Benzinga Market Primer, Monday, November 19

Futures Rise on Fiscal Cliff Resolution Hopes

U.S. equity futures rose in pre-market trading as comments from President Obama Friday signaled that Congressional leaders and the White House may be able to reach a deal to either avert the fiscal cliff for good or kick the can further down the road. Either situation would relieve short term pressures on financial markets.

Top News

In other news around the markets:

• Israel appears set to launch a ground assault into the Gaza Strip as a cease fire has yet to be agreed upon and Israeli air strikes have increased.


• BP BP will use the funds raised from the sale of its Russian joint venture to increase its buyback and dividend, despite needing to pay massive fines resulting from the Gulf oil spill.


• The shadow banking system, consisting of money market funds, monoline insurers, and off-balance sheet investment vehicles, grew to $67 trillion in 2012 from $61 trillion in 2011.


• S&P 500 futures rose 5.9 points to 1,359.88.


• The EUR/USD was higher at 1.2767.


• Spanish 10-year government bond yields rose to 5.884 percent.


• Italian 10-year government bond yields rose to 4.877 percent.


• Gold rose 0.43 percent to $1,722.10 per ounce.

Asian Markets

Asian shares rose overnight led once again by Japanese shares as the political opposition leader Abe, who is expected to win the elections for Prime Minister, vows to require the Bank of Japan to buy bonds in an unlimited capacity in order to meet a higher inflation target. The Japanese Nikkei Index rose 1.43 percent and the Shanghai Composite Index rose 0.11 percent while the Hang Seng Index rose 0.49 percent. Also, the Korean Kospi rose 0.93 percent and Australian shares jumped 0.57 percent.

European Markets

European shares were also higher overnight on hopes that a fiscal cliff deal was within reach in Washington. The Spanish Ibex Index rose 0.61 percent and the Italian MIB Index rose 1.12 percent while Greek shares rallied 0.67 percent. Meanwhile, the German DAX rose 1.27 percent and the French CAC rose 1.28 percent as U.K. shares jumped 1.01 percent.

Commodities

Commodities were stronger overnight, buoyed by the positive tone in markets due to fiscal cliff hopes. WTI Crude futures rose 0.95 percent to $87.85 per barrel and Brent Crude futures rose 0.55 percent to $109.55 per barrel. Oil is rising on the increasing tensions in the Middle East, however analysts believe that it would take larger players entering the conflict for oil to truly spike higher. Copper futures jumped 0.97 percent to $349.50 per barrel on hopes that averting the fiscal cliff is bullish for growth. Gold was higher and silver futures rose 0.71 percent to $32.60.

Currencies

Currency markets show a clear risk-on tone in early trading, as the dollar and the yen were weak and risky currencies rallied. The EUR/USD was higher at 1.2767 and the dollar rose against the yen to 81.17. Overall, the Dollar Index fell 0.28 percent to 81.03 on weakness against the euro, the Swedish krone, and the Canadian dollar. In addition, the Aussie dollar was stronger with the AUD/USD rising back towards the 1.04 level and the EUR/AUD falling below 1.23. Also, the Israeli shekel was stronger against the dollar, hinting that markets expect some sort of cease fire deal before an invasion.

Earnings

Notable companies expected to report earnings Friday include:

• Brocade Communications Systems BRCD is expected to report fourth quarter EPS of $0.14 vs. $0.16 a year ago.


• Lowe's Companies LOW is expected to report third quarter EPS of $0.35 vs. $0.35 a year ago.

Economics

On the economics calendar Monday, existing home sales data and the NAHB Housing Market Index are due out. In addition, the Treasury is set to auction 3- and 6-month bills. Overnight, the Bank of Japan is expected to release its monetary policy and interest rate decisions. The Bank is expected to keep interest rates on hold and maintain its asset purchase program despite calls from political opposition leaders to triple the inflation target to 3 percent and embark on unlimited QE to boost inflation.

Good luck and good trading.