Before the Bell: What every Canadian investor needs to know today

Equities

U.S. stock futures pointed to a weaker start for an abbreviated session after the U.S. Thanksgiving holiday. Both the New York Stock Exchange and the Nasdaq are scheduled to close at 1 p.m. ET Friday and analysts say thinner than normal trading volumes could add to an already volatile market. In this country, futures were lower with with both Brent and West Texas Intermediate crude prices sinking overnigt. Overseas, European markets started the day firmer helped gain gains by Italian stocks - which rallied after a drop in bond yields - while markets in China fell as trade concerns continue to weigh on sentiment.

The MSCI all-country world index, meanwhile, was off 0.03 per cent and looked set for a second week of losses. The decline in crude prices accelerated as the North American open neared. With about half an hour to g before the start of trading, West Texas Intermediate was down 6.9 per cent at US$50.87 a barrel. Brent crude was down 4.82 per cent at US$59.58 a barrel.

“[Closed markets in the U.S. on Thursday], thin trading volumes across the globe but no pause in the wild swings that have been characteristic of recent sessions,” Jasper Lawler, head of research for London Capital Group, said. “Europe experienced falls in the region of 1 per cent in the previous session, as has China overnight. ”

South of the border, retail stocks - which took a hit earlier in the week on the back of a spate of disappointing earnings - could get some more attention today as shoppers head out to catch Black Friday deals.

“Today represents one of the biggest days of the year for retailers, with the Black Friday to Cyber Monday period providing beleaguered firms an opportunity to take advantage of shopping fever that seems to grip the world,” IG market analyst Joshua Mahony said.

“However, it is notable that while higher sales through the end of November have prolonged the shopping fever typically prescribed to December, this can add to the high street demise, as margins are decimated by savvy customers getting their shopping done early. “

Already this year, he said, key retail brands like JC Penney, Macy’s, Walgreens, Gap and Sears have all shuttered stores to combat a tough market.

On Bay Street, economic news returns to the forefront with the release of October inflation and September retail sales numbers. Statistics Canada said the annual rate of inflation rose to 2.4 per cent in October, from 2.2 per cent a month earlier. Higher gasoline prices contributed to the increase. Economists had been expecting a flat reading for the month. Meanwhile, retail sales edged up 0.2 per cent in September to $50.9-billion.

Overseas, markets were higher in early going with the pan-European STOXX 600 up 0.4 per cent. Banking shares were among the best performers after Italy’s Deputy Prime Minister Luigi Di Maio said that country would show the “highest willingness” to negotiate with the EU on its budget. However, he also indicated that Rome “can’t betray Italians.”

Britain’s FTSE 100 was up 0.33 per cent. Germany’s DAX was up 0.48 per cent and France’s CAC 40 gained 0.53 per cent.

Trade worries continue to weigh on stocks in China ahead of a meeting by U.S. President Donald Trump and China’s XI Jinping on the sidelines of next week’s G20 meeting. The Shanghai Composite Index closed out the week’s final session down 2.49 per cent. Hong Kong’s Hang Seng lost 0.48 per cent.

Commodities

Crude prices sank overnight as global supply continues to weigh on a volatile market. At last check, West Texas Intermediate prices were down nearly 7 per cent. The day range on WTI is US$520.63 to US$54.82. Brent crude was down nearly per cent and had a range of US$59.34 to US$62.79. Reuters reports that crude prices touched their lowest levels of the year overnight.

“Oil remains under pressure despite noises from some OPEC countries, most notably Saudi Arabia, about another possible co-ordinated production cut at the next meeting in two weeks,” OANDA analyst Craig Erlam said.

“I do wonder how much lower traders will push it given how likely it is that members will follow through on these threats. I wonder whether we may be trading at the lower end and the price drop may be a little overdone.”

LCG’s Mr. Lawler, meanwhile, noted that swings of over 1 per cent have been the norm in the latter part of this week “and volatility has been high since the beginning of November.”

“This highlights just how jittery the oil market is right now,” he said. “U.S. inventories hitting their highest level in 11 months fueled concerns over a global crude glut amid a worsening economic outlook. The fact that oil traders shrugged off expectations that OPEC will start withholding supply in 2019 to rein in a glut reflects just how concerned oil traders are over the future outlook.”

