Benzinga Market Primer, Friday, November 16
Futures Slip on Spanish Fears
U.S. equity futures slipped in early Friday trade as fears of the finances of Spanish banks resurfaced. The Spanish government has placed a freeze on evictions of homes due to increasing suicide rates as people lose their homes, which will be costly to the banks in the end.
In other news around the markets:
- The Economist has published a scathing article of the French economy in this weekend's edition, with cover headline calling France the ticking time bomb at the heart of Europe.
- Israeli officials and Hamas leaders failed to reach a cease fire overnight and Israel's missile defense system shot down all 66 missiles fired from Gaza.
- Japanese opposition candidate for Prime Minister Abe reiterated his stance on the Bank of Japan overnight, stating that the BoJ should adopt a 3 percent inflation target (currently 1 percent) and commit to unlimited QE to weaken the yen.
- CCLA Chief Investment Officer James Bevan, in an interview with Bloomberg television, called Europe the ultimate value trap and warned investors from trying to call a bottom on the continent.
- S&P 500 futures fell 3.5 points to 1,347.80.
- The EUR/USD was lower at 1.2735.
- Spanish 10-year government bond yields fell to 5.863 percent.
- Italian 10-year government bond yields fell to 4.876 percent.
- Gold slipped 0.23 percent to $1,709.80 per ounce.
Asian shares were mixed overnight, once again led by Japanese stocks on hopes of increased stimulus from the Bank of Japan. The Japanese Nikkei Index jumped 2.2 percent and the Shanghai Composite Index fell 0.77 percent while the Hang Seng Index rose 0.24 percent. Also, the Korean Kospi fell 0.53 percent and Australian shares slipped 0.29 percent as the IMF warned on the slowing export boom.
European shares were lower in early trading on Spanish fears. Spain's Ibex Index fell 0.58 percent and the Italian MIB Index fell 0.88 percent on bank fears there as well. Meanwhile, the German DAX fell 0.55 percent and the French CAC fell 0.33 percent while U.K. shares dropped 0.63 percent.
Commodities were weaker overnight as European fears weighed on risk appetite. WTI Crude futures fell 0.25 percent to $85.24 per barrel and Brent Crude futures slipped 0.06 percent to $107.94 per barrel. Copper futures dropped 0.49 percent to $345.65 per pound, gold was lower, and silver futures slipped 1.16 percent to $32.30 per ounce.
Currency markets were in clear risk-off mode as the dollar rallied against most partners save for the yen. The EUR/USD was lower at 1.2735 and the dollar fell against the yen to 81.11. Overall, the Dollar Index rose 0.19 percent to 81.23 as a report from analysts at Citi (NYSE: C) highlighted that the dollar has been rallying as the Fed has yet to act under its QE3 program. The dollar saw relative strength overnight against the euro, the Swiss franc, and the Swedish krone. The Australian dollar fell slightly against the greenback but rose 0.24 percent against the euro.
Stocks moving in the pre-market included:
- Nike (NYSE: NKE) shares jumped 1.09 percent pre-market as the company announced a 2-for-1 stock split and increased its dividend by 17 percent.
- Hewlett-Packard (NYSE: HPQ) shares fell 0.61 percent pre-market ahead of its earnings report next week.
- Gamestop (NYSE: GME) shares fell 1.11 percent in pre-market trade after the company reported earnings that beat forecasts but was cautious on the key holiday season.
- Target (NYSE: TGT) shares fell 0.24 percent pre-market after the company reported earnings that beat forecasts.
Notable companies expected to report earnings Friday include:
- Foot Locker (NYSE: FL) is expected to report third quarter EPS of $0.54 vs. $0.43 a year ago.
- J.M. Smucker Co. (NYSE: SJM) is expected to report second quarter EPS of $1.44 vs. $1.36 a year ago.
On the economics calendar Friday, the Treasury International Capital (TIC) flows report is due out and will shed light on foreign holdings of U.S. government debt. Also, industrial production and e-commerce retail sales are due out. Lastly, Dennis Lockhart of the Atlanta Fed is set to speak after the close.
Good luck and good trading.
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