Futures Flat on Fiscal Cliff Fears Despite Japanese Easing
U.S. equity futures were nearly unchanged in early Thursday trading on fears over the Fiscal Cliff, as democratic leaders claim that the presentation of a Plan B by the republican caucus represents a significant setback in talks. It now seems unlikely that a deal gets done before the Holiday break for Congress.
In other news around the markets:
- The Bank of Japan launched a new round of asset purchases totaling 10 trillion yen, or approximately $120 billion, half of which would be in short-term government bills and the other half of which would be in longer-term government bonds.
- Intercontinental Exchange ICE is in talks to purchase the NYSE Euronext NYX, a move that last year was thwarted by regulators when ICE and Nasdaq OMX Group NDAQ launched a joint bid for the company.
- Many banks are now calling for Spain to ask for a bailout in the first quarter of 2013, including Citi and Rabobank.
- S&P 500 futures were essentially flat at 1,432.50.
- The EUR/USD was higher at 1.3246.
- Spanish 10-year government bond yields fell to 5.268 percent.
- Italian 10-year government bond yields rose to 4.4 percent.
- Gold rose 0.09 percent to $1,669.20. The recent slide in gold prices is being attributed to redemptions at the Paulson Gold Fund forcing massive amounts of selling.
Asian shares were mixed overnight with notable weakness in Japan in a clear buy-the-rumor-sell-the-news pattern, as stocks rallied sharply Wednesday in Japan only to sell-off on the announcement of more QE. The Japanese Nikkei Index fell 1.19 percent while the Shanghai Composite Index rose 0.28 percent and the Hang Seng Index rose 0.16 percent. In addition, the Korean Kospi rose 0.32 percent and Australian shares rose 0.35 percent.
European shares were mostly lower overnight on fears that the U.S. will not get its fiscal house in order. The Spanish Ibex Index fell 0.2 percent and the Italian MIB Index fell 0.42 percent. Meanwhile, the German DAX fell 0.1 percent and the French CAC fell 0.04 percent while U.K. shares rose 0.05 percent.
Commodities were mixed overnight with strength seen in precious metals and weakness seen in energy. WTI Crude futures fell 0.3 percent to $89.71 per barrel and Brent Crude futures fell 0.25 percent to $110.08 per barrel. Copper futures dropped 0.85 percent $357.55 on news that RBA may not attempt to weaken the Aussie dollar as soon as expected. Gold was higher and silver futures rose 0.08 percent to $31.14 per ounce.
Currency markets showed broad yen strength overnight following the BoJ decision in a clear risk-off signal from the market. The EUR/USD was higher at 1.3246 and the dollar fell against the yen to 83.98. Overall, the Dollar Index fell 0.07 percent on weakness against the yen, the euro, the pound, and the Swiss franc. In addition, the AUD/JPY and the EUR/JPY crosses were both lower due to yen strength, even as the Aussie strengthened against the greenback.
Stocks moving in the pre-market included:
- NYSE Euronext NYX shares gained 21.41 percent pre-market on takeover rumors.
- Apple AAPL shares rose 0.37 percent pre-market despite the company losing a key patent over its two-finger zoom functionality.
- BHP Billiton BHP shares rose 1.2 percent pre-market trading following strength in Australian stocks. Wednesday, the shares were higher pre-market but closed well lower.
- Limited Brands LTD shares fell 0.93 percent pre-market.
Notable companies expected to report earnings Thursday include:
- Carnival Cruises CCL is expected to report fourth quarter EPS of $0.11 vs. $0.28 a year ago.
- Conagra Foods CAG is expected to report second quarter EPS of $0.55 vs. $0.47 a year ago.
- KB Homes KBH is expected to report fourth quarter EPS of $0.06 vs. $0.18 a year ago.
- Nike NKE is expected to report second quarter EPS of $1.00 vs. $1.00 a year ago.
- Research in Motion RIMM is expected to report a third quarter loss of $0.35 per share vs. a profit of $1.27 per share a year ago.
On the economics calendar Thursday, the latest revision of third quarter GDP is due out as well as jobless claims and corporate profits. Later, existing home sales, the Philly Fed Survey, the FHFA House Price Index, and the Conference Board's Leading Indicators are expected to be released. Lastly, the Treasury is to auction 5-year TIPS. Overnight, British GDP data and Spanish trade data highlight the economic calendar.
Good luck and good trading.
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