Benzinga Market Primer: Friday, January 25
Futures Rise on Earnings, German Sentiment
U.S. equity futures rose in pre-market trading following continued strong earnings and a better than expected report on German business confidence. The IFO Business Climate Index rose to 104.2 in January from 102.4 in December, better than economists forecasts of 103. Further, the Expectations Index released alongside the main index, a measure of the outlook of business leaders in the near term, rose to 100.5 from 98 in December, besting estimates of 99.
In other news around the markets:
- ECB President Mario Draghi spoke at the World Economic Forum, saying that the LTRO's and OMT helped to save the euro, that the second half of this year should see accelerating economic momentum, that the OMT will remain in place as long as needed, and that pan-European deposit guarantees are some way out.
- The Bank of Japan released its latest policy meeting minutes, revealing that the BoJ is taking on aggressive easing, that it is not appropriate to be pessimistic on Japanese growth prospects, that the BoJ will act independently of the government, and that beating deflation, not devaluation, is its biggest task.
- Thursday, German Prime Minister Angela Merkel became the latest leader to criticize Japan's currency policies, following central bankers such as the Bundesbank's Jens Weidmann and the Fed's James Bullard questioning the politicization of the exchange rate.
- S&P 500 futures rose 3.5 points to 1,495.30.
- The EUR/USD was was higher at 1.3432.
- Spanish 10-year government bond yields rose sharply to 5.163 percent.
- Italian 10-year government bond yields fell to 4.087 percent.
- Gold fell 0.07 percent to $1,668.80 per ounce.
Asian shares were mixed overnight led by significant strength in Japan following the release of the Bank of Japan minutes. The Japanese Nikkei Index rose a monstrous 2.88 percent and is up 8.4 percent in the past month while the Shanghai Composite Index fell 0.49 percent and the Hang Seng Index fell 0.08 percent. Also, the Korean Kospi declined 0.91 percent and Australian shares rose 0.52 percent on hopes that the RBA will cut rates at its next meeting.
European shares were stronger overnight on the back of the strong IFO survey despite British GDP in the fourth quarter missing estimates. The Spanish Ibex Index rose 0.66 percent despite a strong move higher in bond yields and the Italian MIB Index gained 0.53 percent. Meanwhile, the German DAX rose 1.09 percent and the French CAC rose 0.74 percent while U.K. shares rose 0.19 percent.
Commodities were mixed overnight with oil rising and copper futures rallying nicely. WTI Crude futures rose 0.39 percent to $96.32 per barrel and Brent Crude futures rose 0.1 percent to $113.42 per barrel. Copper futures rose 0.45 percent to $369.30 on hopes of an RBA rate cut. Gold was lower and silver futures were flat at $31.73 per ounce.
Currency markets saw euro strength and yen weakness in overnight trading following the BoJ minutes and the IFO survey release. The EUR/USD was higher at 1.3426 and the dollar rose against the yen to 90.85 but was capped by reports of a large option barrier near 91.75. Overall, the Dollar Index fell 0.16 percent on weakness against the euro and the Swiss franc despite strength against the pound, the yen, and the Canadian dollar. Also, the AUD/USD traded like a roller coaster over the past 48 hours or so as the pair popped on Chinese Manufacturing Data above 1.05 only to retreat lower on increased hopes that the RBA will cut rates.
Stocks moving in the pre-market included:
- Starbucks (NASDAQ: SBUX) shares rose 2.35 percent pre-market as the company reported stronger than expected earnings.
- Microsoft (NASDAQ: MSFT) shares fell 1.38 percent pre-market despite reporting earnings that beat estimates.
- Nokia (NYSE: NOK) shares fell 0.94 percent after declining over 8 percent Thursday following the company's earnings release as the company suspended its dividend to preserve cash.
- Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) shares rose 0.3 percent pre-market as the stock closed in on its 52-week high at $97.73.
Notable companies expected to report earnings Friday include:
- Halliburton (NYSE: HAL) is expected to report fourth quarter EPS of $0.61 vs. $1.00 a year ago.
- Honeywell (NYSE: HON) is expected to report fourth quarter EPS of $1.09 vs. $1.05 a year ago.
- Proctor and Gamble (NYSE: PG) is expected to report second quarter EPS of $1.11 vs. $1.10 a year ago.
- Weyerhaeuser (NYSE: WY) is expected to report fourth quarter EPS of $0.20 vs. $0.14 a year ago.
- Kimberly Clark (NYSE: KMB) is expected to report fourth quarter EPS of $1.35 vs. $1.28 a year ago.
On the economics calendar Friday, New Home Sales are the only relevant piece of data on the calendar ahead of the ECRI weekly index. In addition, Canadian CPI data is due out.
Good luck and good trading.
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