Benzinga Market Primer, Monday September 24
U.S. equity futures fell in early Monday trading as new fears over Europe's latest rescue plan resurfaced. Reports circulated that leaders were considering leveraging the permanent bailout fund (the European Stability Mechanism) to 2 trillion euros from the approximate 700 billion euros of contributed capital. However, a spokesman for German Finance Minister Wolfgang Schaueble refuted these claims, stating that 2 trillion euros is unattainable but the ESM could be leveraged with private capital.
In other news around the markets:
- The German IFO Business Climate Index dropped in September to 101.4 from 102.3 in August one expectations of 102.5. The weak reading indicates declining confidence in Europe's largest economy.
- Greek leaders are still working to agree on a new round of spending cuts to meet the Troika's demands so as to receive the next bailout tranche. Greece needs to cut 13.5 billion in spending to receive the next set of funds and had its last proposal rejected by the Troika.
- Goldman Sachs Asset Management Chairman Jim O'Neil believes that Australia and China are set for further slowdowns.
- Germany auctioned 12-month bills to yield -0.018 percent, higher than the previous auction's -0.025 percent.
- S&P 500 futures slipped 5.6 points to 1,446.3.
- EUR/USD slipped to 1.2914 on the weak economic data.
- Spanish 10-year government bond yields were fell to 5.77 percent.
- Italian 10-year government bond yields rose to 5.097 percent.
- Gold fell 1.03 percent to $1,759.50 per ounce.
Asian shares were mixed overnight as Chinese stocks outperformed most regional indexes. The Shanghai Composite Index rose 0.32 percent and the Korean Kospi rose 0.05 percent. However, most other regional indexes fell, as the Japanese Nikkei fell 0.45 percent and the Hang Seng Index slipped 0.19 percent and the weakest index was the Australian S&P ASX Index, which slipped 0.52 percent. In Europe, markets traded lower following the weak German business confidence reading. Spanish shares were notably weak, as the Ibex slipped 1.58 percent and Italy's MIB Index followed it lower, dropping 1.42 percent as of writing. The French CAC 40 fell 1.17 percent and the German DAX fell 0.71 percent while the U.K. FTSE 100 Index fell 0.63 percent.
Commodities were weak in early Monday trading as WTI Crude futures slipped 1.28 percent to $91.70 per barrel and Brent Crude futures fell 1.21 percent to $110.07 per barrel. Copper futures were also weak in early trading, falling 1.5 percent to $373.20. Gold fell 1.03 percent and silver futures lost 2.36 percent to $33.82 per ounce.
Currency markets were in risk-off mode in early trading, as investors bought the yen and the dollar and sold the Aussie dollar. The dollar index rose 0.26 percent as the EUR/USD slipped and the greenback gained 0.44 percent on the Canadian dollar. The EUR/CHF slipped back below 1.21 in early trading and the euro was weak against a few currencies, most notably the yen, the dollar and the pound. However, it gained against the Aussie dollar as investors sold the Aussie as China continues to slow.
Stocks moving in the pre-market included Lennar (NYSE: LEN), which posted a large increase in third quarter earnings over the previous year, sending the stock higher by 4.77 percent. International Paper (NYSE: IP) also rose in the pre-market, as the stock gained 1.66 percent. United States Steel (NYSE: X) fell 2.36 percent in pre-market trading as steel prices fell and investors feared a protracted slowdown in China would hurt steel demand. The company led a broad sell-off in materials stocks. Also, Proctor and Gamble (NYSE: PG) fell 1.47 percent and Schlumberger (NYSE: SLB) fell 1.35 percent pre-market.
Aside from Lennar's early earnings release, there is only one other notable company releasing earnings Monday. Red Hat (NYSE: RHT) is expected to report quarterly EPS of $0.29 vs. $0.29 a year ago.
On the economic calendar, investors will get further insight into regional economies as the Chicago Fed National Activity Index and the Dallas Fed Manufacturing Survey are due out. Also, San Francisco Fed President John Williams is set to speak later this afternoon.
Good luck and good trading.
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