Benzinga Market Primer, Tuesday, November 13
Futures plummet as Greece gets more time on bailout, German Economic Sentiment Drops.
U.S. equity futures dropped precipitously in early Tuesday trading following a day of think trading as only stock markets were open in observance of Veterans Day Monday. Overnight, European finance ministers and other leaders agreed to give Greece two more years on its bailout agreement to pay back the loans in exchange for further conditions and more austerity. However, leaders will not vote on whether to disperse the next bailout tranche until the meeting scheduled for November 20.
In other news around the markets:
- The German ZEW Economic Survey, a key indicator of economic sentiment that is correlated to growth, unexpectedly dropped to -15.7 in November from -11.5 in October, weaker than forecasts of a -9.8 reading.
- Italy auctioned 6.5 billion euros of 12-month notes to yield 1.762 percent, below the previous 1.941 percent. Also, the bid-to-cover ratio fell slightly to 1.764 from 1.77 at the last auction.
- German Finance Minster Wolfgang Schaeuble spoke overnight, stating that haircuts on Greek debt are out of the question but that maturity extensions and loan rate cuts as possible. He is concerned that hopes for Greece to sustain debt by 2020 are too ambitious.
- S&P 500 futures fell 9.2 points to 1,380.0.
- The EUR/USD was lower at 1.2680.
- Spanish 10-year government bond yields rose to 5.937 percent.
- Italian 10-year government bond yields rose to 5.047 percent.
- Gold fell 0.37 percent to $1,724.50 per ounce.
Asian shares were lower overnight on global growth and European fears. The Japanese Nikkei Index fell 0.18 percent and the Shanghai Composite Index dropped 1.51 percent while the Hang Seng Index fell 1.13 percent in Hong Kong. Meanwhile, the Korean Kospi fell fell 0.59 percent and Australian shares dropped 1.53 percent on weak home price data.
European shares were also trading lower in early Tuesday trade, though the magnitude of losses were less so than Asian indexes. Spain's Ibex Index fell 0.67 percent and the Italian MIB Index fell 0.44 percent while the Greek shares fell 0.6 percent. Also, the German DAX fell 0.72 percent and the French CAC dropped 0.92 percent while U.K. shares slid 0.87 percent.
Commodities were lower overnight as energy once again led prices lower. WTI Crude futures dropped 0.95 percent to $84.76 per barrel and Brent Crude futures fell 1.14 percent to $107.83. Copper futures fell 0.88 percent to $343.75 per pound on global growth fears. Gold was lower and silver futures fell 0.64 percent to $32.32.
Currency markets were in clear risk-off mode overnight as the dollar gained and the euro fell. The EUR/USD was lower at 1.2680 and the dollar fell against the yen in classic risk-off fashion. Overall, the Dollar Index gained 0.17 percent to 81.18 on strength against the Swedish krone, the euro, the Swiss franc, and the British pound. The AUD/USD also fell in line with the risk-off atmosphere and the EUR/AUD continued its decline, probing the lowest level in nearly three months.
Stocks moving in the pre-market included:
- Leucadia National Corp. (NYSE: LUK) shares fell 0.52 percent pre-market following a 3.03 percent slide Monday as the company announced the purchase of Jefferies (NYSE: JEF). Jefferies needed to be rescued following its rescue of Knight Capital Group (NYSE: KCG).
- Microsoft (NASDAQ: MSFT) shares fell 0.82 percent pre-market as the company announced that the head of its Windows division has been fired active immediately and will be replaced by a company insider. The move is said to be so that the company can have a new vision for the next version of Windows.
- Smith and Wesson (NYSE: SWHC) shares fell 0.28 percent following a 4.09 percent gain yesterday as the company increased guidance.
Notable companies expected to report earnings Tuesday include:
- Dicks Sporting Goods (NYSE: DKS) is expected to report third quarter EPS of $0.37 vs. $0.32 a year ago.
- Cisco Systems (NASDAQ: CSCO) is expected to to report third quarter EPS of $0.46 vs. $0.43 a year ago.
- Home Depot (NYSE: HD) is expected to report third quarter EPS of $0.70 vs. $0.60 a year ago.
- The TJX Companies (NYSE: TJX) is expected to report third quarter EPS of $0.61 vs. $0.53 a year ago.
On the economics calendar Tuesday, the NFIB Small Business Optimism Index is due out at 7:30 am eastern followed by the ICSC Goldman Store Sales report and the Redbook. Later, the Treasury is set to auction 4-week, 3-, and 6-month bills and the Treasury budget statement is due out this afternoon. Also, Fed Vice-Chairman Janet Yellen is set to speak at 3:30 at the University of California, Berkley on central bank communications and will answer questions.
Good luck and good trading.
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