Benzinga Market Primer, Tuesday August 21
U.S. equity futures rose for a fourth consecutive day Tuesday on continued hopes that new discussions between European leaders would culminate in a grand solution to Europe's debt crisis. Reports indicated that Germany, mainly the conservative Bundesbankers, are now supporting European Central Bank President Mario Draghi's plan to place a cap on sovereign bond yields, indicating that further assistance for Spain and Italy could be imminent.
In other news around the markets:
- The Troika of creditors for Greece are discussing easing the terms of paying back the bailout loans, either through decreasing the interest rate and/or increasing the length of the payback period. Meanwhile, Greece plans on announcing 13.5 billion euros of new spending cuts, more than the 11.5 billion requested by the creditors.
- Fitch believes that that the ECB may be willing to act even without the support of the Bundesbank citing that Europe will stay together, downward pressure will persist without a resolution of the crisis, and that Italy's crisis is one of politics, not economics.
- Apple (NASDAQ: AAPL) became the largest U.S. company ever measured by market cap, surpassing Microsoft's (NASDAQ: MSFT) record set back at the height of the tech bubble.
- The Royal Bank of Australia (RBA) saw weaker demand growth and inflation pressure across Asia and foreign holders of currency reserves diversifying into the Aussie dollar at its last monetary policy meeting.
- S&P 500 futures rose 3 points to 1,417.70.
- EUR/USD rose above 1.24 to 1.2420.
- Spanish benchmark 10-year bond yield fell 8.7 basis points to 6.195 percent.
- Italian benchmark 10-year bond yield fell 9.2 basis points to 5.681 percent.
- Gold rose 0.28 percent to $1,627.50 per ounce.
Overnight, Asian shares were mixed due to local economic figures and following the RBA comments. The Nikkei Index fell 0.16 percent in Tokyo trading even as Chinese shares and Australian shares both rose nearly 0.5 percent. European equities were much more enthusiastic on the hope of ECB action to solve the debt crisis, as shares rose across the continent. Italian shares notably outperformed, rising over 1.4 percent on the Fitch comments. Spanish shares, measured by the Ibex Index, actually fell 0.08 percent and the German DAX rose 0.45 percent.
Commodities were strong early Tuesday on hopes of coordinated global central bank action. WTI Crude futures rose 0.76 percent to $96.70 per barrel and Brent Crude futures rose 0.58 percent to $114.36 per ounce. Copper futures were also strong in early trade, rising 1.44 percent to $342.75 per pound. Gold rose and silver followed, gaining 1.11 percent to $28.995 per ounce.
The dollar index was exceptionally weak early Tuesday, as the index fell nearly 0.4 percent largely due to strength in the euro against the dollar. The EUR/USD rose over 70 pips in early trading and the euro was actually strong against a basket of currencies, not just the U.S. dollar. The EUR/AUD pair rose slightly, even as Aussie dollar was strong against other currencies and the EUR/CAD rose in tandem with the EUR/USD.
Urban Outfitters (NASDAQ: URBN) beat earnings estimates in its quarterly release after the close on Monday and the stock rose over 10 percent in pre-market trading. Notable earnings releases due out Tuesday include:
- Best Buy (NYSE: BBY) is expected to report Q2 EPS of $0.31 as compared to $0.35 a year ago.
- Dell (NASDAQ: DELL) is expected to report Q2 EPS of $0.45 vs. $0.54 a year ago.
On the economic front, the Redbook indicating same-store sales is due out at 8:55 am EST. Also, Atlanta Fed President Dennis Lockhart is set to speak at 8:45 am eastern and will speak to the Latin American Chamber of Commerce and World Affairs Council in Atlanta.
Good luck and good trading.
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