Colin Cieszynski
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 have started the week in a tailspin with the Dax down 1.6 per cent, the FTSE down 1.3 per cent and U.S. index futures down 0.5 per cent. Asia stocks were also lower with the Hang Seng down 1.6 per cent and the Nikkei down 1.25 per cent.
The European banking sector has been dragging markets down the drain with Deutsche Bank under the most pressure. Over the weekend German Chancellor Angela Merkel indicated she opposes bailing out German banks, raising particular concerns about Deutsche Bank from whom the U.S. Justice Department is seeking $14-billion (U.S.) in fines. I don't think the U.S. government is interested in starting another global banking crisis and some kind of deal will be reached eventually that leaves the bank intact. But this reminds the Street of the precarious position of the banks in Europe, particularly Italian banks.
Oil is rebounding today with the long awaited Algeria oil conference being held through Wednesday. Focus is on the side discussions between OPEC producers and Russia over how to stabilize the market and manage production.
With Iran, Libya and Nigeria still looking to restore lost production, the main focus for cuts has been on Saudi Arabia. The Saudis have been sending mixed messages. On Friday the Saudis suggested we probably would not get a deal this week but the foundation could be laid for further discussions later this year, sending oil down sharply. Over the weekend, the Saudis suggested they would be willing to cut production to January levels.
Anything can happen and there's a lot of attention on these meeting so we could see significant swings in oil potentially in both directions over the next several days. This could also impact trading in energy stocks plus oil-sensitive currencies like the Canadian dollar, the Norwegian krone, the Russian ruble, and the Mexican peso.
The peso along with U.S. stocks may also be impacted by tonight's first U.S. Presidential debate. Latest polls have the race as a dead heat with Hillary Clinton's lead over Donald Trump dwindling from double digits to nothing over the last few months. The Mexican peso has reflected this shift by weakening dramatically relative to the U.S. dollar over Mr. Trump's antagonistic policies toward Mexico.
Stock markets, on the other hand have completely ignored the possibility of a Trump victory. Markets were also dead wrong about Brexit and therefore are vulnerable to a surprise readjustment. Should Ms. Clinton fail to slam the door tonight, political uncertainty in the U.S. could have an increasing impact on trading over the next six weeks, exacerbating usual seasonal volatility.
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)
Dow -0.51 per cent; S&P 500 -0.46 per cent; Nasdaq: -0.59 per cent; TSX 60 -0.38 per cent
Equities
Japan's Nikkei -1.25 per cent
Shanghai composite index -1.74 per cent
Hong Kong's Hang Seng -1.56 per cent
Germany's DAX -1.55 per cent
London's FTSE -1.28 per cent
France's CAC 40 -1.72 per cent
Commodities
WTI crude oil (Nymex Nov.) +0.99 per cent at $44.92 (U.S.) a barrel
Gold (Comex Dec.) -0.08 per cent at $1,340.60 (U.S.) an ounce
Copper (Comex Dec.) -0.77 per cent at $2.18 (U.S.) a pound
Currencies
Canadian dollar -0.12 at 75.87 cents (U.S.)
U.S. dollar index -0.16 at 95.32
Bonds
Canada 10-year bond yield -1.69 at 1.02 per cent
KEY ECONOMIC RELEASES
Japan leading index
Germany IFO business climate
ECB president Mario Draghi to address European parliament in Brussels
(10 a.m. ET) U.S. new home sales for August. Consensus projection is an annualized rate decline of 8.3 per cent.
(10:30 a.m. ET) U.S. Dallas Fed manufacturing activity for September.
(6:55 p.m. ET) Bank of Canada governor Stephen Poloz lectures at Western Washington University in Bellingham, Wa.
Also: U.S. presidential debate (9 p.m.)
KEY STOCKS TO WATCH
The U.S.-listed shares of Deutsche Bank plunged 5.25 per cent premarket after a German magazine cited government sources saying Chancellor Angela Merkel has ruled out state assistance for the lender and rejected any interference in the ongoing U.S. justice department investigation.
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Oppenheimer downgraded Twitter to "underperform" from "perform." That follows CNBC's report on Friday that Twitter was moving closer to a sale and the subsequent jump in the stock price.
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General Motors of Canada Co. has pledged to eliminate the $2.6-billion deficit in the pension plans for its unionized workers and retirees as part of a new contract negotiated between the company and Unifor. The new contract was approved by 64.7 per cent of workers who voted.
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Magna International Inc. will increase its capacity to make automotive latches, hinges and other closure components through the purchase of the BOCO Group of Companies, in a transaction announced Monday. The Ontario-based auto parts company didn't disclose the purchase price but said BOCO has annual sales of more than $148-million and employs 450 people at operations in Germany and China. The deal is expected to close in the third quarter of 2016.
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Apple was down 0.8 per cent after market research firm GfK claimed last week that sales of the new iPhones in Europe were well below the iPhone 6 pace.
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Pfizer fell 0.93 per cent after the drugmaker decided not to split into two publicly traded companies.
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Chemical company Chemtura soared 17 per cent to $33 after Germany's Lanxess offered to buy the company for $2.69-billion, including debt.
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Bank of America is set to cut about two dozen investment banking jobs in Asia, including some top dealmakers, sources told Reuters, as a slowdown forces western banks to cut costs. Its shares were down 0.45 per cent in premarket trading.
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Goldman Sachs will cut more than 25 percent of its investment banking jobs in Asia, according to multiple reports, as merger and acquisition activity slows. Its shares are down 0.62 per cent in premarket trading.
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CBOE Holdings Inc. said it would buy BATS Global Markets Inc. for about $3.2-billion, just over five months after BATS made its market debut, as the largest U.S. options exchange operator looks to diversify its business. CBOE's cash-and-stock offer values BATS - the No. 2 stock exchange operator in the United States by volumes - at about $32.50 per share, a premium of 2.2 percent to its closing price on Friday.
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Retailer Land's End announced the resignation of CEO Frederica Marchionni. Chief merchandising officer Joseph Boitano and chief financial officer James Gooch will serve as interim co-CEOs while the company searches for a permanent replacement.
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Resort operator Vail Resorts lost $1.80 per share for its latest quarter, wider than the $1.67 per share loss predicted by analysts. However, revenue exceeded forecasts, and the company made upbeat comments about its season pass program as well as its recent acquisition of Whistler Blackcomb.
Earnings include: Cal-Maine Foods Inc.; Carnival Corp.; SYNNEX Corp.; Thor Industries Inc.; Vail Resorts Inc.; Vecima Networks Inc.
With files from wire services