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Before the Bell: TSX to rise as bank earnings top forecasts

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.

Trading across markets around the world has been mixed overnight with the waiting for a number of potentially big events this week creating confusion and indecision. U.S. index futures are up 0.1 per cent while in Europe, the FTSE is down 0.5 per cent, and the Dax is up 0.2 per cent. Italy's MIB is up 0.9 per cent in a relief rally after rumours Italian PM Matteo Renzi would resign even if he won this weekend's referendum were quickly stomped out.

The main focus today remains on the oil market and negotiations on a supply deal ahead of tomorrow's big OPEC meeting. It looks like talks are going to go right down to the wire with countries alternating between hard line positions and openness to doing a deal, which is all part of negotiations. It's all going to come down to how much Saudi Arabia is willing to cut to make a deal happen and if Iran and Iraq are willing to at least nominally participate. Rumours, statements and reports could drive significant intraday swings today just like we saw yesterday and overnight. Currently West Texas Intermediate is down 2 per cent but is still trading just above the middle of a $40 to $50 (U.S.) trading range. The news of whether we get a deal this week or not could send oil to either end of this zone in a hurry.

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To no surprise, the lower oil price is dragging on oil sensitive currencies like the loonie, Norwegian krone and the ruble a bit, but not more than other currencies like the euro, for example. The yen has been hit harder overnight again despite a positive retail sales report out of Japan. The U.S. dollar has bounced back a bit but still looks like it could be in the process of peaking. Traders should note that last year, the U.S. dollar peaked in early December and was already starting to sink by the time the Fed actually held its meeting to raise interest rates.

In Canadian trading today, attention may be split between the energy and financial sectors. Energy stocks could be battered like a piñata between oil price swings and OPEC speculation. Canadian banks, on the other hand, could rally today. The Bank of Nova Scotia has kicked off Canadian bank earnings season with a big beat reporting EPS of $1.58 well above the $1.51 the Street had been expecting. Results from both Canadian and International banking operations were above expectations.

Last night's comments from Bank of Canada Governor Stephen Poloz that he feels service sector growth is pointing toward a recovery for the Canadian economy have been overshadowed by oil price action but they could have an impact on the loonie longer term particularly into next week when the OPEC dust settles and the December Bank of Canada meeting approaches.  Expectations of an improving economy suggests that the central bank may not be under as much pressure to cut interest rates particularly if the loonie remains below 75 cents (U.S.)

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 +0.12 per cent; S&P 500 +0.15 per cent; Nasdaq: +0.13 per cent; TSX 60 +0.08 per cent

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Equities
Japan's Nikkei -0.27 per cent
Shanghai composite index +0.19 per cent
Hong Kong's Hang Seng -0.41 per cent 
Germany's DAX +0.01 per cent
London's FTSE -0.57 per cent
France's CAC 40 +0.51 per cent

Commodities
WTI crude oil (Nymex Jan.) -2.08 per cent at $46.10 (U.S.) a barrel
Gold (Comex Feb.) -0.44 per cent at $1,188.60  (U.S.) an ounce
Copper (Comex March) -1.69 per cent at $2.63 (U.S.) a pound

Currencies
Canadian dollar -0.25 at 74.30 cents (U.S.)
U.S. dollar index +0.03 at 101.35

Bonds
Canada 10-year bond yield +1.42 at 1.53 per cent

KEY ECONOMIC RELEASES

Japan jobless rate, household spending and retail sales
Euro Area economic and consumer confidence
Germany consumer price index

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(8:30 a.m. ET) Canada current account deficit for Q3. Consensus is $16.5-billion ($66-billion annualized rate)


(8:30 a.m. ET) U.S. real GDP and GDP deflator for Q3 (preliminary). Consensus estimates are annualized rate increases of 3.0 per cent and 1.5 per cent, respectively.

The U.S. economy grew faster than initially thought in the third quarter, notching its best performance in two years, buoyed by strong consumer spending and a surge in soybean exports.

Gross domestic product increased at a 3.2 percent annual rate instead of the previously reported 2.9 percent pace, the Commerce Department said in its second GDP estimate on Tuesday.

Growth was the strongest since the third quarter of 2014 and followed the second quarter's anemic 1.4 percent pace.
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index (20 city) for September. Consensus is an increase of 0.4 per cent from August and 5.2 per cent year over year.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for November. Consensus is 101.3, up from 98.6 in October.

KEY STOCKS TO WATCH

Also see: Tuesday's small-cap stocks to watch

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Bank of Nova Scotia, Canada's third-biggest lender, reported a better-than-expected rise in fourth-quarter earnings, driven by a strong performance from its domestic and international banking businesses. Scotiabank said on Tuesday its earnings per share increased to $1.58 from $1.46 in the same period the previous year. Analysts had on average forecast earnings of $1.51, according to Thomson Reuters I/B/E/S. Its shares on the NYSE were up 0.52 per cent in premarket trading.

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Tiffany was up 2.4 percent at $80 after the upscale jeweler reported its first rise in sales in eight quarters.

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Mallinckrodt rose 4.1 percent to $60.01 after the drugmaker's quarterly results beat expectations.

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UnitedHealth Group gave strong 2017 guidance ahead of a meeting with analysts and institutional investors. The health insurer expects to earn an adjusted $9.30 to $9.60 per share next year, compared to consensus estimates of $9.17 a share. Its shares were up 3.35 per cent in premarket trading.

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Barclays upgraded Pfizer's shares to "overweight" from "equal-weight" and increased its price target to $38 from $37.  Its shares were up 0.95 per cent in premarket trading.

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Allstate announced a deal to buy third party warranty provider SquareTrade from private investors that include private-equity firm Bain Capital for about $1.4 billion. The insurer expects to close the deal in January.

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Shoe Carnival reported third-quarter earnings and revenue that fell below Wall Street forecasts.

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Royal Dutch Shell is considering a sale of its oil fields in Iraq as part of a $30-billion asset disposal program, according to a Reuters report. Its shares were down 1 per cent in premarket trading.

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Bank of America and Goldman Sachs were both upgraded to "outperform" from "market perform" at Keefe, Bruyette & Woods. The firm also increased its price targets for both stocks. Bank of America's shares were up 0.49 per cent in premarket trading but Goldman's share were off 0.4 per cent.

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Wendy's was downgraded to "neutral" from "buy" at Goldman Sachs. The restaurant chain's shares have jumped nearly 20 percent over the past month. Its shares were down 2.16 per cent in premarket trading.

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Recreational vehicle maker Thor Industries earned $1.49 per share for its latest quarter, well above estimates of $1.23 a share. Revenue was also above forecasts. Its shares jumped 9.3 per cent in premarket trading.

Earnings include: Autodesk Inc.; Bank of Nova Scotia; Berry Plastics Group Inc.; Mallinckrodt Plc; Tiffany & Co.

With files from wire services

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