Benzinga Market Primer Thursday October 18

U.S. equity futures were effectively flat in early Thursday trading as China reported a slew of economic data indicating that the slowdown in the economy that carried through the first several months of this year may have begun to bottom a few months ago. The data released included:

• Chinese home prices fell 1.3 percent in September from August, slower than the rate of a 1.4 percent decline in August.


• Chinese GDP for the third quarter was reported as growing 7.4 percent, in line with economist expectations, but below the second quarter's growth rate of 7.6 percent year-over-year.


• Industrial Production, a leading indicator for growth, was surprisingly strong, rising 9.2 percent in September as compared to a year ago, higher than estimates of a 9.0 percent rise and stronger than August's 8.9 percent rise.


• Chinese Fixed Asset Investment rose 20.5 percent as compared to a year ago on estimates of a 20.2 percent rise and growing faster than the August reading of 20.2 percent.


• Chinese retail sales were reported as strong in September, rising 14.2 percent year-over-year as compared to estimates of a 13.2 percent, which was the same as the previous reading.

Top News

In other news around the markets:

• Standard and Poor's Managing Director Kraemer was quoted as saying that further downgrades of European sovereign credits are to be expected, especially as leaders fall into a complacency trap and do not act quick enough to tackle the crisis.


• Pimco expects the U.S. to get downgraded again should the nation go over the fiscal cliff, which would enact billions in spending cuts and tax increases, pushing it into recession.


• Spanish banks' bad loan percentage rose to 10.5 percent in August from 9.9 percent in July putting further strains on its already troubled banking sector. Wednesday, it was reported that Italy saw continued capital flight, showing the weakness of the banking sector in peripheral nations.


• Spain sold a total of 4.614 billion euros of bonds, with the 10-year auction pricing with a yield of 5.458 percent, below the previous auction's 5.666 percent, and with a bid-to-cover ratio of 1.88 from 2.5 previously.


• S&P 500 futures were flat at 1,456.00.


• The EUR/USD was higher at 1.3126.


• Spanish 10-year government bond yields were lower at 5.401 percent.


• Italian 10-year government bond yields fell to 4.763 percent.


• Gold fell 0.25 percent to $1,748.70 per ounce.

Asian Markets

Asian shares rose overnight buoyed by the Chinese data. The Japanese Nikkei rose 2 percent in Tokyo and the Shanghai Composite Index rose 1.24 percent on the data. The Hang Seng Index rose 0.48 percent in Hong Kong while the Korean Kospi rose 0.2 percent and Australian shares rose 0.69 percent.

European Markets

European shares were mixed in early trade ahead of Thursday's Eurogroup summit. The Spanish Ibex Index fell 0.5 percent while the Italian MIB Index fell 0.19 percent in Milan. Meanwhile, the German DAX rose a modest 0.3 percent and the U.K. FTSE 100 rose 0.18 percent while the French CAC fell 0.03 percent.

Commodities

Commodities were mixed in early trade with energy outperforming. WTI Crude futures rose 0.04 percent to $92.16 per barrel and Brent Crude futures rose 0.16 percent to $113.40 per barrel. Copper futures were higher after the China data, rising 0.09 percent to $375.15 per pound. Gold was lower and silver futures fell 0.22 percent to $33.16 per ounce.

Currencies

Currency markets continued to show broad euro strength but even more so Aussie dollar strength following the strong Chinese data. The EUR/USD was higher in overnight trade and the dollar was higher against the yen, rising above 79. Wednesday, the Financial Times circulated a report that the Bank of Japan is considering pegging the USD/JPY to weaken the currency in a similar manner that the Swiss National Bank did with the EUR/CHF at 85. Notably, the EUR/AUD fell back near 1.26 as the Aussie rallied broadly, including gains against the U.S. dollar, the Canadian dollar, the Japanese yen, and the New Zealand dollar.

Pre-Market Movers

Stocks moving in the pre-market included:

• Verizon Communications VZ rose 0.56 percent pre-market, ahead of its earnings release.


• Clearwire Corporation CLWR fell 0.44 percent in the pre-market despite Standard and Poor's maintaining its credit rating.


• Shares of Apollo Group APOL rose 0.14 percent in the pre-market after falling over 22 percent Wednesday after it slashed guidance for the rest of the year.


• Morgan Stanley MS fell 0.49 percent ahead of its earnings release.

Earnings

There are several notable companies reporting earnings Thursday, including:

• Advanced Micro Devices AMD is expected to report third quarter earnings of $0.01 vs. $0.15 a year ago.


• The Blackstone Group BX is expected to report third quarter EPS of $0.41 vs. a loss of $0.31 per share a year ago.


• Chipotle Mexican Grill CMG is expected to report third quarter EPS of $2.30 vs. $1.90 a year ago.


• E*trade Financial ETFC is expected to report third quarter EPS of $0.08 vs. $0.16 a year ago.


• Google GOOG is expected to report third quarter EPS of $10.58 vs. $9.72 a year ago.


• Microsoft MSFT is expected to to report third quarter EPS of $0.56 vs. $0.68 a year ago.


• Morgan Stanley MS is expected to report third quarter EPS of $0.24 vs. $1.14 a year ago.


• Southwest Airlines LUV is expected to report third quarter EPS of $0.13 vs. $0.15 a year ago.


• Travelers Corp. TRV is expected to report third quarter EPS of $1.49 vs. $0.79 a year ago.


• Verizon Communications VZ is expected to report third quarter EPS of $0.65 vs. $0.56 a year ago.

Economics

On the economic calendar Thursday, weekly jobless claims are due out as well as the Philadelphia's Fed's Regional Activity Index and the Conference Board's Leading Indicators. Also, the Treasury is set to sell $7 billion of 30-year TIPS at 1 pm New York time and the EIA natural gas report is due out as well.

Good luck and good trading.