Benzinga Market Primer, Wednesday September 12
U.S. equity futures were lifted in early Wednesday trade as the German Constitutional Court ratified the European Stability Mechanism and the Fiscal Pact, paving the way for Draghi's master plan to take hold. Also, Apple (NASDAQ: AAPL) shares rose in pre-market trading as investors await the launch of the iPhone 5 today. Lastly, investors remained hopeful that Federal Reserve Chairman Ben Bernanke is set to launch a new round of easing measures tomorrow at the culmination of the two-day FOMC meeting which begins today.
In other news around the markets:
- Chesapeake Energy (NYSE: CHK) has announced a new round of asset sales amounting to some $6.9 billion.
- The German Constitutional Court ratified the ESM and the Fiscal Pact with the conditions that Germany's commitment to the bailout fund not to exceed the already agreed-upon 190 billion euros and that Parliament be informed of decisions.
- The U.S. Ambassador to Libya was killed in an attack on the Embassy in Benzaghi, sending Brent Crude futures higher.
- Morgan Stanley (NYSE: MS) and Citigroup (NYSE: C) have reached an agreement for Morgan Stanley to purchase the remaining stake in their joint venture, Morgan Stanley Smith Barney, for a reported to $13.5 billion.
- S&P 500 futures rose 6.4 points to 1,437.00.
- The EUR/USD rose above 1.29 to 1.2915.
- Spanish 10-year government bond yields fell to 5.618 percent.
- Italian 10-year government bond yields fell to 5.073 percent.
- Gold rose to a 6-month high at $1,746.00 per ounce.
Overnight, Asian equities rose on hopes that the Chinese government is set to announce a new round of stimulus measures to boost the world's second-largest economy. The Japanese Nikkei rose 1.73 percent and the Hang Seng Index rose 1.1 percent. The Korean Kospi rose 1.56 percent and the Shanghai Composite rose 0.28 percent. In Europe, shares rose as the German Constitutional Court passed the bailout fund and the Fiscal Pact. The Spanish Ibex rose 0.82 percent and the Italian MIB Index rose 1.12 percent while the German DAX rose 0.76 percent and the French CAC rose 0.56 percent. The notable laggard was the U.K. FTSE 100, which fell 0.01 percent on weak employment data.
Commodities were higher led by the energy complex following the unrest in the Middle East, as the U.S. Ambassador to Libya was killed and the Consulate in Cairo was assaulted by protesters. WTI Crude futures rose 0.6 percent to $97.75 per barrel and Brent Crude futures rose 0.68 percent to $116.19 per barrel. Copper futures continued to climb with most industrial metals, as the front month futures rose 0.51 percent to $371.60 per pound, the highest level in months. As copper prices have historically been correlated with Chinese growth, this could bode well for a Chinese rebound should further stimuli be announced. Gold also rose and silver followed suit, with futures rising 1.34 percent to $34.015.
The EUR/USD rose above 1.29 for the first time since May of this year on the ESM ruling and on hopes that Chairman Bernanke will announce a new round of easing, hurting the dollar. The dollar was weak overall as the Dollar Index fell 0.24 percent and falling below 80. Also, the USD/JPY bounced off of the lowest levels seen since June and the USD/CHF fell to the lowest level since May. All in all, dollar weakness was the theme. Notably, the AUD/USD rose back above 1.04 and looks set to retest the recent highs above 1.06.
In economics, import and export prices are due out later today, as well as data on wholesale inventories. Inventory growth is a drag on GDP and inventory declines boost GDP, so this will be a key indicator to watch going forwards to see if consumers slow spending. As mentioned, the Federal Reserve meeting begins today and the Royal Bank of New Zealand is set to release its interest rate decision tonight.
Good luck and good trading.
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