Benzinga Market Primer, Wednesday September 26

U.S. equity futures were flat in early Wednesday trading as fears over Spain's finances sent bond yields higher. Tuesday, Spain reported that deficits for the year-to-date were much larger than expected and reports overnight hinted that Germany and other core nations are going to push for Spain to be subject to the strict bailout conditions for its already agreed upon bank bailout. Previously, leaders had agreed that Spain would not need the strict oversight that countries like Greece saw in its bank bailout.

Key News

In other news around the markets:

• The Bank of Spain made a statement indicating that the rate of contraction of the economy likely accelerated in the third quarter. Also, the bank was unable to measure the effect of the increase in the VAT at this time and how much it affected the GDP growth rate.


• The Bank of England released a report indicating that credit growth accelerated in the last month, as the Funding for Lending Scheme appears to be working.


• Greek Finance Minister Stournaras is set to meet with Troika representatives today and brief them on Greece's latest plan to cut spending and raise taxes. Greece needs to have 11.5 billion euros in cuts approved to receive the next bailout tranche.


• Reports show that the U.S. government's probe into HSBC HBC for hiding money from criminals is moving at a sluggish pace, as bureaucracy and infighting among agencies slows the pace of the investigation.


• S&P 500 futures were effectively flat at 1,437.80.


• The EUR/USD was lower at 1.2876.


• Spanish 10-year government bond yields rose to 5.972 percent and look set to climb through the 6 percent level in the near future.


• Italian 10-year government bond yields rose to 5.192 percent.


• Gold fell 0.07 percent to $1,765.20 per ounce.

Overnight Session

Overnight, Asian shares were broadly lower on fears that the European debt crisis is set to enter a new crisis stage. The Japanese Nikkei fell 2.03 percent and the Shanghai Composite Index fell 1.24 percent, showing a clear risk-off bias in markets. Korean, Hong Kong, and Australian shares also all fell, but less so than the Nikkei and Chinese shares. Also, European shares were lower led by Spain and Italy. Spain's Ibex Index fell 2.3 percent and Italy's MIB Index fell 2.29 percent as investors feared peripheral assets. The German DAX fell 1.338 percent and the French CAC fell 1.84 percent.

Commodities

Commodities were lower in early Wednesday trade as oil touched a new 7-week low. WTI Crude futures fell 0.71 percent to $90.72 per barrel and Brent Crude futures fell 0.67 percent to $109.71 per barrel. Copper futures fell 0.73 percent to $373.10 on global growth fears. Gold was lower and silver futures fell 0.04 percent to $33.935 per ounce.

Currencies

Currencies had a strong-dollar bias in early Tuesday trading as investors dumped growth currencies and fled for safe currencies such as the dollar and yen. The EUR/USD was lower at 1.2876, the lowest in over 2-weeks, and the dollar fell against the yen, raising speculation that the Bank of Japan will intervene in the USD/JPY market to keep it from falling further. Currencies such as the Aussie dollar and the New Zealand dollar were broadly weaker and the Canadian dollar also showed weakness.

Movers

Stocks moving in the pre-market included Carnival Cruises CCL after the company reported earnings Tuesday; Carnival shares rose 2.62 percent premarket. Also, Freeport-McMoRan Copper and Gold FCX fell 2.52 percent in pre-market trading as investors sold materials stocks and other high beta sectors and fled to safe haven assets. Cliffs Natural Resources CLF also fell with mining stocks and was lower by 1.08 percent in the pre-market.

Earnings

Notable companies reporting earnings Tuesday include:

• Progress Software PRGS is expected to report quarterly EPS of $0.25 vs. $0.31 a year ago.


• Sycamore Networks SCMR is expected to report a quarterly loss of $0.13 vs. a loss of $0.09 a year ago.


• Texas Industries TXI is expected to report a quarterly loss of $0.07 vs. a loss of $0.27 a year ago. Do note that the stock is higher by 3 percent in the pre-market.

Economics

On the economic calendar, MBA Purchase Applications, New Home Sales, and the EIA Petroleum Status Report are all due out. Other than that, headlines from Europe will most likely be key events during Wednesday's session. The EIA report should be watched closely, as last week it gained a massive 8 million barrels on expectations of a 200 thousand barrel rise. This weak report helped continue the sell-off in oil last week and another weak report could start another leg lower for oil prices.

Good luck and good trading.