Benzinga Market Primer: Tuesday, May 28
Futures Surge as Global Shares Rebound
U.S. equity futures rose sharply in early pre-market trade on relaxed fears of Federal Reserve tapering of easing, fears which drove markets lower last week. Eyes will be on key retail earnings and economic data in Tuesday's session for further direction as well as comments from the Europe-Next Steps conference in Paris.
In other news around the markets:
- AstraZeneca (NYSE: AZN) announced its intention to acquire Omthera Pharmaceuticals (NASDAQ: OMTH) for $12.70 per share, a premium of 88 percent over Friday's closing price.
- Japanese Prime Minister Shinzo Abe's top economic adviser Koichi Hamada spoke overnight, saying that Bank of Japan Governor Kuroda should ease further if he deems necessary and not let policy be forced by market pressures. Recently, fears have grown over the rise in bond yields associated with Japan's easing but these comments seem to be quelling some fears.
- Christian Noyer, Banque de France chief and ECB Board Member spoke overnight, saying that no major central bank has ever lowered deposit rates below zero into negative territory and mentioned that such policies had mixed results in smaller countries. The comments come as some economists still expect the ECB to ease policy further and potentially cut deposit rates into negative territory.
- S&P 500 futures rose 11.1 points to 1,661.70.
- The EUR/USD was lower at 1.2920.
- Spanish 10-year government bond yields rose 1 basis point to 4.34 percent.
- Italian 10-year government bond yields rose 1 basis point to 4.06 percent.
- Gold fell $7.70 or 0.56 percent to $1,378.90 per ounce.
Asian shares were stronger overnight on relaxed fears over Japan's massive easing efforts as well as reduced fears over China's economy following weaker than expected data last week. The Japanese Nikkei Index rose 1.2 percent and the Shanghai Composite Index rose 1.24 percent while the Hang Seng Index gained 1.05 percent. Also, the Korean Kospi gained 0.32 percent and Australian shares added 0.22 percent.
European shares were higher for the second consecutive day as U.K. markets reopened Tuesday following a bank holiday on Monday. The Spanish Ibex Index rose 1.32 percent and the Italian FTSE MIB Index gained 1.56 percent. Meanwhile, the German DAX rose 1.1 percent and the French CAC 40 gained 1.26 percent while U.K. shares rallied 1.66 percent.
Commodities were mixed overnight as energy futures rallied while metal futures were mostly lower as the Dollar continued its trend of strengthening. WTI Crude futures rose 0.5 percent to $94.62 per barrel and Brent Crude futures gained 0.89 percent to $103.53 per barrel. Copper futures added 0.44 percent to $331.00 per pound. Gold was lower and silver futures declined 1.07 percent to $22.26.
Currency markets continued to show dollar strength overnight as the greenback rose against most major trading partners while the yen resumed its decline. The EUR/USD was lower at 1.2920 and the dollar gained against the yen to 101.99, a gain of 1.02 percent. Overall, the Dollar Index gained 0.2 percent on strength against the yen, the euro, the Swiss franc, and the Canadian dollar. Notably, the Australian dollar was higher across the board despite Goldman Sachs making negative comments on the currency.
Earnings Reported Yesterday
Key companies that reported earnings Friday include:
- Abercrombie & Fitch (NYSE: ANF) reported a first quarter loss of $0.09 per share vs. an expected loss of $0.05 per share on revenue of $838.8 million vs. $942.86 million expected.
- Foot Locker (NYSE: FL) reported first quarter EPS of $0.91 vs. $0.87 expected on revenue of $1.64 billion vs. $1.63 billion expected.
Stocks moving in the pre-market included:
- AstraZeneca (NYSE: AZN) shares gained 2.61 percent on the acquisition announcement.
- Citigroup (NYSE: C) shares rose 1.56 percent in the pre-market as financials rose as a sector.
- Exelon Corp. (NYSE: EXC) shares declined 1.3 percent, leading utilities lower as reports showed that power rates are declining and also on apparent sector rotation into cyclicals such as financials.
- Ford (NYSE: F) shares rose 1.35 percent pre-market after Barron's made positive comments on the stock this weekend, saying that earnings will grow as Europe recovers.
Notable companies expected to report earnings Tuesday include:
- Canadian Solar (NASDAQ: CSIQ) is expected to report a first quarter loss of $0.78 per share vs. a loss of $0.49 per share a year ago.
- Guidewire Software (NYSE: GWRE) is expected to report first quarter EPS of $0.03 vs. $0.10 a year ago.
- Tiffany (NYSE: TIF) is expected to report first quarter EPS of $0.52 vs. $0.64 a year ago.
On the economics calendar Tuesday, the S&P Case-Shiller Index kicks off the calendar followed by Consumer Confidence data, the Richmond Fed Manufacturing Index, and the Dallas Fed Manufacturing Index. Also, the Treasury is set to auction 3- and 6-month bills and 2-year notes. Overnight, Bank of Japan Governor Kuroda is expected to speak, German unemployment data, German CPI, and Brazilian GDP are expected.
Good luck and good trading.
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