Benzinga Market Primer, Thursday September 13: Fed Edition
U.S. equity futures fell in early Thursday trading ahead of the Federal Reserve's policy decision, which is set to be released at 12:30 pm. Markets are looking for the Fed to extend its low interest rate guidance into 2015 and some are looking for a third round of quantitative easing. However, some key metrics, especially those of inflation expectations, point to no further easing policies as QE as more easing now could send inflation higher. However, an announcement of a new QE plan would be a strong policy statement because it would be targeted specifically at employment, which is a change for the Fed.
In other news around the markets:
- The Swiss National Bank has announced that there will be no changes to its existing policy, including the currency peg. Investors had been speculating that the bank would boost the peg to 1.30 against the euro from 1.20.
- The U.S. embassy in Yemen has become the latest to be assaulted by protesters in the wake of an anti-Islam film made in the U.S.
- Italy auctioned 3- and 5-year bonds at low yields, aided by the threat of ECB intervention in the bond market. The 3-year bond yielded a low 2.75 percent and the 5-year bond yielded a low 3.71 percent.
- Apple (NASDAQ: AAPL) announced a slew of new products including the new iPhone 5, a new iPod Touch, a new iPod Nano, and a new version of its mobile software, iOS 6.
- EADS (OTC: EADSY) and BAE Systems (OTC: BAESY) are preparing a merger of the two defense companies.
- S&P 500 futures fell 2.2 points to 1,437.3.
- EUR/USD rose slightly to 1.2908.
- Spanish 10-year government bond yields rose to 5.682 percent.
- Italian 10-year government bond yields rose to 5.052 percent.
- Gold was flat at $1,734.00 per ounce.
Asian shares were mixed overnight as global growth fears took hold, specifically in China. The Shanghai Composite Index fell 0.76 percent and the Nikkei rose 0.39 percent. The Korean Kospi rose 0.03 percent and the Australian S&P ASX Index fell 0.5 percent. In Europe, shares were mostly lower as markets sold off ahead of the Fed. The Spanish Ibex fell 1.15 percent and the Italian MIB Index fell 0.74 percent. The German DAX followed the peripheral indexes lower, falling 0.34 percent and the French CAC 40 fell 0.69 percent.
Commodities were once again strong led by energy following unrest in the Middle East. WTI Crude futures rose 0.13 percent to $97.14 and Brent Crude futures rose 0.21 percent to $116.20. Copper futures slipped back below $370.00 per pound to $368.75, gold rose, and silver futures fell 0.76 percent to $33.04.
Currencies continued to show dollar weakness, however less so than the previous two trading sessions. The Dollar Index slipped 0.09 percent led lower by the euro, the yen, and the Canadian dollar. Notably weak was the Aussie dollar, as the Aussie was weak against the greenback, the euro, the yen, the Canadian dollar, and the New Zealand dollar. Also, it is worth noting that the EUR/CHF rose back above 1.21 for the first time in over month.
Once again, the earnings calendar is rather light. Pier 1 Imports (NYSE: PIR) is expected to report EPS of $0.19 vs. $0.14 a year ago.
Aside from the Fed decision, the economic calendar is rather full. Initial jobless claims and producer prices are due out at 8:30 am eastern, followed by the EIA Natural Gas report at 10:30 am. The Fed decision is due out at 12:30 pm, a new set of forecasts from members at 2:00 pm, and then the press conference of Chairman Bernanke at 2:15 pm.
Good luck and good trading.
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