Benzinga Market Primer, Monday, December 31: New Year's Eve Edition
Futures Indicate Lower Open on Imminent Cliff
U.S. equity futures were higher but the Futures-Fair Value was lower, indicating a lower open for Wall Street Monday. Late Friday, futures crashed as investors feared that politicians were heading into the weekend neither with a deal nor a framework for such an agreement. As of writing, there are about 18 hours until the Fiscal Cliff.
In other news around the markets:
- In an attempt to devalue the yen, Japanese authorities may spur trade agreements with G20 nations and push for massive devaluations. These attempts would be in contrast to 2009 agreements between G20 nations, where they pledged not to devalue their own currencies intentionally. As economist Nouriel Roubini wrote on twitter, global trade is a zero sum game; some win, some lose.
- Two key members of the European Central Bank, Jens Weidmann and Jorg Asmussen, spoke late Sunday and warned that the key causes of the debt crisis have not been cured and that complacency risks another crisis shock. The speeches were very gloomy on the European economy.
- France's Constitutional Council has rejected the 75 percent upper income tax bracket, thus sending the French fiscal situation into turmoil. Part of President Francois Hollande's plan to close the deficit was to tax the rich at high tax rates however now this seems unlikely and cuts will have to come from elsewhere.
- S&P 500 futures rose 4.5 points to 1,388.50.
- The EUR/USD was lower at 1.3189.
- Spanish 10-year government bond yields rose to 5.265 percent.
- Italian 10-year government bond yields fell to 4.497 percent.
- Gold 0.53 percent to $1,664.70 per ounce as going over the Fiscal Cliff most likely means more QE from the Fed.
Asian shares were mixed overnight with strength in China and Japan offset by weakness in Australia and Hong Kong. The Japanese Nikkei Index rose 0.7 percent in Tokyo trading while the Shanghai Composite Index rose 1.61 percent on positive manufacturing data while Hong Kong shares slipped 0.04 percent. In addition, the Korean Kospi rose 0.49 percent as weak inflation data signaled more room for monetary easing and Australian shares dropped 0.48 percent.
European shares were mostly lower on Fiscal Cliff fears in early Monday trade. The Spanish Ibex Index fell 0.43 percent and the Italian MIB Index fell 0.43 percent, leading peripheral shares lower. Meanwhile, the German DAX fell 0.57 percent while the French CAC rose 0.37 percent and U.K. shares fell 0.41 percent.
Commodities were mixed overnight as weakness in the energy complex was offset by strength in metals. WTI Crude futures fell 0.09 percent to $90.72 per barrel and Brent Crude futures fell 0.37 percent to $110.21 per barrel. Copper futures rose on the positive HSBC China Manufacturing PMI, which rose to 51.5 in December from 50.5 in November; copper futures rose 0.68 percent to $361.40 per pound. Gold was higher and silver futures rose 0.53 percent to $30.14 per ounce.
Currency markets showed broad euro weakness overnight as Fiscal Cliff fears sent investors to the safety of the dollar. The EUR/USD was lower at 1.3189 and the dollar rose against the yen to 86.11. Overall, the Dollar Index rose 0.13 percent on strength against the euro, the yen, and the Swiss franc. The notable mover is the EUR/GBP cross, falling 0.35 percent to 0.8152 as the pair is stalling out at strong neckline resistance on the 1-year chart.
Stocks moving in the pre-market included:
- Bank of America (NYSE: BAC) shares fell 0.97 percent pre-market along with other financials as the Fiscal Cliff looms.
- Apache Corp (NYSE: APA) shares fell 0.58 percent pre-market as oil prices fell ahead of the Fiscal Cliff.
- Nokia (NYSE: NOK) shares fell 0.52 percent pre-market along with other European companies listed in the U.S. as European shares fell on Fiscal Cliff fears and also on fears of the European economy's health.
No notable companies are expected to report earnings Monday.
On the economics calendar Monday, the Dallas Fed Manufacturing Survey is due out at 10:30 am. Overnight, the official Chinese Manufacturing PMI for December is due out and early Wednesday, European manufacturing PMI's from the major countries as well as the pan-European manufacturing PMI are expected.
Good luck and good trading.
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