Benzinga Market Primer, Tuesday September 4
U.S. equity futures were flat in early Tuesday trading following the long weekend as investors await the European Central Bank's interest rate decision this Thursday and, more importantly, the decision on a bond-buying plan. Doubts still remain amongst traders that ECB President Mario Draghi has been unable to win over conservative board members such as the Bundesbank's Jens Weidmann. However, over the weekend, Draghi did hint that he would be comfortable buying sovereign bonds out to three year maturities so long as those countries have submitted for a formal bailout program.
In other news around the markets:
- Moody's has placed the European Union on negative watch as the crisis threatens the currency bloc's joint credit rating.
- Valeant Pharmaceuticals (NYSE: VRX) has announced the purchase of Medicis Pharmaceuticals (NYSE: MRX) for $2.6 billion, recharging its acquisition strategy.
- Dutch paper Het Financieele Dagblad is reporting that Weidmann is isolated in bond-buying opposition, fueling rumors that he may resign in protest.
- Goldman Sachs (NYSE: GS) has cut its earnings forecasts for Chinese companies, citing that the Chinese economy as a whole has yet to bottom and further downside remains for both the economy and companies.
- Greek Finance Minister Yannis Stournaras is set to present Greece's new proposal for spending cuts and privatization plans to his German counterpart Wolfgang Schaeuble Tuesday.
- S&P 500 futures fell slightly to 1,403.60.
- EUR/USD was lower at 1.2585 after trading above 1.26 on Monday.
- The spread between 10- and 2-year bond yields for both Italy and Spain widened to record levels, as short-term bond purchases loom from the ECB.
- Gold rose 0.37 percent to $1,693.90.
Overnight, Asian shares were weak as Chinese growth fears and a lack of action from the Royal Bank of Australia at its interest rate meeting sent indices lower. The Shanghai Composite Index fell 0.75 percent and the Hang Seng Index fell 0.66 percent after Goldman Sachs cut its earnings estimates for Chinese companies. The Nikkei fell 0.1 percent and Australian shares fell 0.6 percent. In Europe, stock indices of core nations fell on the Moody's warning whereas peripheral shares rose on hopes of increased ECB action. Spain's Ibex rose 1.04 percent and Italy's MIB Index rose 0.04 percent while Germany's DAX fell 0.52 percent and the French CAC fell 0.72 percent. U.K. shares were also weak as the FTSE fell 1.0 percent.
Commodities were stronger in early Tuesday trading as hopes of further monetary stimulus boosted prices. WTI Crude futures rose 0.55 percent to $97.00 per barrel and Brent Crude futures rose 0.37 percent to $116.21 per barrel. Copper futures rose 0.82 percent to $348.55 per pound despite weakness in China. Gold futures approached $1,700 per ounce and silver futures rose 2.28 percent to $32.16 per ounce.
The dollar was slightly stronger early Tuesday after the EUR/USD retreated from multi-week highs. The dollar index rose 0.04 percent to 81.24 as the EUR/USD slipped below 1.26. The dollar was stronger against most other major trading partners, including the pound and the yen. The Swiss franc was also weaker against the dollar after the government reported that the economy contracted in the previous quarter for the first time in over a year.
In earnings news, Smithfield Foods (NYSE: SFD) reported that its first-quarter earnings missed analyst estimates, as the company reported EPS of $0.40 vs. $0.45 expected. Notable companies reporting earnings Tuesday include:
- Campell Soup (NYSE: CPB) is expected to report EPS of $0.38.
- Finisar (NASDAQ: FNSR) is expected to report EPS of $0.14.
- Francesca's Holdings (NASDAQ: FRAN) is expected to report EPS of $0.24.
The ISM Manufacturing Index release at 10:00 am eastern highlights the economic calendar Tuesday. Investors also await data on auto sales, the Markit U.S. PMI, and construction spending.
Good luck and good trading.
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