcoa's quarterly earnings since it's the first Dow component to report. But note the results aren't always a reliable signal for other earnings reports to come. Since 2009, whenever Alcoa missed quarterly analyst earnings forecasts, 72.4 per cent of the companies in the S&P 500 ended up beating the consensus profit forecast, according to FactSet data.

The mildly bearish start to trading today reflects continued uninspiring news on the global economy. The IMF cut its global economic growth today for the second time since April, and now expects global output for 2012 to grow just 3.3 per cent, down from a July estimate of 3.5 per cent. On the European front, traders are keeping close tabs on a regional meeting of finance ministers in Luxembourg. Markets are anticipating Spain will eventually make a formal bailout request to help resolve its debt woes, but there were few signals that was going to happen today.

Now, here's the rundown of what else you need to know before the trading day gets underway:

MARKETS:

Equities:
Futures: Dow -0.1 per cent, S&P 500 -0.1 per cent, Nasdaq -0.2 per cent

Hong Kong's Hang Seng index +0.54 per cent

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Shanghai composite index +1.97 per cent

Japan's Nikkei -0.05 per cent

London's FTSE 100 -0.29 per cent

France's CAC 40 +0.01 per cent

Germany's DAX index -0.48 per cent

Commodities:
WTI (Nymex Nov) +0.32 per cent at $89.62 (U.S.) a barrel

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Gold (Comex Dec) -0.13 per cent at $1,773.40 (U.S.) an ounce

Copper (Comex Dec) +0.08 per cent at $3.72 (U.S.) a pound

Currencies:
Canadian dollar up 0.0006, or 0.06 per cent, at $1.0241 (U.S.)

STOCKS AND ECONOMIC INDICATORS TO WATCH:

Canada Mortgage and Housing Corp. reported annualized housing starts for September of 220,200, stronger than the 207,500 forecast.

Earnings include Alcoa Inc., Levi Strauss & Co., and Yum Brands Inc.

THIS MORNING'S TOP INVESTING READS ON THE WEB:

This earnings season threatens to be one of the roughest since U.S. companies started to pull themselves out of the Great Recession — even if, as usual, results don't live up to the worst of the gloom-and-doom forecasts.

From both a technical and fundamental standpoint, there are reasons to turn wary on tech-sector heavyweight Apple's shares.

There's up to a 90 per cent chance that stocks will post greater returns than bonds over the next 10 years, according to Vanguard Group co-founder John "Jack" Bogle.

... And that may not come as a huge surprise given this chart comparing historical yields on U.S. bonds and dividend stocks.

Why the iPod (yes, the iPod) still matters.

Why retail investors should care about Vanguard's index changes last week.

Chinese stocks are at their cheapest since 1997. But that's still not enough to signal a rally.

... And, in case you missed it over the holiday weekend, here's our recap of last week's best web reads.

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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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