Futures Flat, Euro Falls Ahead of Central Banks
U.S. equity futures were flat Thursday ahead of interest rate decisions from both the European Central Bank and the Bank of England. Also, overnight Greek leaders approved the latest round of austerity measures by a narrow margin, paving the way for Greece to get its next round of bailout funding from the Troika.
In other news around the markets:
- Markets sold off strongly on Wednesday one day after President Obama was reelected for a second term as investors feared that a stalemate in Congress would lead to leaders being unable to reach a deal and sending us over the fiscal cliff.
- The People's Bank of China Governor Zhou spoke overnight, saying that the economy has recently shown signs of improvement and the PBOC will stand ready to act if necessary. China's leadership changeover begins today.
- Spain auctioned 3-, 6-, and 20-year bonds in a rather strong auction with yields falling and the bid-to-cover ratios improving.
- S&P 500 futures were flat at 1,398.20.
- The EUR/USD was much weaker at 1.2734.
- Spanish 10-year government bond yields rose to 5.817 percent.
- Italian 10-year government bond yields rose to 5.017 percent.
- Gold rose 0.04 percent to $1,714.70.
Asian shares were all weaker overnight in response to the sharp sell-off on Wall Street Wednesday. The Japanese Nikkei Index fell 1.51 percent and the Shanghai Composite Index fell 1.63 percent while the Hang Seng Index fell 2.41 percent in Hong Kong trading. Meanwhile, the Korean Kospi fell 1.19 percent and Australian shares fell only 0.72 percent as strong employment data minimized losses.
European shares were mixed with weakness seen in Spain and Italy as Italian bad bank loans rose 15.3 percent in September. Spain's Ibex Index dropped 0.37 percent and the Italian MIB Index fell 1.11 percent while Greek shares rose 0.23 percent. Core stocks were stronger, as the German DAX rose 0.36 percent and the French CAC 40 rose 0.18 percent while U.K. shares rose 0.18 percent.
Commodities were mostly stronger in early Wednesday trade following broad sell-offs in the commodity complex Wednesday (oil fell more than 4 percent). WTI Crude futures rose 0.68 percent to $85.01 per barrel and Brent Crude futures rose 0.6 percent to $107.46 per barrel. Copper futures were weaker on global growth fears, sliding 0.15 percent to $343.65 per pound. Gold was higher and silver futures rose 0.06 percent to $31.68.
Currency markets showed broad euro weakness in overnight trading ahead of the ECB. The EUR/USD was lower at 1.2734 and the dollar fell against the yen to 79.86. Overall, the Dollar Index rose 0.2 percent to 80.92 on strength against the euro, the pound, and the Swedish Krone. The euro was broadly weak, falling against the U.S. dollar, the yen, and the Aussie dollar; the EUR/AUD cross is trading at its lowest levels since late August.
Stocks moving in the pre-market included:
- VirentX Holding Corp. (NYSE: VHC) shares fell 1.07 percent pre-market following a 27 percent gain Wednesday as the company won a lawsuit against Apple (NASDAQ: AAPL).
- Merck and Co. (NYSE: MRK) shares fell 0.58 percent pre-market following the weak earnings from Vivus (NASDAQ: VVUS) which sent its shares to the lowest level on record.
- Shares of the Southern Company (NYSE: SO) rose 0.33 percent as fears over dividend payers in the higher tax environment after the fiscal cliff receded.
- Marathon Petroleum Corp. (NYSE: MPC) shares rose 0.43 percent pre-market as the company was highlighted at Zacks Equity Research.
There are several notable companies expected to report earnings Thursday, including:
- Duke Energy (NYSE: DUK) is expected to report third quarter EPS of $1.45 vs. $1.50 a year ago.
- International Game Technology (NYSE: IGT) is expected to report fourth quarter EPS of $0.32 vs. $0.24 a year ago.
- Kohl's (NYSE: KSS) is expected to report third quarter EPS of $0.86 vs. $0.80 a year ago.
- NVIDIA (NASDAQ: NVDA) is expected to report third quarter EPS of $0.30 vs. $0.29 a year ago.
- Walt Disney (NYSE: DIS) is expected to report third quarter EPS of $0.68 vs. $0.59 a year ago and should comment on the recent Lucasfilm acquisition.
- Zipcar (NASDAQ: ZIP) is expected to report third quarter EPS of $0.01 vs. $0.02 a year ago.
On the economic calendar Thursday, all eyes are on the European Central Bank and the Bank of England. Neither Bank is expected to cut rates nor expand any existing non-traditional policies; however there are some economists who have said a rate cut by the ECB could lead to a boost to growth. Also, jobless claims and trade data are due out. Lastly, the Fed's James Bullard is set to speak tonight at Washington University in St. Louis.
Good luck and good trading.
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