Benzinga Market Primer: Tuesday, July 9: China Inflation Better Than Expected
Futures Gain On Stronger Chinese Data
U.S. equity futures gained in early pre-market trade following some better than expected Chinese inflation data. The new data eased fears that the world's second largest economy is headed for a sharp contraction amid a financial liquidity crisis.
In other news around the markets:
- Chinese CPI was flat in June from May vs. an expected drop of 0.2 percent and much better than the prior reading of a drop of 0.6 percent. On an annualized basis, CPI inflation rose 2.7 percent from a year ago vs. the expected gain of 2.5 percent and the prior reading at 2.1 percent while PPI inflation declined 2.5 percent in June, better than the expected declined of 2.7 percent and prior decline of 2.9 percent.
- U.K. industrial production unexpectedly stalled in June, posting a flat reading from May vs. an expected gain of 0.2 percent while May's figure was revised lower to -0.1 percent from 0.1 percent. Manufacturing production in particular was weak in June.
- Intuitive Surgical (NASDAQ: ISRG) after the close issued some guidance for the second quarter and now sees EPS between $3.86 and $3.98 vs. the consensus estimate of $4.29. Revenue is expected to be $537-575 million vs. $629.61 million expected.
- Amarin (NASDAQ: AMRN) announced a stock offering of 21.7 million shares after the close, sending the stock lower after-hours. The issuance represents nearly one-sixth of total shares.
- S&P 500 futures rose 7.3 points to 1,642.80.
- The EUR/USD was higher at 1.2873.
- Spanish 10-year government bond yields fell 1 basis points to 4.67 percent.
- Italian 10-year government bond yields fell 2 basis points to 4.36 percent.
- Gold rose 1.56 percent to $1,254.20 per ounce.
Asian shares rose overnight on the back of the stronger Chinese inflation data as investors see the data as confirmation that China can withstand a financial liquidity crisis without a hard landing of the economy. The Japanese Nikkei 225 Index rose 2.58 percent and the Topix Index rose 2.07 percent. In Hong Kong, the Hang Seng Index gained 0.49 percent and the Shanghai Composite Index rose 0.37 percent in China. Also, the Korean Kospi gained 0.74 percent and Australian shares rose 1.5 percent.
European shares were higher in early trade on the back of the positive data out of China. The Spanish Ibex Index gained 0.73 percent and the Italian FTSE MIB Index rose 0.79 percent. Meanwhile, the German DAX rose 1.04 percent and the French CAC 40 Index gained 0.76 percent while U.K. shares climbed 1.05 percent.
Commodities were mixed as energy futures dropped while metals gained. WTI Crude futures fell 0.15 percent to $102.99 per barrel and Brent Crude futures declined 0.2 percent to $107.22 per barrel. Copper futures fell 0.94 percent to $307.05 per pound. Gold was higher and silver futures gained 1.53 percent to $19.33 per ounce.
Currency markets were rather quiet save for the pound which declined on the weak industrial production data as the weak figures point to renewed stimulus efforts from the Bank of England, which would most likely devalue the currency. The EUR/USD was higher at 1.2873 and the dollar gained against the yen to 101.19. Overall, the Dollar Index rose 0.09 percent on strength against the pound, the yen, and the Swiss franc. Notably, the GBP/USD declined 0.45 percent to 1.4882 and the EUR/GBP rose 0.5 percent to 0.8650, marking solid declines for the sterling.
Key companies that reported earnings Monday include:
- Alcoa (NYSE: AA) reported second quarter adjusted EPS of $0.07 vs. $0.06 expected on revenue of $5.85 billion vs. $5.83 billion expected.
- WD 40 Company (NASDAQ: WDFC) reported third quarter EPS of $0.66 vs. $0.56 expected on revenue of $93.1 million vs. $89.45 million expected.
Stocks moving in the pre-market included:
- Alcoa (NYSE: AA) shares rose 1.39 percent in pre-market trade as shares whipsawed between positive and negative territory following the earnings release.
- Intuitive Surgical (NASDAQ: ISRG) shares plummeted 11.31 percent on the weak second quarter guidance.
- Amarin (NASDAQ: AMRN) shares declined 10.21 percent pre-market following the stock issuance.
- Sprint (NYSE: S) shares rose 0.99 percent pre-market as 97 percent of shareholders opted to take cash and new stock as part of the Softbank deal following the approval of the takeover of Clearwire (NASDAQ: CLWR) by Clearwire shareholders.
Notable companies expected to report earnings Tuesday include:
- ADTRAN (NASDAQ: ADTN) is expected to report second quarter EPS of $0.16 vs. $0.33 a year ago on revenue of $154.16 million vs. $184.00 million prior.
- Healthcare Services Group (NASDAQ: HCSG) is expected to report second quarter EPS of $0.20 vs. $0.17 a year ago on revenue of $281.77 million vs. $267.11 million a year ago.
- Wolverine World Wide (NYSE: WWW) is expected to report second quarter EPS of $0.34 vs. $0.48 a year ago on revenue of $591.03 million vs. $312.72 million a year ago.
On the economics calendar Tuesday, the NFIB Small Business Optimism Index is due out followed by the weekly Chain Store Sales and Redbook reports. Also, the Treasury is set to hold a 4-week bill and 3-year note auction. Overnight, the Chinese trade report is due out.
Good luck and good trading.
Tune into Benzinga's PreMarket Info show with Dennis Dick and Joel Elconin here.
For a recap of Monday's market action, read Benzinga's daily market wrap here.
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