Benzinga Market Primer, Wednesday August 1

U.S. equity futures rose early Wednesday ahead of the Federal Reserve's interest rate and policy decision later in the afternoon. Also, data out of China showed that the manufacturing sector continued to expand in June despite the global slowdown. The official manufacturing PMI missed estimates of 50.5 by printing 50.1 and slightly below the previous reading of 50.2, showing marginal expansion. However, the much more watched HSBC manufacturing PMI rose from 48.2 to 49.3, showing a slower pace of contraction in China. Further, the output sub-index correlated well with GDP growth printed at 50, showing neither expansion nor contraction, adding fuel to the thesis that China is bottoming.

In other news around the markets:

• Spanish and Italian manufacturing PMI's beat expectations while French, German, and British PMI's missed expectations, showing that the global slowdown is now affecting the core European nations.


• Bundesbank Chief Jens Weidmann said in an internal interview from June released overnight that the ECB must not overstep its mandate, governments overestimate the banks, that the Bundesbank has more influence at the ECB than other national central banks, and that a political union is hard to imagine in the future.


• Germany sold 3.354 billion euros of 5-year bonds, less than the target of 4 billion euros, to yield 0.31 percent, lower than the previous auction's 0.52 percent in April and the lowest yield on record.


• S&P 500 futures rose 4.6 points to 1,379.20.


• Gold rose 0.11 percent to $1,616.30.


• EUR/USD 1.2311, higher by about 20 pips.

Asian equities were mixed overnight following the Chinese manufacturing data. Chinese shares rose on the data, with the Shanghai Composite Index rising nearly 1 percent and the off-shore Hong Kong-based Hang Seng Index 0.12 percent. Korean shares, measured by the Kospi Index, fell on weak Korean manufacturing PMI data. European shares were also mixed following the economic data there and ahead of the much anticipated ECB decision and policy announcement Thursday. The German DAX rose 0.08 percent and the FTSE 100 Index in England rose 0.67 percent. The Spanish Ibex fell 1.11 percent and the Italian MIB Index also fell 0.77 percent.

Oil futures were slightly higher in early Wednesday trading, WTI Crude futures rising 0.1 percent to $88.15 and Brent Crude futures rising 0.36 percent to $105.30. Even as gold futures rose, silver and copper futures fell slightly. Corn futures retreated from near-record highs as cooler weather and some moisture in the corn belt helped the crop conditions.

The Aussie Dollar continues to reign supreme in currencies, having risen to multi-month highs against many currencies including the U.S. dollar and the euro. The AUD/USD cross rose to 1.0534 and the EUR/AUD fell from earlier highs back below 1.17. It had initially popped higher near 1.1730 on the headlines from China however it retreated throughout the overnight session and sits at 1.1684 having been capped by resistance near 1.1735.

In earnings news, Pfizer PFE beat earnings expectations through cost-cutting measures while Electronic Arts EA and Take Two Interactive TTWO both failed to impress investors with lackluster earnings reports. Companies reporting earnings Wednesday include:

• American Tower AMT is expected to report Q2 EPS of $0.77.


• Booz Allen Hamilton BAH is expected to report Q2 EPS of $0.42.


• Comcast CMCSA is expected to report Q2 EPS of $0.48.


• Time Warner TWX is expected to report Q2 EPS of $0.58.


• Mastercard MA is expected to report Q2 EPS of $5.58.

The economic calendar shows lots of important data Wednesday ranging from employment indicators to output indicators. Motor vehicle sales are due out throughout the day with total vehicle sales expected to be 14.0 million, less than the previous estimate of 14.08 million for the year. At 8:15 am EST, the ADP employment survey is due out and markets are expecting a reading of 120,000 private sector jobs added, less than June's 176,000. At 9:00 am, the U.S. manufacturing PMI is expected to show that manufacturing improved slightly in July, to 51.9 from 51.8 in June. At 10:00 am, the eagerly anticipated ISM Manufacturing report is due out and is expected to show that the manufacturing sector resumed growth in July. Economists are expecting a reading of 50.2 compared to June's 49.7. Crude oil inventories and gasoline inventories are due out at 10:30 am and at 12:30 pm, the Federal Reserve is set to release its interest rate decision memo followed by Chairman Bernanke's press conference. QE3 seems unlikely at this meeting according to economists, however many expect the Fed to sour its language in its statement, paving the way for easing later this year.

Good luck and good trading.