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Market Overview

Benzinga Market Primer, Thursday July 12


U.S. equity futures fell early Thursday simultaneously as European peripheral bond yields fell. Negative sentiment has reigned financial markets since the release of the FOMC minutes as Fed officials continued to paint a bleak portrait of the economy. S&P 500 futures fell 5.5 points early Wednesday to 1,330.50. Tech heavy NASDAQ futures fell 9.25 points to 2552.25.

In other news:

  • Brazil cut interest rates to 8.00 percent from 8.5 percent, the latest BRIC nation to cut rates in the face of slowing growth.
  • The Bank of Korea cut rates for the first time since February 2009 to 3.00 percent from 3.25 percent.
  • German wholesale inflation, similar to producer prices, fell 1.1 percent in June from May, lower than expectations of a 0.7 percent.
  • Chinese M2 Money Stock grew 13.6 percent year-over-year on estimates of a 13.5 percent rise. This data release is one day ahead of the much awaited second quarter GDP release.
  • Eurozone industrial production rose 0.6 percent in May after falling 1.1 percent in April.
  • Italy auctioned 1-year bonds at a low yield of 2.697 percent, well below the yield at the last auction of 1.92 percent.

Asian equities mostly fell overnight, with Chinese stocks being the exception. The China Shanghai Composite Index rose 0.4 percent on the strong money supply data and comments from Premier Wen Jiabao Wednesday that the government was set to launch a new round of stimulus spending. Most other major Asian indices fell though, with the Nikkei falling 1.48 percent and the Korean Kospi falling 2.24 percent on the rate cut. European equities were also lower midway through the European session, Spanish and Italian stocks lagging other major indiices. Italy's MIB Index fell 1 percent and the Spanish Ibex Index fell 1.5 percent.

Spanish 10-year bond yields fell for the third straight day as the yield on the benchmark 10-year bond fell to 6.55 percent. However, 2-year bond yields were slightly higher to 4.45 percent. Italian 10-year yields fell more significantly after bond yields fell at auction. The benchmark Italian 10-year bond yielded 5.1 percent and the 2-year bond yielded 3.714 percent.

Commodities were weaker after gains in energy futures Wednesday were seen reversing. The front month WTI crude future fell 0.92 percent to $85.02 and Brent crude fell 0.86 percent to $99.37. Copper futures fell along with weak energy prices, falling 1.25 percent to $340.45 per pound. Metals in general were weak, as gold futures fell 0.59 percent to $1,566.40 per ounce and silver fell 1 percent.

The dollar is strong this morning against most major currencies, aside from the yen. The EUR/USD has continued its slide that began Wednesday and fell to 1.2211. The 1.2200 level, according to analysts, will pose significant technical and fundamental resistance, however many call for a weaker EUR/USD.

On the economic front, jobless claims highlight a rather full economic calendar. Jobless claim are expected to have risen 1 thousand to 375 thousand from the previous 374 thousand. Data on import and export prices is also due out at 8:30 am est. Export prices are expected to have fallen 0.2 percent in June and import prices are expected to have fallen 1.9 percent. At 10:30 am, the EIA Natural Gas Report is due out and the San Francisco Fed's John Williams is expected to speak at 3:40 pm in Portland, Oregon.


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