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Before the Bell: Stocks to rally on oil rebound

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.

Stock markets around the world have put on their rally caps to start the new trading week with miners and energy producers leading the charge. U.S. index futures are up 0.4 per cent while the FTSE and CAC are up 1.4 per cent and the Dax is up 0.7 per cent.

Indications from the Bundesbank that the German economy has slowed in in the third quarter (likely thanks to Brexit)  and Chancellor Angela Merkel's party getting hammered in regional elections‎ over the weekend has dragged on the Dax relative to its peers.

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Crude oil is bouncing back this morning with West Texas Intermediate up 1.4 per cent and Brent up 1.2 per cent. Speculation about what could come out of the side meeting between big producers at an upcoming conference in Algeria has picked up on reports that OPEC could call an emergency meeting to ratify any agreement reached at the informal meeting. Renewed fighting in Libya, which would delay an expected big ramp up in exports, has also helped to boost prices, but this could reverse if hostilities ease again.

Higher energy prices have boosted energy stocks which could help the S&P/TSX and oil sensitive currencies like the Canadian dollar and the Norwegian krone.

Speculation on what could happen at this week's U.S. Federal Open Market Committee and Bank of Japan meetings has also influenced trading today. The U.S. dollar is dropping back as speculation that rising U.S. inflation could force the Fed to raise rates fades. This has helped gold to gain 0.3 per cent and sparked a 1.7 per cent rally in silver, helping mining stocks.

I still think there's a 40 per cent chance of a rate hike and a 60 per cent chance the Fed will use the statement, press conference and projections to hint toward a December increase after the election. With the Republicans having recently accused the Fed of keeping rates low to help the Democrats, this decision could have an impact on the campaign regardless of what the Fed does.

Now, here is a closer look at what's going on this morning and what is still to come.

MARKET DATA:

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

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Dow +0.45 per cent; S&P 500 +0.43 per cent; Nasdaq: +0.33 per cent; TSX 60 +0.25 per cent

Equities
Japan's Nikkei +0.70 per cent
Shanghai composite index +0.79 per cent
Hong Kong's Hang Seng +0.92 per cent 
Germany's DAX +0.73 per cent
London's FTSE +1.38 per cent
France's CAC 40 +1.45 per cent

Commodities
WTI crude oil (Nymex Oct.) +1.42 per cent at $43.64 (U.S.) a barrel
Gold (Comex Dec.) +0.59 per cent at $1,317.90 (U.S.) an ounce
Copper (Comex Dec.) -0.53 per cent at $2.15 (U.S.) a pound

Currencies
Canadian dollar +0.22 at 75.93 cents (U.S.)
U.S. dollar index -0.22 at 95.88

Bonds
Canada 10-year bond yield +0.80 at 1.20 per cent

KEY ECONOMIC RELEASES

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Japan  markets closed

(10 a.m. ET) U.S. NAHB Housing Market Index for September. Consensus is unchanged from August.

KEY STOCKS TO WATCH

Department-store chain Hudson's Bay Co. is  launching toy departments in about 60 of its 90 outlets this month after having ditched the category almost a decade ago in favour of higher-margin fashions.

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Thalmic Labs Inc. of Kitchener, Ont. has secured one of the largest venture-capital deals in Canadian history, vaulting the small startup into the big leagues of the country's technology innovators. Thalmic, which specializes in biomechanical computer interfaces and classifies itself as a wearable technology company, is expected to announce Monday it has raised $158.6-million in funding led by Intel Capital, the Amazon Alexa Fund and Fidelity Canada Asset Management.

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Canada's largest stock-exchange operator found itself in an awkward position on Sunday as it sought to assure investors that its shares were still included in the country's benchmark stock index. TMX Group Ltd., which operates the Toronto Stock Exchange, issued a statement to that effect after "an erroneous alert" generated by S&P Capital IQ suggested the company's stock had been removed from the S&P/TSX Composite Index. S&P Capital IQ, a financial data provider, is a division of S&P Global.

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Casino operator Isle of Capri jumped nearly 30 per cent in premarket trading on Monday after Eldorado Resorts said it would buy the company for $1.7-billion, including debt. Eldorado's stock was up 8.6 per cent.

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Facebook edged 0.72 per cent higher at $130 after Citigroup raised its price target.

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U.S. electrical components distributor Avnet was up 12.2 per cent at $44 after it announced the sale of its IT business to tech products distributor Tech Data Corp. for about $2.6-billion. Tech Data's stock was untraded.

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The Financial Times reported that fast-food giant McDonald's may be ordered to pay $500-million in back taxes to Luxembourg. McDonald's is being investigated by Brussels over a tax ruling which allowed the firm to pay no taxes in the U.S. or in Luxembourg.

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Analysts at Stifel downgraded media giant Viacom's  stock to "hold" from "buy" and slashed their price target to $38 from $49, citing reports that Viacom's board has decided to halt plans to sell its minority stake in Paramount Pictures.

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Online payment firm Paypal's stock was downgraded to "hold" from "buy" by Canaccord Genuity analysts.

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Wells Fargo's stock was upgraded to "outperform" from "neutral" by analysts at Baird, citing an "attractive" risk/reward scenario.

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KBR announced the acquisition of Honeywell Technology Solutions, a Honeywell subsidiary, as KBR expands its Global Services offerings.

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ITT Education, a for-profit college company, filed for Chapter 7 bankruptcy, according to a Securities and Exchange Commission filing. ITT Educational's shares were halted in the premarket.

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Earnings include: Neogen Corp; Thor Industries Inc.

See also: Monday's small-cap stocks to watch

With files from wire services

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