Market Primer: Friday, October 11: Budget Showdown Could Be Nearing Its End
Markets rallied after news that productive talks between Republican leaders and President Obama on Thursday may have resulted in a proposal which will put an end to the debt standoff; at least temporarily.
A GOP proposal to extend the US government’s borrowing authority for six weeks in exchange for the President’s willingness to negotiate on budget issues has been touted as a major breakthrough in the ongoing stalemate.
Although no deal has been reached, the offer is the first step in a compromise between the two sides that could avoid a US default on October 17.
In other news around the markets:
- Libyan Prime Minister Ali Zeidan was abducted from his hotel room in the early hours of Thursday, only to be released hours later on the same day. The incident highlighted the country’s fragile state as the country battles a power struggle between the Libyan government and its militant groups.
- As expected, the Bank of England kept its interest rate fixed and did not make any changes to its bond buying program. Bank of England Governor Mark Carney has been very vocal about his pledge to maintain an accommodative stance until UK unemployment falls to 7 percent.
- US Federal officials are discussing the possibility of creating a new system to release sensitive economic data in order to meet the demands of fast moving financial markets. The government is considering several options to control data leaks and make the data available to everyone at the same time.
- On Thursday, the European Central Bank and the People’s Bank of China announced that the two had agreed on a currency swap deal. The agreement will allow the ECB to access up to 350 billion yuan and the PBOC will have 45 billion euros available. The currency swap underscores the Chinese currency’s growing importance in the marketplace.
Asian markets ended the week on a high note, with the Shanghai composite posting the largest gains, up 1.70 percent. The Shenzhen composite gained 1.10 percent, the Japanese NIKKEI rose 1.48 percent and the Hang Seng index was up 1.16 percent.
European markets were mostly higher on Friday, the UK’s FTSE was up 0.65 percent and the eurozone’s STOXX 600 gained 0.32 percent. The German DAX rose 0.37 percent, but the Spanish IBEX lost 0.29 percent.
Energy futures slid on Friday, Brent crude futures lost 0.35 percent and WTI futures were down 1.24 percent. Precious metals also slipped with gold down 0.85 percent and silver down 1.81 percent. Industrial metals gained with aluminum up 1.24 percent and zinc up 0.42 percent.
The euro gained 0.41 percent against the dollar and the pound was up 0.12 percent against the greenback. However the yen lost out against the dollar, down 0.17 percent.
Notable earnings released on Thursday included:
- Micron Technology, Inc. (NASDAQ: MU) reported EPS of $0.20 on revenue of $2.80 billion, compared to last year’s loss of $0.24 per share on revenue of $1.96 billion.
- Lindsay Corporation (NYSE: LNN) reported EPS of $0.81 on revenue of $148.40 million, compared to last year’s EPS of $0.68 on revenue of $127.82 million.
- Marriot Vacations Worldwide Corporation (NYSE: VAC) reported EPS of $0.72, compared to last year’s EPS of $0.23 on revenue of $383.00 million.
- Safeway Inc. (NYSE: SWY) is expected to report EPS of $0.10 on revenue of $8.60 billion, compared to last year’s EPS of $0.16 on revenue of $10.05 billion.
Stocks moving in the pre-market included:
- Newmont Mining Corp (NYSE: NEM) gained 0.46 percent in pre-market trade after falling 2.45 percent over the past week.
- McDonald’s Corp (NYSE: MCD) gained 0.21 percent in pre-market trade after gaining 1.25 percent on Thursday
- Northrop Grumman Corporation (NYSE: NOC) after rising 4.32 percent over the past week, Northrop Grumman gained 0.21 percent in pre-market trade
- Eli Lilly and Co (NYSE: LLY) lost 4.37 percent in pre-market trade after rising 2.48 percent on Thursday
- Corning Inc (NYSE: GLW) fell 2.28 percent in pre-market trade after a week of choppy trading.
Earnings reports expected on Friday include:
- Infosys Limited (NASDAQ: INFY) is expected to report EPS of $0.70 on revenue of $2.00 billion, compared to last year’s loss of $0.75 per share on revenue of $1.80 billion.
- Webster Financial Corporation (NYSE: WBS) is expected to report EPS of $0.49 on revenue of $149.73 million, compared to last year’s EPS of $0.48 on revenue of $144.89 million.
- Wells Fargo & Company (NYSE: WFC) is expected to report EPS of $0.97 on revenue of $21.00 billion, compared to last year’s EPS of $0.88 on revenue of $21.21 billion.
- J P Morgan Chase & Co (NYSE: JPM) is expected to report EPS of $1.22 on revenue of $24.06 billion, compared to last year’s EPS of $1.40 on revenue of $25.86 billion.
Economic releases on Friday will include Canadian employment change and the unemployment rate, US PPI, Spanish CPI, German CPI and the French current account.
Good luck with your trades and have a great weekend!
For a recap of Thursday’s market action, click here
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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