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Before the Bell: Stock rally set to continue on Fed views

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 been trading sharply upward overnight. Wednesday's late rally continued through overseas sessions and back around to North America again. U.S. and Canadian index futures are up about 0.3 per cent. The FTSE  is up 1.1 per cent while the Dax is up 2.0 per cent.

Improving global sentiment and higher oil prices could put a tailwind behind Canadian stocks today, particularly in the energy sector and also potentially in financials, with overseas banks rallying.

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Wednesday's Fed news left both hawks and doves with something to cheer about. For the hawks, the statement indicated conditions were aligning for a rate hike but not just yet. With Regional Fed Presidents Loretta Mester and Eric Rosengren joining Esther George, the stage appears to be set for a December rate increase unless there's some kind of negative surprise.

The doves, meanwhile, took encouragement from the dot plot fed funds projections that suggest members are considering only two rate hikes in 2017, indicating a shallow pace of future increases and confirming a lower neutral rate goal of 1.00-1.25 per cent. Markets really took off after ‎Fed Chair Janet Yellen indicated in her press conference that the U.S. economy has more room to run than thought without overheating.

So traders are responding to what looks like a Goldilocks scenario where the U.S. economy is growing enough to support robust corporate earnings but not fast enough to force the Fed to put on the brakes more aggressively.

Crude oil remains in rally mode this morning with West Texas Intermediate and Brent both up about 1 per cent and WTI back up above $45 (U.S.) per barrel. Another steep drop in U.S. inventories this week provides a fundamental tailwind for Texas Tea, while speculation continues to swirl ahead of informal talks between OPEC countries and Russia at a big conference in Alger‎ia this weekend. The latest rumours suggest Iran and Saudi Arabia, the countries at the centre of the market share battle potentially having a preperatory sit down ahead of the bigger meeting.

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 7:15 a.m. ET)

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Dow +0.29 per cent; S&P 500 +0.28 per cent; Nasdaq: +0.29 per cent; TSX 60 +0.28 per cent

Equities
Japan's Nikkei Closed for holiday
Shanghai composite index +0.56 per cent
Hong Kong's Hang Seng +0.38 per cent 
Germany's DAX +1.91 per cent
London's FTSE +1.19 per cent
France's CAC 40 +1.98 per cent

Commodities
WTI crude oil (Nymex Nov.) +1.01 per cent at $45.80 (U.S.) a barrel
Gold (Comex Dec.) +0.49 per cent at $1,337.90 (U.S.) an ounce
Copper (Comex Dec.) +1.48 per cent at $2.187 (U.S.) a pound

Currencies
Canadian dollar +0.37 at 76.69 cents (U.S.)
U.S. dollar index -0.408 at 95.252

Bonds
Canada 10-year bond yield -0.022 at 1.127 per cent

KEY ECONOMIC RELEASES

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U.S. initial jobless claims were 252,000 last week vs. an estimated 261,000.

Still to come:
(10 a.m. ET) U.S. existing home sales for August. Consensus is an annualized rate increase of 1.1 per cent.
(10 a.m. ET) U.S. leading indicator for August. Consensus is unchanged from July.

KEY STOCKS TO WATCH

Brookfield Asset Management Inc.'s private equity arm has bought almost 11 per cent of Performance Sports Group Ltd., signalling a show of support for the troubled sports equipment manufacturer amid widespread market uncertainty about its financial status.

Yahoo Inc will confirm this week a massive data breach of its service, technology news website Recode reported on Thursday, citing several sources close to the situation. The breach exposed several hundred million user accounts, Recode reported.

Shares of Apple rose 0.44 per cent in the premarket after Nomura and RBC raised price targets.

Jabil Circuit fell 4.8 per cent to $22.60 after the contract electronics maker said it intends to realign its business at a cost of $195 million over two years.

Red Hat rose 6.7 per cent to $82.27 in light trading after the Linux operating system distributor reported second-quarter revenue and profit that beat market expectations.

Earnings include: Autozone Inc.; Ceres Global Ag Corp.; Rite Aid Corp.

With files from wire services

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