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 big story overnight has been a major plunge in the pound which fell over 10 per cent at one point overnight to a more than 30-year low. The collapse appears to have been kicked off by more Brexit concerns that then turned into a rout as program selling likely kicked in after $1.2500 (U.S.) and then $1.2000 were breached.
Threats from French President Francois Hollande over the potential for a hard Brexit and rough treatment for the U.K. in negotiations along with harsh talk from German Chancellor Angela Merkel earlier in the week combined to send Sterling off a cliff.
But seriously, what would people expect them to say publicly at this early point in negotiations? In any arrangement everyone starts out talking tough and taking extreme positions. They would be ridiculous not to start out at an extreme view, or they would have nothing to negotiate with later. With Article 50 -- a five-point plan for how to leave the European Union -- likely to be triggered in March it may take two years or more before Brexit talks get really serious and a lot can happen between now and then.
Meanwhile, markets handing the U.K. another big currency devaluation makes the U.K. even more competitive relative to the rest of Europe than it already is. Equity traders have recognized this sending the FTSE up 0.85 per cent and the Dax down 0.3 per cent.
Gold and the yen have bounced back a bit today from big selloffs earlier in the week, but there's been no rush into the usual defensive havens indicating that, in the context of the big picture, the current "concern" about Brexit is a big tempest in a teapot focused mainly on pound to U.S. dollar and the euro to the pound. It's certainly nothing like the real damage being wrought by Hurricane Matthew across the Carribbean and into Florida this week.
The pound to U.S. dollar has stabilized at a lower level between $1.2000 (U.S.) and $1.2500 and, as often happens after this kind of plunge, it may remain volatile for a few more days. The big plunge however, also has likely flushed out a lot of weak hands and stops and appears to have put in a significant panic bottom.
Other markets around the world have been steady overnight with West Texas Intermediate hovering near $50 (U.S.) and U.S. index futures were down as much as 0.3 per cent, but jumped after the jobs data was released. Data showed that U.S. employment growth unexpectedly slowed for the third straight month in September, which could make the U.S. Federal Reserve more cautious about raising interest rates. Nonfarm payrolls rose 156,000, down from a revised gain of 167,000 jobs in August, the Labor Department said on Friday. Economists polled by Reuters had expected employers to add 175,000 jobs last month. Investors will parse this data in trading today to see if this could leave the door open for the Fed to reconsider a potential December rate hike.
Fed members have lowered the bar in recent months for job creation into the 50,000 to 100,000 area and ADP payrolls were about 150,000. Jobless claims remain really low but I still think employers may be holding back on hiring ahead of the election. Politically, the Democrats could spin a strong report as confirmation their economic policies working while the Republicans could jump on a weak report as a need for change.
In Canada, the country added far more jobs than expected in September, though that was fuelled by the biggest increase in self-employed workers in more than seven years, data from Statistics Canada showed on Friday. The economy created 67,200 new jobs last month, handily topping the increase of 10,000 jobs analysts had forecast. The unemployment rate held at 7.0 per cent, as expected, as there were slightly more people looking for work.
Now, here is a closer look at what's going on this morning and what is still to come.
Futures (as of about 8:55 a.m. ET)
Dow +0.12 per cent; S&P 500 +0.05 per cent; Nasdaq: +0.04 per cent; TSX 60 -0.09 per cent
Japan's Nikkei -0.23 per cent
Shanghai composite index -0.23 per cent
Hong Kong's Hang Seng -0.42 per cent
Germany's DAX -0.31 per cent
London's FTSE +0.92 per cent
France's CAC 40 -0.23 per cent
WTI crude oil (Nymex Nov.) -0.12 per cent at $50.38 (U.S.) a barrel
Gold (Comex Dec.) +0.43 per cent at $1,258.40 (U.S.) an ounce
Copper (Comex Dec.) +0.02 per cent at $2.16 (U.S.) a pound
Canadian dollar -0.37 at 75.28 cents (U.S.)
U.S. dollar index +0.25 at 97.01
Canada 10-year bond yield +1.44 at 1.15 per cent
KEY ECONOMIC RELEASES
Japan leading index
Germany industrial production
(8:30 a.m. ET) Canada employment for September. Consensus is an increase of 7,500 jobs, or 0.04 per cent, from August.
(8:30 a.m. ET) Canada unemployment rate for September. Consensus is 7.0 per cent, unchanged from August.
(8:30 a.m. ET) Canada average hourly wages for September. Consensus is an increase of 1.5 per cent year over year.
(8:30 a.m. ET) U.S. nonfarm payrolls for September. Consensus is an increase of 170,000 jobs from August.
(8:30 a.m. ET) U.S. unemployment rate for September. Consensus is 4.9 per cent, unchanged from August.
(8:30 a.m. ET) U.S. average hourly earnings for September. Consensus is an increase of 0.3 per cent from August and 2.6 per cent year over year.
(10 a.m. ET) Canada Ivey PMI
(10 a.m. ET) U.S. wholesale inventories for August. Estimate is a decline of 0.1 per cent from July.
(10:30 a.m. ET) Bank of Canada outlook survey and senior loan officer survey for Q3.
(1 p.m. ET) Baker-Hughes rig count.
(3 p.m. ET) U.S. consumer credit for August. Consensus is an increase of $17-billion from July.
(4 p.m. ET) Bank of Canada deputy governor Carolyn Wilkins gives remarks on a panel at the IIF annual meeting in Washington.
Also: IMF and World Bank Annual Meetings in Washington, D.C. (Oct. 7 – Oct. 9)
KEY STOCKS TO WATCH
Apparel retailer Gap reported a three per cent drop in comparable-store sales for September. That was slightly larger than the 2.9 per cent Thomson Reuters consensus estimate. Its shares were up 6.9 per cent in premarket trading.
Recreational vehicle dealer Camping World will debut on the New York Stock Exchange Friday after pricing its initial public offering at $22 per share, in the middle of the expected range of $21 to $23 per share, which raised $251-million.
Shares in steelmaker ArcelorMittal are getting a boost, up 4.6 per cent, on news that the European Union set new import duties on some grades of Chinese steel.
Shares of GW Pharmaceuticals were up nearly 2 per cent at $135.72 premarket after Goldman Sachs initiated coverage of the stock with a "buy" rating.
CIT Group rose 8.4 per cent to $39.45 after Avolon Holdings said it would buy the company's $10-billion aircraft leasing business.
Cruise operator Carnival Corp was down 1.9 per cent as a major hurricane hits Florida, threatening travel.
Honeywell cut its sales and profit outlook, pointing to an overall business slowdown as well as some delays. Its shares were down 5.9 per cent in premarket trading.
Yahoo is resisting calls by buyer Verizon to cut $1 billion off the previously announced purchase price of $4.8 billion, according to the New York Post. That comes after the revelation that an estimated 500 million Yahoo accounts had been hacked in 2014, with Verizon saying it had been informed of the breach but not of the extent. Yahoo is down 1.1 per cent in premarket trading while Verizon is up 0.3 per cent.
Beef and poultry producer Tyson Foods was cut to "sell" from "buy" at Pivotal Research, which also cut its price target to $40 from $100. Pivotal's significant shift in its position is based on a class action suit filed against Tyson, alleging that it colluded with other players in the industry to cut production of broiler chickens since 2008. Its shares are down 5.7 per cent in premarket trading.
Also see: Friday's small-cap stocks to watch
With files from wire services