Benzinga Market Primer: Wednesday, January 30
Futures Flat Despite Italian Weakness, Eye FOMC Decision
U.S. equity futures were flat in early trade as Italian shares plunged. This occurred as the euro rose above 1.35 against the dollar for the first time since 2011, showing broad strength against a basket of currencies. Economists and analysts now worry that the strong euro will eventually be negative for the eurozone economy.
In other news around the markets:
- Italy sold 5- and 10-year bonds this morning with yields falling and the bid-to-cover rising while the take-up reached the maximum target.
- Spain's economy contracted 0.7 percent in the fourth quarter or at a 1.8 percent annualized rate, slightly weaker than forecasts of a 0.6 percent contraction in the quarter or a 1.7 percent annualized rate.
- Germany sold benchmark 30-year bonds this morning with yields rising to 2.45 percent from 2.34 percent and demand declining.
- S&P 500 futures were flat at 1,505.30.
- The EUR/USD was was higher at 1.3543.
- Spanish 10-year government bond yields rose to 5.18 percent.
- Italian 10-year government bond yields rose to 4.22 percent.
- Gold rose 0.25 percent to $1,667.20 per ounce.
Asian shares were stronger overnight ahead of the FOMC rate decision. The Japanese Nikkei Index rose 2.28 percent and the Shanghai Composite Index rose 1.00 percent while the Hang Seng Index rose 0.71 percent. Also, the Korean Kospi rose 0.43 percent and Australian shares rose 0.16 percent.
European shares were mostly lower overnight led by Italy and oil service stocks. The Spanish Ibex Index fell 0.02 percent and the Italian MIB Index declined 1.84 percent led lower by Saipen, the oil services company, which fell 34 percent, and financials. Meanwhile, the German DAX fell 0.07 percent and the French CAC fell 0.01 percent while U.K. shares rose 0.07 percent.
Commodities were stronger overnight led by Natural Gas and Copper. WTI Crude futures rose 0.26 percent to $97.80 per barrel and Brent Crude futures rose 0.27 percent to $114.67 per barrel and Natural Gas futures rose 1.04 percent to $3.23 per million BTU. Copper futures rose 1.1 percent on increasing Asian demand and low inventories. Gold was higher and silver futures rose 0.84 percent to $31.45 per ounce.
Currency markets saw broad euro strength and broad yen weakness overnight in a clear risk-on environment. The EUR/USD was higher at 1.3543, the first time above 1.35 since November of 2011, and the dollar rose against the yen to 91.27. Overall, the Dollar Index fell 0.16 percent on weakness against the euro and the Swiss franc. Also, the Aussie dollar was weak against the greenback and the euro but rose against the yen. Lastly, the dollar-shekel rate was unchanged overnight despite Israel Central Bank Governor Stanley Fischer announcing his intentions to step down.
Stocks moving in the pre-market included:
- Chesapeake Energy (NYSE: CHK) shares rose 9.65 percent pre-market as the company announced that CEO Aubrey McClendon is to step down.
- Amazon (NASDAQ: AMZN) shares rose 8.51 percent after the company reported earnings that missed estimates despite showing strong revenue growth.
- Hess (NYSE: HES) shares rose 1.01 percent pre-market after rising more than nine percent Tuesday after Elliot Management announced a position in the company with intent to overthrow the board.
- Ford (NYSE: F) shares fell 0.19 percent pre-market after declining more than 4.6 percent Tuesday after posting earnings that missed estimates and guiding for a weak European market in 2013.
Notable companies expected to report earnings Wednesday include:
- Boeing (NYSE: BA) is expected to report fourth quarter EPS of $1.19 vs. $1.83 a year ago. The company is also set to comment on the state of the investigation into the 787 Dreamliner.
- ConocoPhillips (NYSE: COP) is expected to report fourth quarter EPS of $1.42 vs. $2.02 a year ago.
- Las Vegas Sands (NYSE: LVS) is expected to report fourth quarter EPS of $0.59 vs. $0.57 a year ago.
- Marathon Petroleum Corp. (NYSE: MPC) is expected to report fourth quarter EPS of $2.08 vs. a loss of $0.21 a year ago.
- Hess (NYSE: HES) is expected to report fourth quarter EPS of $1.25 vs. $1.17.
- Facebook (NASDAQ: FB) is expected to report fourth quarter EPS of $0.15.
On the economics calendar Wednesday, MBA Purchase Applications and the ADP Employment Report are due out. In addition, the initial fourth quarter GDP estimate will be released for the U.S. and FOMC policy statement will be released later this afternoon. Also, the Treasury is set to sell 7-year notes. the Spanish Budget Balance statement is expected and could move markets.
Good luck and good trading.
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