Benzinga Market Primer: Monday, February 4
Futures Flat on Global Fears
U.S. equity futures were flat in pre-market trading Monday on global fears as eurozone risks crept higher. Peripheral bond yields rose overnight as former Italian Prime Minister Silvio Berlusconi wants to undo austerity measures just two weeks before elections and also as Spanish Prime Minister Mariano Rajoy gets swept into a scandal surrounding his personal finances.
In other news around the markets:
- China's services sector expanded in January as the non-manufacturing PMI rose to 56.2 from 56.1 in January.
- French Finance Minister Pierre Moscovici spoke over the weekend, warning that the strong euro could derail any economic recovery.
- China's futures exchanges are set to raise margins ahead of the Lunar New Year holiday, which could hurt prices as traders have to post more collateral per contract.
- S&P 500 futures were slightly lower by 1.2 points to 1,505.70.
- The EUR/USD was lower at 1.3588.
- Spanish 10-year government bond yields rose sharply to 5.21 percent, the highest in over one month.
- Italian 10-year government bond yields rose sharply to 4.42 percent.
- Gold was lower at $1,664.70.
Asian shares were mixed overnight with strength in the major markets in Japan and China offset by weakness elsewhere. The Japanese Nikkei Index rose 0.62 percent and the Shanghai Composite Index rose 0.38 percent while the Hang Seng Index fell 0.16 percent. Also, the Korean Kospi fell 0.23 percent and Australian shares fell 0.28 percent.
European shares were lower led by Italian shares as regulators launched a formal investigation into Banca Monte dei Paschi di Sienna following its bailout request resulting from a large derivative loss. The Spanish Ibex Index fell 0.89 percent, led lower by energy and financials companies, and the Italian MIB Index declined 1.75 percent, hurt by financials and economically sensitive industrial companies. Meanwhile, the German DAX fell 0.25 percent, the French CAC fell 0.32 percent, and U.K. shares lost 0.37 percent.
Commodities were weak overnight across the board as weakness was seen in both energy and metals futures. WTI Crude futures declined 0.63 percent to $97.25 per barrel and Brent Crude futures fell 0.51 percent to $116.17 per barrel. Copper futures declined 0.22 percent to $377.60 per pound. Gold was lower and silver futures dropped 1.07 percent to $31.62.
Currency markets were in risk-off mode overnight as the euro sold off and the yen strengthened after early weakness. The EUR/USD was lower at 1.3588 and the dollar rose against the yen to 92.89 after rising above 93 earlier. Overall, the Dollar Index rose 0.34 percent on strength against the euro, the yen, and the Swiss franc. In addition, the AUD/USD rose ahead of the RBA rate decision and the EUR/GBP declined 0.71 percent, reversing recent flows.
Notable companies expected to report earnings Monday include:
- Baidu (NASDAQ: BIDU) is expected to report fourth quarter EPS of $1.29 vs. $0.92 a year ago.
- Clorox (NYSE: CLX) is expected to report second quarter EPS of $0.81. vs. $0.79 a year ago.
- Humana (NYSE: HUM) is expected to report fourth quarter EPS of $1.07 vs. $1.20 a year ago.
- Simon Property Group (NYSE: SPG) is expected to report fourth quarter EPS of $1.08. vs. $1.24 a year ago.
- Yum! Brands (NYSE: YUM) is expected to report fourth quarter EPS of $0.82. vs $0.75 a year ago.
On the economics calendar Monday, factory orders are the only notable piece of economic data set to be released in the U.S. The Treasury is also set to auction 3- and 6-month bills. Overnight, the RBA rate decision and Eurozone services PMI's should move markets.
Good luck and good trading.
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Tags: Banca Monte dei Paschi di Sienna, China Non-Manufacturing PMI, Eurozone Non-Manufacturing PMI, Factory Orders, French Finance Minister Pierre Moscovici, Margin Hikes, Mariano Rajoy, Reserve Bank of Australia (RBA), Silvio Berlusconi