Benzinga Market Primer, Thursday, December 13
Futures Slips Post-FOMC
U.S. equity futures slipped in early Thursday trade after the FOMC decided to increase the size of QE3 to $85 billion of monthly purchases, up from $40 billion originally. In addition, the FOMC dropped its target date guidance for interest rates and adopted a threshold-based methodology, where the Fed will not raise rates until employment improves further and inflation remains tepid.
In other news around the markets:
- Eurozone finance ministers reached a deal to create a banking union and house a banking regulator within the ECB.
- Despite recent moves in the bond markets, Moody's says that the increased political turmoil in Italy is not credit negative, so long as Italy can construct a government quickly in elections in April.
- Germany's IFO, the economic think tank, forecasts that German GDP contracted 0.3 percent in the fourth quarter, showing that even Europe's healthiest nation cannot escape the debt crisis and the recession driven by austerity.
- S&P 500 futures fell 2.8 points to 1,424.4.
- The EUR/USD was lower at 1.3042.
- Spanish 10-year government bond yields rose to 5.396 percent.
- Italian 10-year government bond yields rose to 4.649 percent.
- Gold fell 1.25 percent to $1,696.50.
Asian shares were mixed overnight as Japanese shares rose and Chinese shares lagged. The Japanese Nikkei Index rose 1.68 percent overnight while the Shanghai Composite Index fell 1.02 percent and the Hang Seng Index fell 0.26 percent. Also, the Korean Kospi rose 1.38 percent while Australian shares slipped 0.02 percent.
European shares were mostly lower in early trade as concerns over the true reach and effectiveness of the banking union arose. The Spanish Ibex Index fell 0.07 percent while the Italian MIB Index rose slightly by 0.02 percent. Meanwhile, the German DAX fell 0.66 percent, the French CAC dropped 0.36 percent, and U.K. shares fell 0.28 percent.
Commodities were weaker in overnight trade, reversing the run-up seen in commodities markets before the FOMC decision. WTI Crude futures fell 0.62 percent to $86.23 per barrel and Brent Crude futures fell 0.29 percent to $109.18 per barrel. Copper futures fell 1.04 percent, following the weakness in Australia and fears over the RBA being unwilling to devalue the Aussie dollar to boost exports. Gold was lower and silver futures fell 2.97 percent to $32.78.
Currency markets were in clear risk-off mode as the dollar reigned and most other currencies slipped, including the yen. The EUR/USD was lower at 1.3042 and the dollar rose against the yen to 83.39. Overall, the Dollar Index rose 0.21 percent on strength against the pound, the euro, the yen and the Swedish krone. Also, the Aussie dollar slipped and the Swiss franc was rather flat as the Swiss National Bank did not change its current policy overnight.
Stocks moving in the pre-market included:
- Yum! Brands (NYSE: YUM) shares rose 1.05 percent ahead of key data late Thursday out of China.
- Berkshire Hathaway (NYSE: BRK-B) shares rose 0.07 percent pre-market after gaining 2.35 percent Wednesday as the company announced that a large, long-time owner had sold back class A shares to the company for slightly more than $1.2 billion. Also, the company increased the amount it is willing to pay per share in its existing buyback.
- Time Warner (NYSE: TWX) shares fell 0.34 percent pre-market as the company launched its iOS streaming app and also as the stock retreated from a new 52-week high.
- Dendreon (NASDAQ: DNDN) shares fell 0.39 percent after rising over 4 percent Wednesday on takeover chatter.
Notable companies expected to report earnings Thursday include:
- Adobe Systems (NASDAQ: ADBE) is expected to report fourth quarter EPS of $0.57 vs. $0.67 a year ago.
- Pier 1 Imports (NYSE: PIR) is expected to report third quarter EPS of $0.24 vs. $0.21 a year ago.
On the economics calendar Thursday, weekly jobless claims, PPI inflation, and retail sales are due out at 8:30 am eastern. Also, business inventories data is expected. In addition, the Treasury is set to auction 30-year bonds. Overnight, the Preliminary HSBC Chinese Manufacturing PMI is due out and the Preliminary Eurozone Manufacturing PMI for December is expected as well.
Good luck and good trading.
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