Benzinga Market Primer, Wednesday August 8
U.S. equity futures fell in early trading Wednesday after three straight days of gains in major indexes. Also, fears over Greece needing a third bailout and potential second debt restructuring increased overnight, following S&P making negative comments on the southern European nation. S&P placed Greece on negative watch and noted that Greece will need additional funding support from the Troika and that they expect GDP to miss targets of a 4-5 percent contraction in 2012. Rather, they expect GDP to fall a whopping 10-11 percent in 2012.
In other news around the markets:
- Spain increased its 2012 deficit target to 4.5 percent from 3.5 percent, putting pressure on Spanish bonds.
- Spanish industrial output fell at a 6.3 percent annualized rate in June, showing that economy continued to slow through the end of the second quarter.
- The Bank of England cut its GDP forecast in its quarterly inflation report, citing weak domestic demand and continued pressure from a slowing Eurozone. The Bank of England also included a rate cut in Q2 2013 in its forecast.
- Germany sold 3.4 billion euros of 10-year bonds of a targeted 4.0 billion to yield 1.42 percent, up from 1.31 percent. Demand was strong, with the bid-to-cover increasing to 1.8 from 1.5.
- S&P 500 futures fell 4 points to 1,392.90.
- EUR/USD fell to 1.2360.
- Spanish 10-year yield rose to 6.944 percent.
- Italy 10-year yields fell to 5.957 percent.
- Gold fell 0.19 percent to $1,609.70.
Asian shares were mixed overnight, with Korea's Kospi Index rising 0.87 percent and the Japanese Nikkei rising 0.88 percent. However, the Singapore STI fell 0.5 percent. European shares were less enthusiastic, with shares falling across the continent. Spain's Ibex 35 Index was the notable laggard, falling more than 2 percent on the weak economic data and deficit revision. Italy's MIB Index fell 0.97 percent and Greece's AEX fell 0.88 percent. The broad Stoxx 50 index also fell 0.42 percent.
Commodities reflected the weakness in equities in early Wednesday trading, as WTI Crude futures fell 0.68 percent to $93.03 per barrel and Brent Crude futures fell 0.75 percent to $111.16 per barrel. Copper futures also fell on global weakness, with front month futures falling 0.83 percent to $341.20 per pound. Gold fell 0.19 percent to $1,609.70 and silver fell 0.79 percent to $27.87.
The dollar index rallied after a few days of losses, helped by the euro being weak against the greenback. The EUR/USD fell to 1.2360 after trading above 1.24 on Tuesday. The USD/JPY fell in early Wednesday trading as yields on 10-year U.S. treasuries retreated.
Disney (NYSE: DIS) reported earnings that were "better than good," to quote Tom Keene of Bloomberg Surveillance. Disney beat earnings estimates despite reporting revenue that slightly missed analysts estimates. Also, Priceline (NASDAQ: PCLN) and Zillow (NASDAQ: Z) missed earnings. Notable companies reporting earnings Wednesday include:
- HollyFrontier Corp (NYSE: HFC) is expected to report Q2 EPS of $2.24.
- Ralph Lauren (NYSE: RL) is expected to report Q2 EPS of $1.78.
- Macy's (NYSE: M) is expected to report Q2 EPS of $0.64.
- NewsCorp (NYSE: NWSA) is expected to report Q2 EPS of $0.32.
- Monster Beverage (NASDAQ: MNST) is expected to report Q2 EPS of $0.61.
The economic calendar is more full Wednesday than it has been the previous two days. Data on labor productivity and costs are due out and the EIA petroleum status report is also due out. Overnight Wednesday into Thursday, Chinese inflation, fixed asset investment, industrial production and retail sales data are all due out.
Good luck and good trading.
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