Benzinga Market Primer, Friday September 28
U.S. equity futures rose in early Friday trading as Spain and France presented new deficit-cutting measures and China prepared a new round of fiscal stimulus. Markets were pleased with Spain's new budget released Thursday, which consisted of a new round of spending cuts and tax increases and France made similar cuts to its budget to curb deficits. Also, investors bought risk assets on hopes of a new round of fiscal stimulus in China, rumored to be in the trillions of dollars.
In other news around the markets:
- Fitch cut its forecast for Chinese GDP growth in 2012 to 7.8 percent from 8.0 percent. The cut follows reports out of China that GDP growth could slow to as much as 7.6 percent in the third quarter.
- Spain is set to announce the results of the bank stress tests at 6 pm local time, or noon eastern. The results will allow investors to gauge just how much of the 100 billion euro bailout Spain will need to recapitalize its banks and how much new debt will be added to the Spanish government's existing debt load.
- A new plan in England will change the structure of LIBOR for good following the rate rigging scandal and will make it more of a market rate.
- Eurozone consumer price inflation accelerated in September to a 2.7 percent annualized rate on expectations of a 2.4 percent rise. High inflation is not what the ECB wants, as high inflation will constrain any crisis-fighting measures to balance sheet neutral ones by the ECB.
- S&P 500 futures were effectively flat at 1,441.70.
- The EUR/USD was higher at 1.2952, helped by the budget announcements in Spain and France.
- Spanish 10-year government bond yields rose to 5.973 percent.
- Italian 10-year government bond yields rose to 5.116 percent.
- Gold rose 0.24 percent to $1,784.80 per ounce.
Overnight, Asian shares rose with China once again leading gains on stimulus hopes. The Shanghai Composite Index rose 1.45 percent while the Japanese Nikkei fell 0.89 percent on slightly weak domestic economic data. Korean and Australian shares were also higher in Friday trading. European shares were broadly higher led by Spain and Italy as markets apparently liked the austerity budgets of Spain and France. The Spanish Ibex Index rose 0.56 percent and Italy's MIB Index rose 0.54 percent. The French CAC rose 0.18 percent and the German DAX 0.38 percent.
Commodities were higher in early trading, led by energy. WTI Crude futures rose 0.77 percent to $92.56 per barrel and Brent Crude futures rose 0.94 percent to $113.06 per barrel. Copper futures rose 0.77 percent to $377.30 per pound on continued hopes of Chinese stimulus. Gold was higher and silver futures rose 0.53 percent to $34.85 per ounce.
Currencies showed a slight risk-on bias in early trading, as investors sold the dollar and bought riskier, growth currencies. The EUR/USD was higher at 1.2952 and the dollar fell against the yen. Overall, the Dollar Index slipped 0.13 percent with weakness notable against the euro, the Swiss franc, and the Aussie dollar.
Stocks moving in the pre-market included Research in Motion (NASDAQ: RIMM), which posted a smaller than expected loss after the close Thursday, and shares rose 19.05 percent pre-market. Morgan Stanley (NYSE: MS) shares rose 0.65 percent pre-market as it was reaffirmed at JMP securities. Bank of America (NYSE: BAC) shares fell 1.00 percent in pre-market trading, as the bank announced more cuts to staff and investors worried about hack attacks on banks across the country spreading to the big banks.
The only notable company reporting earnings Friday is Walgreens (NYSE: WAG), which is expected to report quarterly EPS of $0.56 vs. $0.57 a year ago.
On the economic calendar, investors will get new data on personal income and spending as well as the Chicago PMI. In addition, Dallas Fed President Richard Fisher is set to speak and will most likely comment on current Fed policy.
Good luck and good trading.
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