Benzinga Market Primer, Wednesday, December 19
Futures Rise on Cliff Deal, German Confidence
U.S. equity futures rose slightly in pre-market trading as Congressional leaders appear closer to a deal to at least manage the fiscal cliff and mute some of the effects of the tax hikes and spending cuts. Now, it is true that many of measures do not take effect immediately and leaders would have time should no deal be reached by January 1, but the faster a deal is reached, the better.
In other news around the markets:
- The German IFO Business Confidence Survey rose to 102.4 in December from 101.4 in November and was better than expectations of a reading of 102. The survey is a strong economic indicator and points to slightly better than expected growth in Germany for December.
- Spanish Industrial Activity rose 5.5 percent in December, well above the consensus forecast of a 3.5 percent contraction and better than the previous reading of a 6.2 percent contraction.
- Fitch has warned that going over the Fiscal Cliff would jeopardize the U.S.'s AAA rating with the rating agency, as a failure to avoid it would most likely send the U.S. back into recession.
- S&P 500 futures rose 1.75 points to 1,446.79.
- The EUR/USD was higher at 1.3277.
- Spanish 10-year government bond yields fell to 5.283 percent.
- Italian 10-year government bond yields fell to 4.395 percent.
- Gold rose 0.37 percent to $1,676.90 per ounce.
Asian shares were mostly higher overnight led by strength in Japan on hopes of a new round of economic stimulus. The Japanese Nikkei rose 2.39 percent while the Shanghai Composite Index was flat and the Hang Seng Index rose 0.57 percent. In addition, the Korean Kospi rose 0.51 percent and Australian shares rose 0.49 percent.
European shares were also higher overnight on hopes of a Fiscal Cliff deal and on the German confidence survey. The Spanish Ibex Index jumped 1.5 percent and the Italian MIB Index rose 0.78 percent in early trade. Also, the German DAX rose 0.3 percent and the French CAC rose 0.51 percent while U.K. shares rose 0.56 percent.
Commodities were mostly higher in overnight trade, boosted by global growth hopes. WTI Crude futures rose 0.38 percent to $88.26 per barrel and Brent Crude futures rose 0.56 percent to $109.45 per barrel. Copper futures fell 0.14 percent as Chinese shares lagged despite the strength in Australian miners overnight. Gold was higher and silver futures rose 0.26 percent to $31.75 per ounce.
Currency markets were in clear risk-on mode overnight as investors sold the dollar and bought other currencies. The EUR/USD was higher at 1.3277 and the dollar rose against the yen to 84.40. Overall, the Dollar Index fell 0.3 percent overnight on weakness against the euro, the yen, the pound, the Swiss franc, and the Swedish krone. The British pound was stronger overnight following the release of the Bank of England's Monetary Policy Committee minutes showed that authorities were in large agreement to keep rates on hold and not increase its asset purchase program.
Stocks moving in the pre-market included:
- UBS (NYSE: UBS) shares rose 0.12 percent pre-market as the company agreed a $1.5 billion fine with regulators over the Libor rigging scandal. However, some employees may face criminal charges in London as regulators found bribery in some employees.
- Alcoa (NYSE: AA) shares fell 1.8 percent pre-market as Moody's placed the company's credit rating on review for a downgrade as low steel prices continue to crimp margins.
- Altria (NYSE: MO) shares rose 1.26 percent pre-market as several tobacco companies reached an agreement with 17 states over payment-adjustment disputes.
- BHP Billiton (NYSE: BHP) shares rose 1.2 percent pre-market and Australian traded shares rose overnight on hopes that a Fiscal Cliff deal would help boost demand for metals.
Notable companies expected to report earnings Wednesday include:
- Bed Bath & Beyond (NASDAQ: BBBY) is expected to report third quarter EPS of $1.02 vs. $0.95 a year ago.
- FedEx (NYSE: FDX) is expected to report second quarter EPS of $1.41. vs. $1.57 a year ago.
- General Mills (NYSE: GIS) is expected to report second quarter EPS of $0.79 vs. $0.76 a year ago.
- Navistar (NYSE: NAV) is expected to report a fourth quarter loss of $1.12 per share vs. a profit of $3.37 per share a year ago.
On the economics calendar Wednesday, MBA Purchase Applications and Housing Starts data are due out, followed by the EIA Petroleum Status Report. In addition, the Treasury is expected to auction 7-year notes. Overnight, the Bank of Japan interest rate decision is expected as well as German inflation data.
Good luck and good trading.
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