Benzinga Market Primer: Monday, August 26: Emerging Markets Struggling To Stabilize
As the Fed taper approaches, emerging markets are finding it difficult to find solid ground. The fresh turmoil prompted policy makers at the Jackson Hole summit to consider the benefits of capital controls in such a situation. Over the weekend, a paper was presented at the summit which defended capital controls, something that was previously frowned upon.
In other news around the markets:
- Bank of Finland Governor Erkki Liikanen reassured investors that the market has eased but admitted that the EU was showing uncertain positive signals. He also noted that Finland still had a long road of reforms ahead, even as the crisis eases.
- Tension between the US and Syria reached a new high over the weekend as the UN investigated the possible use of chemical weapons by the Syrian government. Syrian President Bashar al-Assad has said claims that his government used chemical weapons were unfounded and politically motivated.
- The Japanese government is set to decide on one of two sales tax hikes on October 7. Originally, the government planned to take the sales tax up 3 percent in April. However, to soften the blow to the Japanese economy, the nation’s policy makers are thinking of raising the sales tax by 1 percent annually instead.
- New Zealand’s trade deficit came in much higher than expected at $774 million, the highest it has been since September of 2012. Original estimates were for a deficit of $16 million.
- The Chinese statistics bureau announced that the nation’s economy was showing signs of growth stabilization and that China’s PPI shows improving demand for commodities.
After the Chinese Statistics Bureau announced that China’s economy has been showing signs of growth stabilization, the Shanghai and Shenzhen composites went up 1.90 percent . The Japanese NIKKEI index and New Zealand NZ50 didn’t fare as well, dropping 0.18 percent and 0.13 percent respectively. The Hang Seng index climbed 0.65 percent and Australia’s ASX 200 was up 0.23 percent.
European markets got off to a rough start on Monday as investors waited for US goods data. The STOXX600 was down 0.26 percent and the Spanish IBEX 35 was down nearly 1 percent. The German DAX slipped 0.32 percent and France’s CAC 40 fell 0.69 percent. UK markets were closed for a bank holiday.
Energy futures were mixed with anticipation of the Fed taper and escalating tension in the Middle East. Brent futures were down 0.17 percent but WTI gained 0.18 percent. Gold was little changed but silver was up 1.32 percent and copper climbed 0.74 percent.
Currency markets were flat this morning the euro settled in at $1.3367 as investors weighed up the region’s recovery. The yen gained 0.26 percent against the dollar. Emerging markets’ currencies continued to struggle, but the Brazilian real was flat, holding on to Friday’s gains following the Brazilian central bank’s announcement of a currency intervention plan.
Earnings Reported Yesterday
Notable companies that reported earnings on Friday included:
- ANN INC. (NYSE: ANN) reported second quarter EPS of $0.76 on revenue of $638.20 million, compared to last year’s EPS of $0.66 on $594.87 million worth or revenue.
- Foot Locker (NYSE: FL) reported second quarter EPS of $0.45, just short of expectations. The company’s revenue was $1.45 billion, in line with expectations.
Stocks moving in the pre-market included:
- Tyson Foods (NYSE: TSN) was the biggest loser in pre-market trade, shedding 1.52 percent.
- Exxon Mobile (NYSE: XOM) gained half a percent in pre-market trade after the company agreed on Friday to pay $2.4 million in fines for violations at its Baton Rouge plants.
- Citigroup Inc. (NYSE: C) gained 0.72 percent ahead of market opening as company stepped up its hiring in Europe
There are no notable companies set to report earnings today
Monday’s economic calendar is relatively quiet; the US is set to release durable goods orders, Singapore will release industrial production data and Mexico’s trade balance is due as well.
For a recap of Friday’s market action, click here.
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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