Benzinga Market Primer, Friday, January 4: Non-Farm Payrolls Edition

Futures Flat Ahead of Employment Report

U.S. equity futures were flat in overnight trading ahead of the much anticipated employment report, the last for 2012, as hawkish Fed minutes made investors second guess the so-called QE Infinity program of the Fed. However, as the Fed now has its rate guidance and policy measures tied to economic data, a weak employment report would boost hopes of more easing.

Top News

In other news around the markets:

• Treasury Secretary Timothy Geithner is to step down soon, before the debt-ceiling debate is to be had and before the debate over spending cuts gets heard in Congress. Geithner is the last remaining original member of President Obama's economic team.


• The European Services PMI rose in December to 47.8 from 46.8 in November and in line with the flash estimate from mid-month. Better than expected data in Spain and Italy were off-set by weaker than expected data in Germany and France in the pan-European index.


• Ernst and Young published a report overnight highlighting that they believe there is a high probability that Italy will ask for a bailout in 2013, with the upcoming elections acting as a catalyst towards a bailout.


• S&P 500 futures were flat at 1,453.70.


• The EUR/USD was lower at 1.3008.


• Spanish 10-year government bond yields rose to 5.033 percent.


• Italian 10-year government bond yields rose to 4.25 percent.


• Gold fell 2.33 percent to $1,635.70.

Asian Markets

Asian shares were mixed overnight as Japanese and Chinese markets reopened for the first trading day of the new year following a prolonged holiday break. The Japanese Nikkei Index rose 2.82 percent and the Shanghai Composite Index rallied 0.35 percent while the Hang Seng Index fell a slight 0.29 percent. In addition, the Korean Kospi slipped 0.37 percent while Australian shares fell 0.36 percent.

European Markets

European shares were mostly lower overnight as the Fed threats of less easing weighed on risk sentiment despite service PMI data showing signs of bottoming. The Spanish Ibex Index did rise 0.15 percent but the Italian MIB Index fell 0.5 percent and Greek shares slipped 0.21 percent. Meanwhile, the German DAX fell 0.26 percent and the French CAC slipped 0.61 percent while U.K. shares were lower by 0.13 percent.

Commodities

Commodities were in clear risk-off mode following the Fed minutes Thursday with metals declining substantially overnight. WTI Crude futures fell 1.21 percent to $91.78 per barrel and Brent Crude futures fell 1.23 percent to $110.73 per barrel. Copper futures were the best performing of the major metals, only losing 0.69 percent to $369.20 per pound. Gold was lower and silver futures dropped 4.65 percent.

Currencies

Currency markets were also in a clear risk-off mode with the EUR/USD sitting on a proverbial knife's edge. The EUR/USD was lower at 1.3008 and the dollar rose against the yen to 88.23. Overall, the Dollar Index gained 0.49 percent on strength against the euro, the pound, the yen and the Canadian dollar. Notably, the the yen was extremely weak against nearly all other major currencies, losing 1.13 percent against the dollar and 0.88 percent against the euro. As the chart below shows, the EUR/USD is very close to breaking down further towards 1.28.

Pre-Market Movers

Stocks moving in the pre-market included:

• Carnival Corporation CCL shares fell 1.84 percent pre-market as the company announced the departure of a key executive.


• Pfizer PFE shares rose 0.46 percent pre-market as a new report shows that the company surpassed rival Proctor & Gamble PG in market share.


• Newmont Mining NEM shares fell 0.94 percent pre-market as gold prices slid and as Citi C analysts highlighted the bank as one potential buyer of Australian miner Regis Resources, of which it already owns nearly 20 percent.


• 3M MMM shares rose 0.35 percent following positive comments from Jeffries JEF Thursday.

Earnings

Notable companies expected to report earnings Friday include:

• Mosaic MOS is expected to report second quarter EPS of $0.97 vs. $1.40 a year ago.

Economics

On the economics calendar Friday, it's the first Friday of the month and that means its Non-Farm Payrolls day. Markets are looking for a reading of +150,000 jobs in December, slightly higher than the +146,000 reading in November but not significantly more statistically. Canadian payrolls data is also due out as well as the ECRI Weekly indicator and the ISM Non-Manufacturing Index. Energy markets will also watch the crude oil and gasoline inventories data released at 11:00 am eastern. Lastly, Charles Plosser, Janet Yellen and James Bullard, all of the Fed, are set to speak at separate events throughout the course of the afternoon.

Good luck and good trading.