Benzinga Market Primer, Tuesday July 31
As Jamie Coleman of Forexlive.com wrote, markets will trade with one hand tied behind their back ahead of the European Central Bank's decision on Thursday. Following comments from ECB President Mario Draghi, markets await the policy action that was hinted at late last week. Despite rumors of the German Economic Council supporting a European Redemption Fund to mutualize debt versus the ECB buying bonds, ECB action remains the swiftest way for authorities to tackle this new leg of the European Debt Crisis. The German economists see such a redemption fund not taking shape for seven years.
In other news around the markets:
- Moody's reiterated its negative outlook on the U.K. citing downwardly revised growth estimates amid renewed economic headwinds.
- China Premier Wen Jiabao said that he sees signs of economic stabilization in China and that policy fine-tuning and property tightening measures will increase in the second half of 2012.
- S&P 500 futures rose 4 points to 1,384.70.
- EUR/USD slightly higher at 1.2288.
- Gold rose $6.10 to $1,630.10.
- Spanish 10-year yield 6.609 percent.
- Italian 10-year yield 6.01 percent.
Oil futures rose modestly early Tuesday, as WTI Crude futures rose 0.43 percent to $90.17 per barrel and Brent Crude Futures rose 0.1 percent to $106.30. Copper futures rose over 1 percent to $345.10 on hopes of further central bank easing. Silver futures also rose 1 percent to $28.32.
The euro continues to trade in the spotlight as it trades at record weak levels against the Aussie dollar. The EUR/AUD cross fell as low as 1.1645, another record low for the pair. The prospect of ECB easing and hopes of a Chinese rebound have been the key drivers behind the move lower. The EUR/USD continues to trade sideways in the 1.2250/1.2300 range after the spike last week on the ECB hopes. The Aussie dollar has been the clear winner over the past few sessions, not just against the euro but also against the U.S. dollar.
In earnings, UBS (NYSE: UBS) and Deutsche Bank (NYSE: DB) both reported earnings that missed analysts estimates. The weak European banking earnings follow the strong report from British, but largely Asian exposed, HSBC (NYSE: HBC). Notable earnings due out Tuesday include:
- Pfizer (NYSE: PFE) is expected to report Q2 EPS of $0.54.
- Valero (NYSE: VLO) is expected to report Q2 EPS of $0.68.
- BMC Software (NASDAQ: BMC) is expected to report Q2 EPS of $0.75.
The economic data docket is much more full Tuesday, headlined by the S&P Case-Shiller Home Price Index at 9:00 am. First, Same Store Sales are due at 7:45 and then the personal income and outlays report is due out at 8:30. The Redbook is due at 8:55 am and then the home price index is at 9:00 am. Chicago PMI at 9:45 and consumer sentiment at 10:00 am round up a rather full economic data docket. However, the large events begin late Tuesday, with the Chinese Manufacturing PMI due out at 9:00 pm est.
Good luck and good trading.
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