Jennifer Dowty
Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
A very happy Friday morning to you. It has been a challenging and volatile week for equity markets, with commodities under significant pressure. Today, things aren't looking much calmer, with stock futures increasingly falling deep into the red as the opening approaches.
Dow futures are down 183 points or 1.1 per cent, S&P 500 futures are down 18 points or 0.9 per cent, and Nasdaq futures are lower by 45 points or 1 per cent. In Canada, S&P/TSX 60 index futures are lower by 6 points. Losses continue to steepen in major European markets. The German DAX is down 194 points or 1.8 per cent. The French CAC is down 1.5 per cent, and the London FTSE is lower by 1.3 per cent.
On Thursday, North American indexes broke their losing streak and inched slightly higher. The S&P 500, Dow, and Nasdaq composite gained just under half a per cent, and the TSX index advanced 0.6 per cent. However, that positive momentum appears fleeting, and the energy sector again today is under significant pressure.
Overseas, in the Pacific Rim, it was a negative day with the exception of Japan, which bucked the downtrend and increased 1 per cent, with the Japanese yen weakening. Meanwhile, China's central bank, the People's Bank of China, continues to devalue the yuan relative to the U.S. dollar but the depreciating yuan didn't give the markets a lift. In China, the Shanghai composite and Shenzhen composite declined 0.6 per cent and 0.7 per cent, respectively. In Hong Kong, the Hang Seng fell 1.1 per cent. In Korea, the KOSPI lost 0.2 per cent, as did the Australian ASX 200.
Energy prices are slipping again today after the International Energy Agency (IEA) released a bearish outlook for oil in its monthly Oil Market Report for December. According to the IEA, "Global inventories are set to keep building at least until late 2016, but at a much slower pace than observed this year." The price of West Texas Intermediate oil futures are down over 1 per cent to $36.32. Meanwhile, natural gas futures have fallen below $2 this morning, to $1.99, with high natural gas inventory levels and balmy temperatures in many parts of Canada and the U.S. The price of gold is also under pressure, down $7 to $1,064.
Turning to currencies, the Canadian dollar is down nearly a third of a cent to 73.11 cents relative to the U.S. dollar, and down to 66.71 cents relative to the euro. The euro is up two tenths of a per cent to 1.0959 relative to the U.S. dollar.
Here's the bottom line. It has been a weak week for equity markets as the approaching U.S. Federal Reserve announcement spurs volatility, and the commodity collapse weights on markets. In the coming days, leading up to the Federal Reserve monetary policy meeting, unsteadiness is likely to persist in the markets. Over the weekend, Chinese retail sales, industrial production, and fixed assets investment data will be released, and may create some instability in the markets on Monday. Pressure is the key word for markets in the days ahead.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -1.0 per cent; Dow -1.1 per cent; Nasdaq: -1.1 per cent
Equities
Hong Kong's Hang Seng -1.11 per cent
Shanghai composite index -0.59 per cent
Japan's Nikkei +0.96 per cent
London's FTSE -1.31 per cent
Germany's DAX -1.79 per cent
France's CAC 40 -1.49 per cent
Commodities
WTI crude oil (Nymex Jan) -1.39 per cent at $36.23 (U.S.) a barrel
Gold (Comex Feb) -0.74 per cent at $1,064.10 (U.S.) an ounce
Copper (Comex Mar) +1.62 per cent at $2.11 (U.S.) a pound
Currencies
Canadian dollar -0.0016 at 73.16 cents (U.S.).
Bonds
U.S. 10-year Treasury yield 2.20 per cent, -0.03
ECONOMIC NEWS
A gauge of U.S. consumer spending rose solidly in November as the holiday shopping season got off to a fairly brisk start, suggesting enough momentum in the economy for the Federal Reserve to raise interest rates next week for the first time in nearly a decade. The Commerce Department said on Friday retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 per cent after an unrevised 0.2 per cent gain in October. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists polled by Reuters had forecast core retail sales increasing 0.4 per cent. Overall retail sales increased only 0.2 per cent in November as automobile sales fell and cheaper gasoline weighed on receipts at service stations.
U.S. producer prices unexpectedly rose in November as the cost of services increased, but the underlying trend continued to point to weak inflation pressures. The Labor Department said on Friday its producer price index advanced 0.3 percent after falling 0.4 per cent in October. In the 12 months through November, the PPI declined 1.1 per cent after sliding 1.6 per cent in October. November marked the 10th straight 12-month decrease in the index. Economists had forecast the PPI unchanged last month and sliding 1.4 per cent from a year ago.
(10 a.m. ET) U.S. University of Michigan consumer sentiment for December (preliminary). Estimate is 92.0, up from 91.3 in November.
(10 a.m. ET) U.S. business inventories for October. Estimate is an increase of 0.1 per cent from September.
CORPORATE NEWS
BRP reported better-than-expected third-quarter results and increased its earnings guidance for fiscal 2016 to between $1.60 to $1.72 from $1.55 to $1.70.
Dow Chemical and the DuPont will attempt to merge in an all-stock deal that would create a colossal chemical producer worth $130 billion, before splitting into three separate companies.
Hudson's Bay Co posted a 34 per cent rise in quarterly sales, helped by higher same-store sales in North America and Europe and strong online sales However, the company cut its sales forecasts for 2015 and 2016, citing among other reasons the impact of terrorism incidents on its businesses in Belgium and Germany. The company said total same-store sales rose 12.9 per cent in the third quarter.
United Technologies was up 1.4 per cent in premarket trading after announcing a $1.5 billion restructuring plan to reduce costs.
SunEdison was up 6 per cent, a day after the company said it would sell wind assets for $209 million.
ANALYST ACTIONS
Bankers Petroleum (BNK-TSX). The analyst at RBC Capital market reduced his price target to $2.40 from $2.70 but maintained his sector perform recommendation.
Tahoe Resources (THO-TSX). The analyst at J.P. Morgan launched coverage with an overweight recommendation and a $15.50 price target.
Westshore Terminals (WTE-TSX). The analyst at RBC Capital Markets reduced his target price to $23 from $28 but maintained his overweight recommendation.
Yamana Gold (YRI-TSX). The analyst at J.P. Morgan launched coverage with an overweight recommendation.
QUOTE OF THE DAY
"People tend to dwell more on negative things than on good things so the mind then become obsessed with negative things, with judgments, guilt, and anxiety produced by thoughts about the future and so on." - Eckhart Tolle