Benzinga Market Primer: Monday, June 24

Futures Drop On China Fears, Easing Doubts As Chinese Stocks Plummet

U.S. equity futures declined in early pre-market trade Monday on continued fears surrounding the Chinese economy. The People's Bank of China issued a statement attempting to reassure markets of the state of the Chinese economy while Goldman Sachs downgraded its growth outlook for the Chinese economy. The Shanghai Composite Index proceeded to fall 5.29 percent on the news.

Top News

In other news around the markets:

• Goldman Sachs cut its second quarter growth forecast for China to 7.5 percent year-over-year growth vs. 7.8 percent previously and cut 2013 growth to 7.4 percent from 7.8 percent. Goldman also cut 2014 growth forecasts to 7.7 percent from 8.4 percent.


• The PBOC commented on the recent liquidity crunch in China (finally), saying that liquidity is at a reasonable level and that credit growth must be kept steady. The PBOC reiterated that it stands to ready to act if needed.


• The Bank for International Settlements (BIS) made some strong comments on the risks of continued non-traditional monetary policy. In its annual report, the BIS urged central banks to pull back the reigns on policy and that delivering more expansionary policy was becoming "increasingly perilous."


• S&P 500 futures fell 12.30 points to 1,571.80.


• The EUR/USD was lower at 1.3116.


• Spanish 10-year government bond yields rose 13 basis points to 5.04 percent, crossing back above the 5 percent level for the first time in three months.


• Italian 10-year government bond yields rose 9 basis points to 4.7 percent.


• Gold fell 0.63 percent to $1,283.90 per ounce.

Asian Markets

Asian shares all closed at or near the lows overnight after opening higher following increased fears over the health of the Chinese economy. The Japanese Nikkei 225 Index declined 1.26 percent and the Topix Index fell 0.89 percent. In Hong Kong, the Hang Seng Index fell 2.22 percent while the Shanghai Composite Index declined 5.29 percent in China. Also, the Korean Kospi fell 1.31 percent and Australian shares fell 1.47 percent.

European Markets

European shares were also lower in early trade, taking cues from Asia. The Spanish Ibex Index fell 1.07 percent and the Italian FTSE MIB Index declined 0.74 percent. Meanwhile, the German DAX fell 0.89 percent and the French CAC 40 Index declined 0.96 percent while U.K. shares lost 0.64 percent.

Commodities

Commodities were taking it on the proverbial chin overnight as lowered Chinese growth estimates weighed on prices. WTI Crude futures fell 0.31 percent to $93.40 per barrel and Brent Crude futures declined 0.23 percent to $100.68 per barrel. Copper futures tumbled a whopping 3.18 percent to $300.15 per pound, the lowest in over a year. Gold was lower and silver futures declined 1.62 percent to $19.64 per ounce.

Currencies

Currency markets were on the move overnight as early yen weakness was canceled out as the session went on. The EUR/USD was lower at 1.3116 and the dollar fell against the yen by 0.03 percent to 97.87 after touching 98.60 overnight. Overall, the Dollar Index rose 0.28 percent on strength against the Canadian dollar, the pound, the Swiss franc, and the euro.

Earnings Reported Yesterday

Key companies that reported earnings Friday include:

• Darden Restaurants DRI reported fourth quarter EPS of $1.01 vs. $1.04 expected on revenue of $2.3 billion vs. $2.27 billion expected. The company also raised its quarterly dividend to $0.55 per share from $0.50 per share.


• CarMax KMX reported first quarter EPS of $0.64 vs. $0.58 expected on revenue of $3.31 billion vs. $3.15 billion expected.

Pre-Market Movers

Stocks moving in the pre-market included:

• Advanced Micro Devices AMD shares gained 1.25 percent after rising over 3 percent Friday.


• U.S. Steel X shares declined 2.46 percent pre-market on Chinese fears.


• Cliff's Natural Resources CLF shares declined 1.4 percent pre-market on lower commodity prices in the face of Chinese fears.


• Freeport-McMoRan Copper and Gold FCX shares fell 1.31 percent pre-market as copper prices plunged.

Earnings

Notable companies expected to report earnings Monday include:

• Gencorp GY is expected to report a second quarter loss of $0.01 per share vs. EPS of $0.03 a year ago.


• Sonic SONC is expected to report third quarter EPS of $0.26 vs. $0.24 a year ago.

Economics

On the economics calendar Monday, the Chicago Fed National Activity Index and the Dallas Fed Manufacturing Index are due out followed by the weekly 3- and 6-month bill auctions and speech from Fed President Richard Fisher. Overnight, Italian retail sales and a Spanish bill auction are expected.

Good luck and good trading.

Tune into Benzinga's PreMarket Info show with Dennis Dick and Joel Elconin here.

For a recap of Friday's market action, read Benzinga's daily market wrap here.