Market oversupply has been a key driver in recent price movements. The International Energy Agency says it expects non-OPEC output to rise by 2.3 million barrels a day this year. Six months ago it had forecast an increase of 1.8 million barrels a day. Demand is expected to rise at a rate of 1.3 million barrels a day, slower than the forecast earlier this year of 1.5 million barrels a day.

In other commodities, gold prices moved in a narrow range as investor caution governed the market ahead of next week’s G20 meeting. Gold prices look set for a second weekly gain, however.

Spot gold was down 0.1 per cent at US$1,224.34 per ounce in early trading in Europe but up about 0.2 per cent on the week. U.S. gold futures were down 0.3 per cent at US$1,224.70 per ounce.

Silver prices were off 1.3 per cent at US14.30 an ounce.

Currencies

The Canadian dollar held near the low end of the day’s range of 75.51 US cents to 75.84 US cents after readings on inflation and retail sales came in above forecasts, with falling crude prices weighing on the loonie.

Statscan said the annual rate of inflation in October rose to 2.4 per cent from 2.2 per cent the month before. Retail sales in September, meanwhile, edged up 0.2 per cent. Excluding price changes, sales were up 0.5 per cent by volume. Economists had been expecting little change in both reports.

CIBC economist Andrew Grantham said in a note that, given the recent drop in oil prices, the acceleration in headline inflation is likely to prove temporary. He also said the slightly better-than-expected reading on retail sales does little to change forecasts for September and third-quarter GDP. With soft wholesale and manufacturing releases recently, September is likely to be flat on GDP with growth in the third quarter coming in at an annual rate of 1.8 per cent, inline with the Bank of Canada’s forecasts.

“We see nothing here to tip the BoC’s hand towards a December hike,” Mr. Grantham said. “We continue to favour them waiting until Q1 2019, by which time we’ll hopefully see some improvement in growth data and global oil prices.”

In world currencies, the euro lost nearly half a percent against the U.S. dollar on signs of slower economic growth in the euro zone. (A widely watched purchasing managers index showed euro zone business growth slowing at a faster-than-expected rate this month.) Following the report, the euro gave back early gains to trade down more than 0.4 per cent, going as low as US$1.1402.

That weakness helped bolster the U.S. dollar index, which weighs the greenback against a basket of currencies. The index rose 0.3 per cent to trade flat at 96.706. The dollar has been weaker for the last two sessions. The dollar index hit a 16-month high of 97.69 earlier this month.

In bonds, the yield on the U.S. 10-year note was lower at 3.05 per cent. The yield on the 30-year note was also lower at 3.302 per cent.

Stocks set to see action

A German court has ruled Volkswagen must reimburse the owner of a Golf the full original price of his vehicle bought in 2012, dealing a blow to the car maker as the legal battles over its emissions scandal drag on. VW said it believed the court in Augsburg had misapplied the law and that it would appeal the ruling at the higher regional court. The Augsburg civil court ruled on Nov. 14th that VW had acted immorally by deliberately installing emissions-cheating software to increase sales and profits, a spokesman for the court said on Friday.

The U.S. government is trying to persuade wireless and internet providers in allied countries to avoid telecommunications equipment from China’s Huawei Technologies , the Wall Street Journal reported on Thursday. U.S. officials have reached out to their government counterparts and telecom executives in friendly countries where Huawei equipment is already in wide use about what they see as cybersecurity risks, according to the WSJ report, which cited unnamed people familiar with the situation. Huawei has come under scrutiny in the United States recently.

British regional airline Flybe Group Plc said on Friday Virgin Atlantic Airways Ltd was one of the parties it was in discussions with, as part of a formal sale process announced earlier this month. Flybe said on Nov. 13 it was in talks with potential buyers, as it grapples with higher fuel costs, lower demand and a weak British pound. Shares of Flybe rose 48.5 percent on the news,

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Economic news

The annual rate of inflation rose to 2.4 per cent in October from 2.2 per cent in September. For the month, the consumer price index was up 0.3 per cent.

Retail sales rose 0.2 per cent in September, helped by higher sales at food stores. Economists had been expecting little change for the month.

With Reuters and The Canadian Press