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The Globe and Mail

Before the Bell: Stocks set to fall as earnings in focus

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.

World markets have started the week on their back foot. An orderly retreat that started Friday afternoon in North America has continued overnight and into this morning. U.S. index futures are trading down 0.1 per cent while the Dax is down 0.3 per cent and the FTSE down 0.7 per cent along with the Hang Seng. Currency markets are mixed with the major pairs trading close to even while West Texas Intermediate crude is up 0.2 per cent, but still essentially holding at $50 (U.S.).

This week focus turns to corporate earnings which really ramp up as usual with Bank of America and Netflix due today. Bank of America surprised today with a huge earnings beat on both the top and bottom line. After Alcoa started things off with a big miss last week, U.S. bank earnings turned things around on Friday. Traders may continue to look to both results and guidance to any indication of whether the hotly contested U.S. election is having any impact on business or consumer spending decisions. Speaking of which, the final U.S. Presidential Election debate is Wednesday night with the big vote just over three weeks away. Empire manufacturing data this morning may also attract some interest, but only if there's a big surprise.

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The U.K. and Europe may attract more attention as the week progresses. U.K. inflation, employment and retail sales reports due over the next few days may indicate whether Brexit and the lower Pound are still having a positive impact on the U.K. economy. The euro may also see some activity around Thursday's European Central Bank meeting. The recent breakdown of euro relative to the greenback suggests traders are expecting taper talk to die down and the central bank to take a neutral to dovish tone.

Canadian markets may start to see some positioning on anticipation of Wednesday's Bank of Canada meeting. Governor Stephen Poloz is expected to hold interest rates steady with the Canadian economy having shown signs of a summer recovery, particularly in recent monthly GDP and employment reports. Last meeting, the bank had been cautious on the economy. The tone of this week's statement could give an indication to traders of whether a Canadian rate cut this year is still a possibility or not, and if the central bank still prefers the loonie to do the heavy lifting.

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 8:55 a.m. ET)

Dow -0.15 per cent; S&P 500 -0.15 per cent; Nasdaq: -0.19 per cent; TSX 60 -0.15 per cent

Equities
Japan's Nikkei +0.26 per cent
Shanghai composite index -0.74 per cent
Hong Kong's Hang Seng -0.84 per cent 
Germany's DAX -0.46 per cent
London's FTSE -0.73 per cent
France's CAC 40 -0.35 per cent

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Commodities
WTI crude oil (Nymex Nov.) +0.26 per cent at $50.48 (U.S.) a barrel
Gold (Comex Dec.) -0.02 per cent at $1,255.20 (U.S.) an ounce
Copper (Comex Dec.) +0.28 per cent at $2.12 (U.S.) a pound

Currencies
Canadian dollar +0.03 at 76.11 cents (U.S.)
U.S. dollar index +0.02 at 98.00

Bonds
Canada 10-year bond yield -0.7605 at 1.24 per cent

KEY ECONOMIC RELEASES

China aggregate yuan financing, new yuan loans and M2 money supply

Japan industrial production
Euro Area consumer price index (CPI)

(8:30 a.m. ET) Canada international securities transactions for August.

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Foreign investment in Canadian securities in August rose to $12.74-billion from $9.10-billion in July, led by acquisition of bonds on the secondary market, Statistics Canada said on Monday. Statscan revised July's purchases by non-residents from an initial $5.23-billion to reflect the late arrival of data. Foreigners bought $8.97-billion in Canadian bonds, most of them corporate. They also invested $2.60-billion in stocks and $1.17-billion in corporate paper.


(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for October.

Manufacturing in New York state contracted for the third straight month in October. The Federal Reserve Bank of New York says its Empire State index slid to a reading of minus 6.8 this month, lowest since May and down from a minus 2 reading in September. Anything below zero signals contraction. Economists had expected the survey to show growth this month. New orders, shipments and employment all fell this month, but at a slower pace than they did in September.


(9:15 a.m. ET) U.S. industrial production and capacity utilization for September. Consensus projections are an increase of 0.2 per cent and 75.6 per cent (up 0.1 per cent), respectively, from August.

KEY STOCKS TO WATCH

Guy Laurence is out as chief executive officer of Rogers Communications Inc. The British transplant to Canada will be replaced by former Telus Corp. CEO Joe Natale, Rogers said Monday. Rogers also reported that earnings excluding some items were 83 cents a share, trailing analysts' estimates of 87 cents. Sales of $3.49-billion beat estimates of $3.45-billion, helped by growth in the company's wireless and media units.

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Supervalu Inc. said it would sell its Save-A-Lot business to Canadian private equity firm Onex Corp. for $1.37-billion, more than a year after making public plans to spin off the discount grocery chain. Supervalu's shares were up 8 per cent in premarket trading.

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 Bank of America earned 41 cents per share for its latest quarter, beating estimates by seven cents, with revenue also beating forecasts. Its shares were up 1.4 per cent in premarket trading.

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Toymaker Hasbro reported quarterly profit of $2.03 per share, easily beating estimates of $1.74, with revenue also topping analyst estimates. Its shares were up 5.4 per cent in premarket trading.

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Spirits maker Constellation Brands has sold its Canadian wine business, which includes 163 Wine Rack stores, to the Ontario Teachers' Pension Plan for $1.03-billion (Canadian).

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Walgreens has been upgraded to "buy" from "hold" at Jefferies, which has also increased its price target for the drug store operator's stock to $95 per share from $87.

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RBC downgraded Dunkin' Brands to "sector perform" from "outperform," saying the stock's price already reflects the donut chain's acceleration in sales, the introduction of new beverages, and the launch of its "On-The-Go" mobile ordering platform.

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Wedbush upgraded Groupon to "outperform" from "neutral," as the site sees increased customer traffic and expands its deal inventory.

**

MKM downgraded appliance maker Whirlpool to "neutral" from "buy," based primarily on a rise in steel prices.

Earnings include: Bank of America Corp.; Celanese Corp.; Hasbro Inc.; International Business Machines Corp.; J B Hunt Transport Services Inc.; Lennox International Inc.; Netflix Inc.; United Continental Holdings Inc.; Valeant Pharmaceuticals International Inc.

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

With files from wire services

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