#PreMarket Primer: Thursday, October 31: BOJ Bullish On Inflation
The Bank of Japan released its semiannual outlook report on Thursday in which the bank predicted that core consumer prices will rise by 1.9 percent in the fiscal year starting April 2015.
The estimate was unchanged from July’s expectations, but many private-sector economists are disputing the forecast. Many believe that the years of deflation Japan has suffered will keep the inflation rate at 1 percent and that the bank will need to make more policy changes in order to combat it.
In other news around the markets:
- As expected, the US Federal Reserve maintained its easy money program and did not provide any concrete details about when the bank would begin to taper. Most see the Fed’s taper hinging on congressional budget negotiations which have a December 13th deadline to agree on a budget for government spending in 2014.
- Although Facebook released impressive earnings on Wednesday, warnings about the future from the company’s executives overshadowed its 60 percent revenue growth. Most worrisome was that Facebook will likely be unable to include more ads on users’ newsfeeds. Instead, the company will focus on improving the quality of the ads to increase prices.
- Inflation figures from the eurozone added to growing pressure on the ECB to make a move in order to keep inflation from slipping to dangerously low levels. Germany’s annual inflation was down to 1.3 in October from 1.6 in September, and consumer prices slipped 0.2 percent in Spain.
- Retailers and grocers could be hit hard when $16 billion worth of food stamps are taken from the market. Retailers that rely on low-income shoppers like gas stations, dollar stores and discounters will likely feel the strain. Retailers like Wal-Mart Stores Inc and Target Corp have already lowered their sales forecasts for the remainder of the year despite the upcoming holidays.
Asian markets fell on Thursday, the Japanese NIKKEI was down 1.20 percent, the Shanghai composite lost 0.87 percent and the Shenzhen composite fell 1.18 percent. The South Korean KOSPI had the largest losses, down 1.43 percent.
Europe’s markets also slipped as worrisome inflation data weighed on sentiment. The UK’s FTSE fell 0.36 percent and the eurozone’s STOXX 600 lost 0.11 percent. The German DAX was down 0.24 percent and France’s CAC 40 lost 0.20 percent.
Energy futures were lower, Brent futures lost 0.42 percent and WTI futures were down 0.14 percent. Precious metals also tumbled with gold down 1.12 percent and silver down 2.88 percent. Industrial metals were mostly higher with Aluminum up 0.52 percent but copper down 0.63 percent.
The dollar got a boost from the possibility that the Fed could taper sooner rather than later. The euro lost 0.25 percent against the dollar and the pound was down 0.09 percent against the American currency. The yen was up 0.23 percent against the dollar and the Australian dollar gained 0.31 percent against the greenback.
Notable earnings released on Wednesday included:
- Facebook, Inc. (NASDAQ: FB) reported third quarter EPS of $0.25 on revenue of $2.02 billion, compared to last year’s EPS of $0.12 per share on revenue of $1.26 billion.
- Comcast Corporation (NASDAQ: CMCSA) reported EPS of $0.65 on revenue of $16.15 billion, compared to last year’s EPS of $0.46 on revenue of $16.54 billion.
- Visa Inc. (NYSE: V) reported third quarter EPS of $1.85 on revenue of $2.97 billion, compared to last year’s EPS of $1.54 on revenue of $2.73 billion.
- Marriott International (NYSE: MAR) reported third quarter EPS of $0.52 on revenue of $3.20 billion, compared to last year’s EPS of $0.44 on revenue of $2.73 billion.
Stocks moving in the Premarket included:
- Facebook, Inc. (NASDAQ: FB) gained 1.14 percent in premarket trade after releasing strong earnings data on Wednesday
- PowerShares QQQ Trust, Series 1 (NASDAQ: QQQ) gained 0.35 percent in premarket trade on the possibility of a Fed taper sooner than expected.
- ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) gained 7.65 percent in premarket trade after Sarissa Capital Management LP took a 6.22 percent stake in the company.
Earnings reports expected on Thursday include:
- ConocoPhillips (NYSE: COP) is expected to report third quarter EPS of $1.39 on revenue of $12.97 billion, compared to last year’s EPS of $1.44 per share on revenue of $15.09 billion.
- Mastercard Incorporated (NYSE: MA) is expected to report EPS of $6.92 on revenue of $2.13 billion, compared to last year’s EPS of $6.17 on revenue of $1.92 billion.
- Allstate Corporation (NYSE: ALL) is expected to report third quarter EPS of $1.06 on revenue of $7.30 billion, compared to last year’s EPS of $1.46 on revenue of $7.06 billion.
- American International Group, Inc. (NYSE: AIG) is expected to report third quarter EPS of $0.86 on revenue of $8.63 billion, compared to last year’s EPS of $1.00 on revenue of $8.75 billion.
Thursday’s economic calendar is a busy one with several US and European releases including US initial and continuing jobless claims, Italian CPI and PPI, the eurozone unemployment rate, French consumer spending and the Spanish current account.
For a recap of Wednesday’s market action, click here.
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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