Benzinga Market Primer, Thursday July 26
U.S. equity futures reversed early losses Thursday as bad earnings and fears in Europe weighed on markets until ECB President Mario Draghi stated that the ECB may be ready to act further. Bad earnings from companies such as Zynga (NASDAQ: ZNGA) headlined an earnings season that has been relatively disappointing. Also, a weak Italian 2-year auction has caused investors' fear to rise.
In other news around the markets:
- South Korea's export-driven economy continued to slow in the second quarter, only growing at a 2.4 percent annual rate, less than economist expectations of a 2.6 percent expansion.
- Italy sold 2.5 billion euros of 2-year, zero coupon bonds yielding 4.86 percent, up from the previous 4.712 percent.
- ECB President Mario Draghi says that the ECB will do whatever it takes to preserve the euro.
- Citigroup analyst see a 90 percent of a Greek exit and a broad range of downgrades for multiple European nations, the U.S., the U.K. and Japan. This follows an FT report yesterday that said a U.K. downgrade could happen sooner after the weak GDP data Wednesday.
- S&P 500 futures up 2.6 to 1337.89.
- Spanish 10-year yield 727 percent.
- Italy 10-year yield 6.302 percent.
- EUR/USD 1.2196 (just bounced as of writing on Draghi's comments).
- Gold $1,607.20, down 5.
Overnight, Asian shares were mixed on weak economic data. The Korean Kospi rallied 0.74 percent on the bad GDP report, signaling that investors in Seoul may be expecting further rate cuts from the central bank in Korea. The Shanghai Composite Index and Thai shares were the notable weak markets in Asia and Hong Kong shares outperformed. In European trading, equity indices were a sea of red led lower by German shares. However, Draghi's comments sent shares higher into positive territory. Weak import price data and renewed fears of an imminent Greek exit sent shares lower in Germany.
Commodities were slightly weak, Brent Crude futures falling 0.78 percent to $103.57 and WTI Crude futures falling 0.94 percent to $88.13. Metals futures, including copper, gold and silver, all fell.
The EUR/USD is leading currencies higher early Thursday, as ECB President Mario Draghi speaks bullishly of the continent. Some of his comments included:
- Progress has been extraordinary in the last six months.
- Within our mandate, the ECB is ready to do whatever it takes to preserve the euro.
- Bank supervision to be established first, bank resolution to be established second.
The euro was broadly strong after Draghi's comments against most major currencies. However, the EUR/AUD cross continued to probe new record lows below 1.18.
In earnings, the Zynga miss highlighted Wednesday's earnings. On Thursday, Facebook (NASDAQ: FB) headlines the earnings calendar. Notable earnings include:
- 3M (NYSE: MMM) is expected to report Q2 earnings of $1.65 vs. $1.60 a year ago.
- Amazon Inc. (NASDAQ: AMZN) is expected to report Q2 earnings of $0.02 vs. $0.41 a year ago.
- ExxonMobil (NYSE: XOM) is expected to report Q2 EPS of $1.95 vs. $2.18 a year ago.
McGraw Hill (NYSE: MHP) is expected to report Q2 EPS of $0.76 vs. $0.64 a year ago.
Good luck and good trading.
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