North American markets are set to pick up where they left off late Wednesday - and it's not going to be pretty.
U.S. stock futures are down close to 1 per cent, and while the resource-heavy TSX didn't sell off quite as hard as the U.S. benchmark did in the moments after Ben Bernanke's suggestion that Federal Reserve bond buying may soon be coming to an end, it could be a different story today. A rally in the U.S. dollar this morning - not to mention more data showing a slowdown in Chinese economic growth - have commodities deep in the red.
Gold in particular is suffering, plummeting early this morning to below $1,300 (U.S.) an ounce to 2-1/2-year lows. It has since slightly recovered, hanging in just above that level. Several technical support levels were taken out in electronic trading. Holdings in the world's largest exchange-trade fund backed by bullion, the SPDR Gold Trust, fell below 1,000 tonnes for the first time in four years, according to Bloomberg.
Renewed strength in the U.S. dollar is making greenback-denominated commodities less attractive to hold, and traders are particularly nervous about gold because the Fed's $85-billion-a-month bond-buying program was seen to have inflationary risks.
Mr. Bernanke made his clearest signals to date at a news conference Wednesday that those quantitative easing measures will start to be scaled back later this year, and possibly end in 2014, assuming the U.S. economy continues on its expected path to recovery.
The S&P 500 fell 1.4 per cent Wednesday and the S&P/TSX composite index 0.8 per cent. That selloff soon spread to Asia, with traders there also met with more weak economic data out of China. The preliminary reading of a Chinese purchasing managers' index came in at 48.3, missing the median forecast by economists of 49.1. Chinese stocks have now seen all their gains wiped out since the third round of quantitative easing was announced on Sept. 13. The overnight lending market in China showed considerable stress, too, with the SHIBOR rising to an average 12.5 per cent from an average 7.87 per cent Wednesday. The move points to possible cash shortages by the nation's banks.
Most European indexes are down more than 2 per cent this morning. There, a manufacturing index for the euro zone posted a slight beat against expectations, rising to 48.7 compared with an expected reading of 48.6. British retail sales also slightly exceeded economists' forecast.
Bonds fell across the world today as well, and yields on the U.S. and Canadian 10-year government bonds are up sharply, hitting fresh 14-month highs. That should mean some pretty steep losses in income-producing investments today, including real estate investment trusts and bond funds.
Given that Mr. Bernanke is closely linking bond tapering to economic numbers, upcoming data - especially on the labour market - will be coming under even more scrutiny.
Some fresh U.S. data are coming out today. We detail those, along with what else is going on this morning, below.
Futures: S&P 500 -0.7 per cent; Dow -0.6 per cent; Nasdaq -0.8 per cent
Hong Kong's Hang Seng -2.88 per cent
Shanghai composite index -2.77 per cent
Japan's Nikkei -1.74 per cent
London's FTSE 100 -2.22 per cent
Germany's DAX -2.42 per cent
France's CAC 40 -2.35 per cent
WTI crude oil (Nymex Aug) -1.65 per cent at $96.86 (U.S.) a barrel
Gold (Comex Aug) -5.41 per cent at $1,299.70 (U.S.) an ounce
Silver (Comex July) -6.95 per cent at $20.11 (U.S.) an ounce.
Copper (Comex Sep) -1.92 per cent at $3.09 (U.S.) a pound
Canadian dollar down 0.0063, or 0.65 per cent, at $0.9671 (U.S.)
U.S. 10-year Treasury yield 2.31 per cent, up 0.13
Canada 10-year government bond yield 2.25 per cent, up 0.09
ECONOMIC INDICATORS TO WATCH:
U.S. jobless claims for last week rose 18,000 to 354,000. That's higher than economists' forecasts for 340,000.
The final U.S. Market PMI manufacturing index for June fell to 52.2 versus 52.3 in May, below forecasts of 52.7.
(10 a.m. ET) The U.S. National Association of Realtors reports on existing home sales for May
(10 a.m. ET) The Philadelphia Fed Survey for June. The general business conditions index is expected to come in at -1.0, following a reading of -5.2 in May.
STOCKS TO WATCH:
Manulife Financial Corp. shares could rise as BMO Nesbitt Burns upgrades stock to an "outperform" rating from "market perform." The higher interest rates seen this morning should also be supportive for the stock.
Walt Disney Co. shares are down 1.8 per cent in the premarket after Goldman Sachs downgraded the stock to "neutral" from "conviction buy."
Earnings today include: Carnival Corp.; Kroger Co.; Oracle Corp.; Pier 1 Imports Inc.; Progress Software Corp.; Rite Aid Corp.; Winnebago Indus Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
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Why you don't need to beat the market to be a successful long-term investor, just protect yourself from two key risks. And here's a chart that shows you cannot sit in cash for very long stretches of time.
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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.