Benzinga Market Primer, Wednesday September 19
U.S. equity futures rose in early Wednesday trade as the Bank of Japan unexpectedly launched a new round of easing aimed at stimulating its fledgling economy. The Bank of Japan decided to increase the size of its quantitative easing program by 10 trillion yen, or about $126.75 billion. The increase in the plan represents about 22 percent of the previous 45 trillion yen total stimulus to date.
In other news around the markets:
- German leaders are set to propose that a European banking regulator would only supervise systemically relevant banks with large cross-border operations, rather than all banks. The oversight would be through the ECB for banks deemed systemically relevant or with large cross-border operations.
- Spain's Prime Minister Mariano Rajoy said that Spain would not be able to fund itself without further cuts and that reforms take will take time. Investors await Spain's request for a formal program so that the ECB can step in and buy bonds.
- Germany auctioned 2-year bonds to yield 0.006 percent, the first positive yielding 2-year auction since June.
- Blackstone (NYSE: BX) announced that it is in a definitive agreement to purchase Vivint for more than $2 billion.
- Japanese monetary leaders cited Chinese weakness as a key reason for the increase in the stimulus program. However, tensions between the two nations continue to escalate and the Korean economy may be the one to benefit the most from continued tensions.
- S&P 500 futures rose 1.8 points to 1,454.70.
- The EUR/USD was weaker at 1.3009.
- Spanish 10-year government bond yields fell to 5.787 percent.
- Italian 10-year government bond yields fell to 5.015 percent.
- Gold rose to a 6-month high of $1,776.00, a gain of 0.27 percent, on the continued central bank stimulus.
Overnight, Asian shares rose on the news that the Bank of Japan decided to ease further. The Japanese Nikkei rose 1.19 percent on the news and Hong Kong shares, measured by the Hang Seng Index, rose 1.16 percent. The Shanghai Composite Index rose 0.4 percent and the Korean Kospi rose 0.15 percent, while Australian shares rose 0.54 percent. In Europe, shares were mixed as British shares rose 0.07 percent but eurozone stocks slid. The Spanish Ibex fell 0.13 percent and the Italian MIB Index slipped 0.19 percent. The German DAX fell 0.06 percent and the French CAC fell 0.16 percent.
Commodities were weak in early trading with energy futures trading lower following the weak API Inventories report after the market close Tuesday. Crude inventories were reported as rising 2.43 million barrels on estimates of a meager rise of 0.23 million barrels. WTI Crude futures fell 0.39 percent to $94.92 and Brent Crude futures slipped 1.01 percent to $110.90. Copper futures rose on the Japanese stimulus, as the front month future climbed 0.57 percent to $380.85 per pound. Gold rose to a six-month high and silver fell 0.04 percent to $34.705.
Currencies showed euro and yen weakness overnight as the Bank of Japan increased the size of its QE program. The USD/JPY rose 0.14 percent to 78.91 and the EUR/JPY traded lower after initially bouncing to intra-session highs near 103.50, but now trades 102.65. Overall, the dollar was stronger as the Dollar Index rose 0.12 percent to 79.35 on weakness in the euro, the yen, the pound, and the Swiss franc.
Notable stocks gaining in the pre-market included:
- DeVry Inc. (NYSE: DV) rose 12.34 percent pre-market.
- Corning Inc (NYSE: GLW) rose 2.12 percent pre-market after it was upgraded by Goldman Sachs (NYSE: GS).
- Hewlett-Packard (NYSE: HPQ) rose 1.26 percent pre-market as Jim Chanos made positive comments on the stock.
Notable stocks declining in the pre-market included:
- Autozone Inc (NYSE: AZO) fell 4.99 percent pre-market as its earnings beat estimates but revenue missed analyst estimates. O'Reilly Autoparts (NASDAQ: ORLY) fell 1.47 percent pre-market, in tandem with Autozone.
- CSX Corp. (NYSE: CSX) fell 1.35 percent pre-market as the company announced that Amtrak is set to lease tracks from the company in a deal totaling $35 million.
- SunTrust Banks (NYSE: STI) fell 0.73 percent pre-market despite Jefferies (NYSE: JEF) reiterating the company at outperform and increasing its price target to $33.00 from $29.00.
General Mills (NYSE: GIS) posted earnings that beat expectations but missed on revenue and the stock rose. Other companies reporting earnings today include Adobe Systems (NASDAQ: ADBE) and Bed Bath and Beyond (NASDAQ: BBBY).
The economic calendar is rather light today, with housing starts and existing home sales the key data-points to watch. However, Ben Bernanke is set to meet privately with leaders on the Hill regarding the fiscal cliff. There is no press conference expected nor a Q&A session. However, Kansas CIty Fed President Esther George is set to speak at a conference hosted by the bank and Richard Fisher, President of the Dallas Fed, is set to speak at the Harvard Club in New York.
Good luck and good trading.
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