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.
Good Monday morning to you.
The volatility continues. The selloff in crude oil has extended for a seventh consecutive day, with the price of oil slipping below $35 (U.S.) a barrel this morning. Iran reiterated its pledge to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply. Meanwhile, the price of natural gas down over 5 per cent. This is putting continued pressure on equity markets.
In the U.S., equity markets are set to open relatively flat, for now. However, futures are well off from earlier this morning. Dow futures are currently down 6 points. S&P 500 futures are up 1 point, and Nasdaq futures are up 1 point. In Canada, the S&P/TSX 60 index futures are lower by 4 points.
Overseas in the Pacific Rim, equity markets drifted lower with the exception of Chinese markets. In Japan, the Nikkei 225 dropped 1.8 per cent. Japan's fourth-quarter Tankan survey showed sentiment at large manufacturers held steady at 12, unchanged from the previous quarter. In Hong Kong, the Hang Seng declined 0.7 per cent. The Korean KOSPI fell 1.1 per cent, and in Australia, the ASX 200 fell 2 per cent. However, there was a bright spot - in China. Over the weekend, Chinese November retail sales increased for the fourth consecutive month, climbing 11.2 per cent year-over-year. Industrial production in November was also strong, coming in at 6.2 per cent year-over-year compared to the prior month's reading of 5.6 per cent and expectations of 5.7 per cent. Finally, fixed-asset investment in November was steady at 10.2 per cent, unchanged from last month. The strong economic data drove the Shanghai composite and the Shenzhen composite higher by 2.5 per cent and 2 per cent, respectively.
European markets have been whipsawed today. They were in the green earlier but the gains were wiped out and the French CAC is down 0.3 per cent, the London FTSE is down 0.1 per cent, and the German DAX is down 0.7 per cent.
Commodities remain under pressure. The price of gold is down $9 to $1,066. The price of West Texas Intermediate oil futures are lower by 85 cents to $34.77, and the price of natural gas futures continues to get beaten down, falling 5.5 per cent this morning to $1.88. Warm winter weather, especially in the high consumption region of the U.S. northeast, continues to weigh on the price of natural gas. For instance, the forecast for New York City is 18 degrees Celsius on Christmas day, with above normal temperatures forecast for the next two weeks. The strengthening U.S. dollar is also weighing on U.S. denominated commodities.
Commodity price weakness and the strengthening U.S. dollar with a Fed rate hike expected this Wednesday is putting pressure on the Canadian dollar, which has inched down to 72.66 cents relative to the U.S. dollar, and is at 66.15 cents relative to the euro. The euro is down slightly relative to the U.S. dollar to 1.0982.
Now, here is a closer look at major markets, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.3 per cent; Dow -0.3 per cent; Nasdaq: -0.3 per cent
Equities
Hong Kong's Hang Seng -0.72 per cent
Shanghai composite index +2.52 per cent
Japan's Nikkei -1.81 per cent
London's FTSE +0.14 per cent
Germany's DAX -0.51 per cent
France's CAC 40 +0.03 per cent
Commodities
WTI crude oil (Nymex Feb) -2.75 per cent at $34.64 (U.S.) a barrel
Gold (Comex Feb) -0.59 per cent at $1,069.30 (U.S.) an ounce
Copper (Comex Mar) -0.71 per cent at $2.10 (U.S.) a pound
Currencies
Canadian dollar -0.0014 at 72.67 cents (U.S.).
Bonds
U.S. 10-year Treasury yield 2.15 per cent, +0.02
ECONOMIC NEWS
Teranet said Canadian November home pries rose 0.2 per cent from October vs. an estimated 0.2 per cent dip.
CORPORATE NEWS
Newell Rubbermaid is buying Jarden Corp. in a cash-and-stock deal that creates a $16 billion consumer goods company. Jarden shareholders will receive $21 in cash and 0.862 shares of Newell Rubbermaid stock for each share they own. The implied total value is $60 per share. Newell Rubbermaid shareholders will own about 55 per cent of the combined business.
Encana Corp, responding to a sharp drop in oil prices, has cut its 2016 capital budget by more than a quarter to $1.5-$1.7 billion. It also slashed its dividend by 79 per cent. The company in November said it expected total capital spending of $2.2 billion this year. The Calgary-based oil producer, which has accelerated its spending in the Permian basin in Texas, said it would direct about half of its capital budget for the next year to Permian.
Pharmaceuticals firm Valeant, under mounting pressure from Congress and prosecutors over its drug pricing, has hired an attorney in Washington, DC and crisis public relations experts with political connections, according to sources familiar with the matter, Reuters reported.
Trinidad Drilling Ltd. has chopped its initial capital spending budget for 2016 to $30 million — 84 per cent less than what it's spending this year — to reflect weak conditions in the oil and gas industry. The Calgary-based company says it's primarily aiming to maintain Trinidad's current operations, although it may be able to spend as much as $45 million if certain growth opportunities arise — still 76 per cent below 2015 levels.
Whistler Blackcomb Holdings Inc. says revenues for the year ended Sept. 30 rose 3 per cent to $262.3 million, despite a drop in total visits as guests spent more money at the mountain resort. The revenue total slightly beat analysts' expectation of $260.8 million for fiscal 2015.
Calfrac Well Services Ltd. says it's reducing its credit facilities commitment from $400 million to $300 million, which the company said will still give it "more than sufficient liquidity."
The company made the change as part of an agreement with a syndicate of lenders to amend its credit facilities to increase its financial flexibility.
Earnings include: Kirkland Lake Gold Inc.; Stornoway Diamond Corp.; VeriFone Systems Inc.; Whistler Blackcomb Holdings Inc.
ANALYST ACTIONS
Badger Daylighting (BAD-TSX). The analyst at Canaccord Genuity initiated coverage with a buy recommendation and $31 price target.
Hudson's Bay Company (HBC-TSX). The price target was decreased to $32 from $37 at RBC Capital Markets. The analyst has maintained his outperform recommendation.
Raging River Exploration (RRX-TSX). A few analysts raised their price targets. At RBC Capital Markets, the price target was raised to $12 from $11. The outperform recommendation remained unchanged. At First Energy Capital, the price target was also increased to $11.50 from $11 with the outperform recommendation unchanged.
Stella-Jones (SJ-TSX). The price target was raised to $57 from $50 at RBC Capital Markets. The analyst's stock recommendation remains a sector perform.
Suncor Energy (SU-TSX). The price target was reduced to $38 from $39 with the analyst's market perform recommendation for the stock unchanged.
QUOTE OF THE DAY
"I like to listen. I have learned a great deal from listening carefully. Most people never listen." - Ernest Hemingway