Benzinga Market Primer, Wednesday October 3
U.S. equity futures were effectively flat in early Wednesday trading as the eurozone's services sector contracted slightly less than expected in September, despite severe weakness in Spain and France and slight weakness in Germany. The eurozone-wide PMI rose to 46.1 in September, higher than August's 46.0 reading and above economist expectations of a 46.0 reading.
In other news around the markets:
- Spain's service sector contracted at a faster than expected rate in September, as the nation's service PMI was reported at 40.2, below the previous reading of 44.0 and below economist expectations of 42.5. The collapsing service sector only serves to highlight Spain's woes.
- The French and German service sectors contracted in September, with Germany's unexpectedly contracting and France's slipping further to the lowest level in over 3 months.
- Spain outlined the details of its bad bank Wednesday, to little flare. The bank will sell assets over the next 15 years, will be made of at least 55 percent private capital (with the state's capital coming from the leftover from the bank bailout agreement after the recapitalizations), and will also be levered with senior debt.
- Investors such as Pimco and Blackrock (NYSE: BLK) have been buying Spanish bank debt of the highest-quality banks, as they do not expect Spain to submit for a bailout in the imminent future.
- S&P 500 futures were effectively flat at 1,441.70.
- The EUR/USD was slightly higher at 1.2929.
- Spanish 10-year government bond yields fell to 5.738 percent.
- Italian 10-year government bond yields fell to 4.983 percent.
- Gold futures rose 0.2 percent to $1,779.10 per ounce.
Asian shares were mixed overnight, as the Hang Seng Index rose 0.23 percent while the Japanese Nikkei slipped 0.45 percent on dashed hopes that the Bank of Japan would intervene to lower the yen to aid exporting companies. The Korean Kospi was flat in the session and Australian shares rose slightly, a second day of gains following the Royal Bank of Australia's rate cut. European shares were also mixed in early trading, as Spain's Ibex fell 0.11 percent and Italy's MIB Index rose 0.49 percent. The German DAX rose 0.14 percent while the French CAC dropped 0.22 percent and the U.K. FTSE 100 fell 0.06 percent.
Commodities were mixed in early Wednesday trading, as energy futures slipped and metal futures gained. WTI Crude futures fell 0.47 percent to $91.46 per barrel and Brent Crude futures fell 0.65 percent to $110.85 per barrel. Copper futures slipped 0.51 percent to $378.15 per pound despite the support from Australian monetary authorities to prop up the mining sector there. Gold was higher and silver futures rose 0.29 percent to $34.77 per ounce.
Currency markets continued to show Aussie dollar weakness in early trading following the rate cut on Tuesday. The EUR/USD was slightly higher in early trading and the dollar rose against the yen. Overall, the dollar index was flat as the greenback reversed a lot of moves from Tuesday, including gains against the pound, the Canadian dollar, and the Swedish krona. The Aussie dollar was broadly weak, falling against the U.S. dollar to levels near the summer low and weakening against the euro and the yen as well.
Stocks moving in the pre-market included Apple (NASDAQ: AAPL), which gained 0.56 percent pre-market as rumors of an iPad Mini recirculated following reports of suppliers making parts for a smaller tablet. Also, Monsanto (NYSE: MON) shares slipped more than 0.3 percent pre-market ahead of its earnings report later. Lastly, Xyratex (NASDAQ: XRTX) fell 13.79 percent in the pre-market after the company reported weaker than expected earnings after the close Tuesday.
Notable companies reporting earnings Tuesday include:
- Family Dollar Stores (NYSE: FDO) is expected to report quarterly EPS of $0.75 vs. $0.66 a year ago.
- Monsanto (NYSE: MON) is expected to report a quarterly loss of $0.43 per share vs. a loss of $0.22 a share a year ago.
RPM International (NYSE: RPM) is expected to report quarterly EPS of $0.64 vs. $0.59 a year ago.
On the economic calendar, investors will receive further data this week leading into the Non-Farm Payrolls report on Friday. Investors will get data on private sector hiring in the ADP Payrolls report and the ISM Non-Manufacturing Report is due out as well. Also, the EIA Petroleum Status report is due out, which has been very volatile over the past few weeks and will most likely move crude prices.
Good luck and good trading.
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