Benzinga Market Primer, Monday March 18
Futures Sharply Lower on Cypriot Bailout, Deposit Raid
U.S. equity futures traded sharply lower in early pre-market trade Monday after EU leaders agreed to a bailout in principle for Cyprus, however choosing to penalize savers in the country for the bailout. The EU is set to place a levy on deposits, effectively taking percentages of deposits in exchange for the bailout.
In other news around the markets:
- Chinese Premier Li, having just assumed office, told markets to expect 7.5 percent growth through 2020, as his predecessor had done. Economists seem reluctant to take officials seriously in forecasting growth since estimates differ from those of the government.
- Chinese home prices rose 1.1 percent February, or 2.2 percent from a year ago, fueling concerns of a property bubble in China and increasing the likelihood that the PBOC would need to tighten policy. The data marks the seventh monthly increase in the past eight months.
- Bailout packages for both Ireland and Portugal have had the loan period extended by EU leaders, as they were with Greece, in a sign of good faith as the two countries have taken strong steps in implementing austerity measures.
- S&P 500 futures fell 13.3 points to 1,540.30.
- The EUR/USD was lower at 1.2956.
- Spanish 10-year government bond yields rose rose 11 basis points to 5.03 percent, crossing back above the dreaded 5 percent level.
- Italian 10-year government bond yields rose 8 basis points to 4.67 percent.
- Gold rose 0.68 percent to $1,603.40 per ounce.
Asian shares were weak overnight on both the Cyprus bailout news threatening depositors and also on the negative news out of China. The Japanese Nikkei Index fell 2.71 percent and the Shanghai Composite Index fell 1.68 percent while the Hang Seng Index declined 2.00 percent. Also, the Korean Kospi fell 0.92 percent and Australian shares declined 2.05 percent.
European shares traded lower but off of session lows as financials led stocks lower following the bailout of Cyprus. The Spanish Ibex Index fell 2.00 percent and the Italian FTSE MIB Index fell 2.22 percent both led lower by banks. Meanwhile, the German DAX declined 0.96 percent and the French CAC fell 1.13 percent while U.K. shares declined 0.76 percent.
Commodities were lower overnight on global growth fears resulting from the negative Chinese home data as well as the confidence shock from the Cyprus bailout. WTI Crude futures fell 0.92 percent to $92.59 per barrel and Brent Crude futures declined 1.1 percent to $108.61 per barrel. Copper futures declined 2.2 percent to $344.30 per pound. Gold was higher and silver futures declined 0.16 percent to $28.82 per ounce.
Currency markets were in broad risk-off mode as investors fled to the safe-haven currencies in the dollar and the yen and sold the euro. The EUR/USD was nearly 1 percent lower at 1.2956 and the dollar fell against the yen to 95.00. Overall, the Dollar Index rose 0.4 percent on strength against the euro, the Swiss franc, and the Canadian dollar. The Australian dollar was also sharply lower overnight on global growth fears and the EUR/JPY was a big mover, declining 1.2 percent overnight.
Stocks moving in the pre-market included:
- Citigroup (NYSE: C) shares fell 2.79 percent pre-market as banks globally declined following the Cyprus bailout.
- Alcoa (NYSE: AA) shares fell 2.67 percent pre-market as steel prices declined on Chinese tightening fears.
- Kimberly Clark (NYSE: KMB) shares fell 1.68 percent pre-market on fears that global sales could slow in the face of global economic headwinds.
- Carnival Corp. (NYSE: CCL) shares declined 3.58 percent pre-market as analysts have been making negative comments about the company relating to new pricing policies.
Notable companies expected to report earnings Monday include:
- Horizon Pharmaceuticals (NASDAQ: HZNP) is expected to report a fourth quarter loss of $0.47 per share vs. a loss of $.097 per share a year ago.
- Kior (NASDAQ: KIOR) is expected to report a fourth quarter loss of $0.32 per share vs. a loss of $0.15 per share a year ago.
- Micron Technology (NASDAQ: MU) is expected to report a second quarter loss of $0.20 per share vs. a loss of $0.29 per share a year ago.
On the economics calendar Monday, the NAHB Housing Market Index is expected to be released and the Treasury is set to auction 3- and 6-month bills. Overnight, Italian industrial production and the German ZEW Economic Sentiment Index could move markets.
Good luck and good trading.
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