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Before the Bell: Futures flat as May triggers Brexit

The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.

The U.K.'s big day has arrived at last. The letter from British Prime Minister Theresa May to the European Union to trigger Article 50 has been delivered with additional comments due today from the Prime Minister and perhaps other U.K. and European officials. This action kicks off formal Brexit negotiations with a two-year deadline for reaching a deal. An initial official response from the EU is due within 48 hours.

Overnight Sterling continued the tumble that started yesterday after the Scottish Parliament voted to call for a second independence referendum for late 2018 or early 2019. The U.K. government stance is for no vote until after Brexit is complete. In the last few hours with the trigger approaching, Sterling has already been bouncing back and may remain active through the rest of the week.

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With more details on the negotiating stances of both sides due over the next few days, both the British pound and euro could be impacted. Traders may look for indications of whether or not either side is willing to compromise, what they are looking for in a deal, if a transition agreement is possible and how big the bill for each side could be.

At this early stage one would expect to see quite a bit of posturing and extreme positions that can then be negotiated upon. Once more details are available on what each side wants the Street can start to anticipate where the two sides may end up.

Stock markets have been on hold overnight awaiting Brexit news. The FTSE is down 0.2 per cent while the Dax is up 0.3 per cent. U.S. index futures and the Nikkei are flat, holding on to yesterday's gains.

With the exception of the British pound, currency markets have been steady overnight. The Canadian dollar is slightly higher following a 0.5 per cent gain in Brent and West Texas Intermediate oil prices. Last night the American Petroleum Institute reported a 2-million-barrel (mmbbl) increase in U.S. crude oil inventories, down from about 5 mmbbls last week. ‎Oil and related markets like gasoline, energy currencies and energy stocks may remain active through the morning with Department of Energy (DOE) inventory reports due at 10:30 a.m. EDT.

Now, here is a closer look at key market data, and corporate and economic news.

MARKET DATA:

Futures (as of about 7:30 a.m. ET)

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Dow -0.03 per cent; S&P 500 +0.01 per cent; Nasdaq: +0.06 per cent; TSX 60 +0.08 per cent

Equities
Japan's Nikkei +0.08 per cent
Shanghai composite index -0.36 per cent
Hong Kong's Hang Seng +0.19 per cent 
Germany's DAX +0.33 per cent
London's FTSE -0.16 per cent
France's CAC 40 +0.10 per cent

Commodities
WTI crude oil (Nymex May) +0.45 per cent at $48.59 (U.S.) a barrel
Gold (Comex June) -0.24 per cent at $1,255.80  (U.S.) an ounce
Copper (Comex May) -0.43 per cent at $2.66 (U.S.) a pound

Currencies
Canadian dollar +0.13 at 74.82 cents (U.S.)
U.S. dollar index +0.14 at 99.96

Bonds
Canada 10-year bond yield +0.17 at 1.60 per cent

KEY ECONOMIC RELEASES

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Japan retail sales
UK prime minister Theresa May to trigger Article 50

(10 a.m. ET) U.S. pending home sales for February. The consensus estimate is an increase of 2.2 per cent from January.
(10:30 a.m. ET) EIA Petroleum Status Report

KEY STOCKS TO WATCH

Also see: Wednesday's small-cap stocks to watch

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Luxury furniture retailer Restoration Hardware soared 16 per cent to $44 following a quarterly profit that beat analysts' expectations.

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Chipmaker Exar Corp. was up 5.5 per cent at $11.20 following a deal to be bought by Maxlinear for about $700-million (U.S.).

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Dave & Buster's came in four cents a share above estimates, with quarterly earnings of 63 cents per share. But its shares fell 3.5 per cent in premarket trading.

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Dunkin Brands has been downgraded to "sell" from "neutral" at Goldman Sachs. Its shares fell 2 per cent in premarket trading.

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Deutsche Bank upgraded Morgan Stanley to "buy " from "hold." Morgan's shares were up 1 per cent in premarket trading.

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Vertex Pharmaceuticals jumped nearly 18 percent to $105.65 after its cystic fibrosis treatment succeeded in a late-stage trial.

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Earnings include: EXFO Inc.; Imperial Metals Corp.; Lululemon Athletica Inc.; Theratechnologies Inc.; Vermillion Inc.

With files from wire services

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