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Premarket: TSX to struggle as gold, silver sink to 3-year lows

U.S. stock futures are pointing up this morning, but it's going to be tough for the resource-heavy S&P/TSX composite index to register any significant gains as gold and silver tumbled overnight to fresh three-year lows.

Equity markets are seeing some follow-through buying after a slate of better-than-expected U.S. economic data on Tuesday. But those economic reports aren't helping out precious metals, as some think the strong readings may push the U.S. Federal Reserve toward soon tapering its $85-billion in bond-buying purchases. The U.S. dollar is also gaining strength this morning, undermining the performance of commodities overall.

The backdrop ahead of the opening bell is mildly encouraging for equities, which were pummelled this month amid surging long-term bond yields and the possibility of a looming credit crunch in China. The 10-year U.S. Treasury yield is hovering just below 22-month highs reached earlier this week, and volatility in the U.S. bond market is starting to subside. In China, the overnight repo rate - a measurement of credit flowing to the nation's banks - slipped 40 basis points to 5.6 per cent today, according to Bloomberg. Last week, it soared to a record 12.85 per cent, about four times its average this year.

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U.S. stock futures trimmed some gains as the U.S. released a weaker-than-expected final reading on first-quarter gross domestic product, highlighting the slow growth trajectory of the economy. Meanwhile, Minneapolis Fed President Narayana Kocherlakota said on CNBC this morning that the bond-market reaction to last week's Federal Reserve tapering plans was "outsized." He also said the unemployment rate is unlikely to fall below 7 per cent until the second half of next year. While not a voting member of the Fed, his comments on Monday that the central bank wasn't becoming more hawkish drew considerable attention at trading desks.

Overall, this month's 2.6-per-cent drop in the S&P 500 has market participants wondering whether it's time for another leg up. With Chinese bank lending fears abating somewhat, and feelings that the sharp reaction to the Fed's bond-tapering plans revealed last week may have been overdone, there's a bit of bargain hunting going on.

Now, here's a closer look at what's going on this morning and what's to come.

MARKETS:

Equities:

Futures: S&P 500 +0.4 per cent; Dow +0.4 per cent; Nasdaq +0.6 per cent; TSX Toronto -0.3 per cent

Hong Kong's Hang Seng  +2.43 per cent

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Shanghai composite index -0.43 per cent

Japan's Nikkei -1.04 per cent

London's FTSE 100 +1.07 per cent

Germany's DAX +1.60 per cent

France's CAC 40 +1.90 per cent

Commodities:

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WTI crude oil (Nymex Aug) -0.22 per cent at $95.11 (U.S.) a barrel

Gold (Comex Aug) -2.44 per cent at $1,243.70 (U.S.) an ounce

Silver (Comex Sep) -3.36 per cent at $18.90 (U.S.) an ounce.

Copper (Comex Sep) -0.55 per cent at $3.06 (U.S.) a pound

Currencies:

Canadian dollar up 0.0031, or 0.33 per cent, at $0.9543 (U.S.)

U.S. dollar index up 0.10 at 82.69

Bonds:

U.S. 10-year Treasury yield 2.59 per cent, up 0.04

Canada 10-year government bond yield 2.54 per cent, up 0.05

STOCKS TO WATCH:

Barrick Gold Corp. could hit fresh multi-year lows today as bullion prices sink; it's down 4.4 per cent in the premarket.

AGF Management reported quarterly losses of 12 cents a share as revenues declined to $126.9-million from $133.5-million.

General Mills Inc. reported earnings in line with expectations but its guidance for fiscal year 2014 disappointed the Street. Shares are down nearly 1 per cent in the premarket.

Other earnings today include Monsanto Co.

ECONOMIC INDICATORS TO WATCH:

The U.S. Commerce Department said gross domestic product in the first quarter grew 1.8 per cent, down from the previous reading - and economists' expectations - of 2.4 per cent. Consumer spending and business investment were revised sharply downward.

THIS MORNING'S TOP INVESTING READS ON THE WEB:

A contrarian analysis of stock market sentiment suggests the worst is yet to come.

5 reasons why you still may want to consider buying bonds.

Vanguard recently changed its index provider for its ETFs. The Canadian Couch Potato blog looks at whether one index really is better than another.

A research report that may be the most succinct you've ever seen.

Is bitcoin nearing its end?

What the price of gold looks like when adjusted for inflation.

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The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities. You can also be notified using our dashboard feature when new articles appear from this author. Read more on using this feature here.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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