Benzinga Market Primer, Tuesday October 9
U.S. equity futures fell in early Tuesday trading as the International Monetary Fund (IMF) slashed global growth forecasts in its quarterly World Economic Outlook. The IMF slashed its estimate for 2012 global growth to 3.3 percent global GDP growth from 3.5 percent in its previous estimate. Also, the IMF slashed its estimates for global growth in 2013 as well as slashing growth forecasts for nearly every major economy in the world for both 2012 and 2013. The cuts came just one day after the World Bank slashed forecasts for Asian growth, sending markets lower.
In other news around the markets:
- In a prepared speech at the Eurogroup meeting in Luxembourg, ECB President Mario Draghi said that leaders need to continue with reforms and that there are reasons to be positive on the euro. He also hinted that the ECB would only purchase bonds in the secondary market of countries who submit for a formal plan, as previously thought.
- Italian GDP fell more than expected in the third quarter, as GDP fell 2.6 percent on an annualized basis, worse than economist expectations of a 2.5 percent contraction.
- British industrial production dropped 1.2 percent in September, worse than economist expectations of a 1.1 percent drop in production, indicating a prolonged double-dip recession in the U.K.
- S&P 500 futures fell 2.1 points to 1,447.70.
- The EUR/USD was lower at 1.2935 after spiking lower at the beginning of Draghi's press conference.
- Spanish 10-year government bond yields rose a whopping 38.3 basis points to 6.096 percent.
- Italian 10-year government bond yields fell to 5.082 percent.
- Gold fell 0.17 percent to $1,772.60 per ounce.
Asian shares were mixed overnight with Chinese stocks leading. China's Shanghai Composite Index rose 1.97 percent and Hong Kong's Hang Seng Index rose 0.54 percent. Australian shares rose 0.52 percent but the Japanese Nikkei did fall 1.06 percent and the Korean Kospi dropped 0.14 percent. European shares were all lower in pre-market trade following the IMF cuts. Spain's Ibex was notably weak, falling 1.02 percent, and Italy's MIB Index fell 0.21 percent. Elsewhere, the German DAX fell 0.6 percent and the French CAC fell 0.15 percent while U.K. shares dropped 0.36 percent.
Commodities were mixed in early Tuesday trade, as energy futures lead. WTI Crude futures rose 0.39 percent to $89.68 per barrel and Brent Crude futures rose 0.64 percent to $112.54 per barrel as hopes of a European solution dwarfed fears of a continued global slowdown and rising inventories. Copper futures rose 0.17 percent to $372.45 per pound on similar hopes, but gold was lower and silver futures fell 0.34 percent to $33.90 per ounce.
Currency markets were once again in clear risk-off mode as the euro fell across the board, despite some renewed strength in the Aussie dollar. The EUR/USD was lower in overnight trading and the dollar fell against the yen. Overall, the Dollar Index rose 0.22 percent and closed in on the 80.00 level. The Aussie dollar did show strength in the overnight trade, with the AUD/USD rising above 1.02 for the first time since the aftermath of the Royal Bank of Australia's rate cut last week. Also, the EUR/AUD fell back below 1.27 and the Aussie rose against the yen.
Stocks moving in the pre-market included Apple (NASDAQ: AAPL), which fell to the lowest price in a month, falling 1.08 percent in the pre-market. Meanwhile, Wells Fargo (NYSE: WFC) shares rose 0.2 percent in the the pre-market ahead of the company's quarterly earnings report, due out Friday. On the other hand, Citi (NYSE: C) shares fell 0.92 percent in the pre-market as investors fear that its earnings release will be weaker than expected.
Notable companies reporting earnings Friday include:
- Alcoa (NYSE: AA) is expected to kick off the third quarter earnings season by reporting quarterly EPS of $0.01 vs. $0.15 a year ago.
- Yum Brands (NYSE: YUM) is expected to report quarterly EPS of $0.97 vs. $0.83 a year ago.
On the economic calendar, investors will get data on small business optimism as the NFIB Small Business Optimism survey is released. Investors should watch the comments on the job market made by small business leaders as well as comments on future trends of the economy, as they tend to point to renewed strength or continued weakness in the economy. Also, the Fed is set to buy approximately $2 billion worth of notes Tuesday while the Treasury is set to auction $32 billion in 3-month bills and $28 billion in 6-month bills.
Good luck and good trading.
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