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Before the bell: Tech stocks surge, Asian markets hit hard

The Before the Bell report is constantly updated to reflect the latest news developments and market moves in the premarket. Check back later for updates.

Stock futures suggest a flat opening this morning for the major North American indexes as traders continue to absorb this week's rush of corporate earnings.

Late Thursday, Microsoft, Amazon and Zynga all reported quarterly results that impressed the Street and shares in all three stocks are up sharply in the premarket this morning.

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That's setting the tech sector up for a strong session, and not surprisingly, Nasdaq futures are rising in the premarket. In their earnings releases, Microsoft pointed to an increase in corporate software sales and Amazon indicated a pick-up in holiday shopping, while both had positive things to say about their fourth-quarter outlooks.

That's an encouraging sign for the economy and markets in general as we head further into the fourth quarter. The overall tally so far may not sound so impressive: of the S&P 500 companies that have reported quarterly results so far, 52 per cent have posted positive sales surprises and 72 per cent have beaten earnings expectations, according to FactSet data.

But as Jonathan Golub, chief market strategist of RBC Dominion Securities, points out this morning in a research note, all of the 10 sectors of the S&P 500 have actually beaten their earnings per share expectations, with an aggregate earnings surprise of 4.8 per cent.

Check out our Stocks to Watch section below for more details on premarket movers, the latest analyst actions, and today's key earnings results.

Also of note this morning are some economic figures out of Europe. A first reading of U.K. growth for the third quarter of 0.8 per cent, compared to the second quarter, met expectations - and signaled the strongest growth since early 2010. A business climate index for Germany unexpectedly weakened in October to 107.4, suggesting business morale had dropped for the first time in six months.

That reading could be making portfolio managers a little nervous, given the huge surge of inflows into European equity funds of late. Some tallies suggest those inflows over the past 10 weeks have been the largest ever.

Meanwhile, tightening credit conditions in China spooked Asian markets overnight, with the Nikkei falling to a nearly three-week low and the Shanghai composite index declining to a seven-week low. China's overnight money-market rate rose to 7.5 per cent overnight to its highest level since June. China's central bank has been refraining from injecting cash in open-market operations this week, rekindling the fears of tightening credit conditions that had been prevalent back in June.

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

MARKETS:

Equities:

Futures: S&P 500 -0.13 per cent; Dow -0.06 per cent; Nasdaq +0.13 per cent; S&P Toronto -0.20 per cent

Hong Kong's Hang Seng -0.60 per cent

Shanghai composite index -1.45 per cent

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Japan's Nikkei -2.75 per cent

London's FTSE 100 +0.04 per cent

Germany's DAX -0.06 per cent

France's CAC 40 -0.30 per cent

Commodities:

WTI crude oil (Nymex Dec) +0.40 per cent at $97.50 (U.S.) a barrel

Gold (Comex Dec) -0.61 per cent at $1,342.00 (U.S.) an ounce

Copper (Comex Dec) -0.63 per cent at $3.24 (U.S.) a pound

Currencies:

Canadian dollar at 95.75 (U.S.), down 0.0020 from Thursday's North American close.

U.S. dollar index up 0.03 at 79.22

Bonds:

U.S. 10-year Treasury yield 2.51 per cent, down 0.007

ECONOMIC INDICATORS TO WATCH:

U.S. durable goods orders for September rose 3.7 per cent from August, stronger than the 2.5 per cent rise that was forecast. But excluding the transportation sector, durable goods contracted 0.1 per cent.

(955 a.m. ET) Reuter's/University of Michigan consumer sentiment index is released, forecast to fall to 74.8 from 75.2 earlier this month.

STOCKS TO WATCH:

Cliff Natural Resources said its CEO, Joseph Carrabba, will retire.

Brookfield Office reported third-quarter funds from operations of 29 (U.S.) cents a share versus Street estimates of 24 cents.

Procter & Gamble reported first-quarter core earnings per share of $1.05, matching Street estimates. The company maintained its forward guidance.

UPS reported third-quarter earnings per share of $1.16, a penny better than Street estimates, and reaffirmed its outlook. But revenue missed expectations. Shares are up 2 per cent in the premarket.

Amazon reported late Thursday that its third-quarter net loss narrowed to 9 cents a share and that its revenue jumped 24 per cent. Shares are up 8 per cent in the premarket.

Microsoft said late Thursday that its quarterly profit rose to 62 cents a share from 53 cents. Shares are up 6 per cent in the premarket.

Zynga reported late Thursday an adjusted loss of 2 cents a share, half the loss expected by analysts. Shares are up 11 per cent in the premarket.

Other earnings today include National Oilwell Varco and Capital Power.

ANALYST ACTIONS:

Canaccord Genuity downgraded Rogers Communications to "hold" from "buy" and maintained a $49 (Canadian) price target. Late Thursday, Macquarie Equities Research also downgraded the stock, moving its rating to "neutral" while maintaining a $47 price target.

TD Securities downgraded Cenovus Energy to "buy" from "action list buy" and trimmed its price target to $38 (Canadian) from $39. Canaccord Genuity cut its target to $39 from $40.

CIBC World Markets upgraded Agnico-Eagle Mines to "sector outperform" from "sector perform" with a price target of $37. Desjardins Securities raised its target to $39 from $35 and maintained a "buy" rating. Canaccord Genuity raised its target to $32 from $30 and maintained a "hold" rating.

CIBC upgraded Mullen Group to "sector performer" from "sector underperformer" and hiked its target to $27 (Canadian) from $23. BMO Nesbitt Burns raised its target to $29 from $25 and reiterated a "market perform" rating.

RBC hiked its price target on Microsoft to $37 from $34, reiterated "sector perform" rating.

Societe Generale downgraded Coca-Cola Enterprises to "hold" from "buy" with a price target of $42.50 (U.S.).

Evercore Partners raised its price target on Amazon to $400 (U.S.) from $350. Canaccord Genuity raised its target to $365 from $300. Jefferies raised its price target on Amazon to $390 from $350 and reiterated a "buy" rating. SunTrust Robinson Humphrey raised its target to $400 from $370.

Desjardins Securities cut its price target on Potash Corp. to $35.55 (Canadian) from $38.50 and maintained a "buy" rating.

Industrial Alliance upgraded WiLan to "strong buy" from "buy" due to share price depreciation, keeps $7.70 (Canadian) price target.

Deutsche Bank downgraded Rayonier to "sell" from "hold" and cut its price target to $47 (U.S.) from $55.

TD Securities downgraded Progressive Waste Solutions to "hold" from "buy" with a price target of $28 (U.S.). Canaccord Genuity downgraded its rating to "hold" from "buy" but raised its price target to $26.50 from $25.50.

Canaccord Genuity raised its target on Precision Castparts to $287 (U.S. from $264 and maintained a "buy" rating.

CIBC World Markets raised its price target on Surge Energy to $8 (Canadian) from $7 and reiterated a "sector outperformer" rating.

BMO upgraded Hasbro to "market perform" from "underperform" and hikes target to $50 from $38.

RBC upgraded Advance Auto Parts, increases target to $116 (U.S.) from $103.

THIS MORNING'S TOP INVESTING READS ON THE WEB:

Google has trumped Apple as the most widely held stock among equity mutual funds.

How to find the perfect pair of ETFs for tax-loss selling.

The not-so-crazy case for commodities stocks.

The indices that are at all-time and 2013 highs.

10 ETF filings with blockbuster potential.

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For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities.

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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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