Benzinga Market Primer: Wednesday, August 14: Futures Lower As Eurozone Escapes Recession

Futures Lower As Eurozone Escapes Recession

U.S. equity futures dropped in early Wednesday trade despite a new report from Europe showing that the eurozone has finally escaped the longest recession in the currency bloc's history. Also, a strong employment report in the U.K. boosted confidence that the global economy is starting to find its footing.

Top News

In other news around the markets:

• The eurozone economy grew 0.3 percent in the second quarter, outpacing the forecasted 0.2 percent growth and outpacing the first quarter's -0.2 percent reading. As of this first estimate, the eurozone is officially out of recession.


• Germany's economy grew 0.7 percent in the second quarter, outpacing the estimate 0.6 percent expected rate, while France grew 0.5 percent vs. the 0.2 percent growth expected. In all, only 4 eurozone nations contracted in the second quarter including Spain and Italy.


• The number of people claiming unemployment benefits in the U.K. fell faster than expected in July with 29.2 thousand fewer people claiming benefits compared to the expected decline of 15 thousand. The unemployment rate was flat at 7.8 percent, in line.


• The Bank of England released its minutes of the last meeting of Monetary Policy Committee, showing that the MPC voted 9-0 to keep the QE program flat and 8-1 to adopt forward guidance. In the minutes, most MPC members noted that short-term interest rates are not consistent with short-term economic projections.


• S&P 500 futures fell 3.5 points to 1,687.30.


• The EUR/USD was lower at 1.3249.


• Spanish 10-year government bond yields were flat at 4.49 percent.


• Italian 10-year government bond yields fell 1 basis point to 4.22 percent.


• Gold rose 0.17 percent to $1,322.80 per ounce.

Asian Markets

Asian shares rallied on thin volume as trading in Hong Kong was closed due to a typhoon. The Japanese Nikkei 225 Index rose 1.32 percent and the Topix Index gained 1.23 percent. In China, the Shanghai Composite Index fell 0.29 percent while the Korean Kospi gained 0.57 percent and Australian shares edged lower by 0.01 percent.

European Markets

European shares were mixed following the multitude of economic data. The Spanish Ibex Index fell 0.28 percent and the Italian FTSE MIB Index declined 0.3 percent. Meanwhile, the German DAX rose 0.15 percent and the French CAC 40 Index gained 0.26 percent while U.K. shares dropped 0.24 percent.

Commodities

Commodities were mixed overnight as oil sold off and silver rallied. WTI Crude futures declined 0.3 percent to $106.51 per barrel and Brent Crude futures fell 0.31 percent to $109.48 per barrel. Copper futures rose 0.17 percent to $332.25 per pound. Gold was higher and silver futures gained 0.57 percent to $21.47 per ounce.

Currencies

Currency markets were rather quiet overnight as the dollar eked out a slight gain. The EUR/USD was lower at 1.3249 and the dollar was flat against the yen. Overall, the Dollar index gained 0.04 percent on strength against the Swiss franc, the euro, and the Canadian dollar despite weakness against the pound.

Earnings Reported Yesterday

Key companies that reported earnings Tuesday include:

• Brocade Communications BRCD reported third quarter EPS of $0.26 vs. $0.12 expected on revenue of $536.06 million vs. $518.85 million expected. The company also guided fourth quarter EPS and revenue above the street.


• Cree CREE reported fourth quarter EPS of $0.38, in line, on revenue of $375.0 million vs. $377.21 million expected. However, the company guided EPS and revenue for the first quarter below expectations.


• JDS Uniphase JDSU reported fourth quarter EPS of $0.13, in line, on revenue of $421.3 million vs. $430.64 million expected. However, revenue guidance was weak for the first quarter.

Pre-Market Movers

Stocks moving in the pre-market included:

• Apple AAPL shares rose 0.88 percent pre-market after gaining 4.75 percent Tuesday on news that Carl Icahn IEP has taken a new large stake in the company.


• Cree CREE shares fell 15.52 percent pre-market on the weak guidance for the first quarter.


• Brocade Communications BRCD shares rose 16.52 percent pre-market on the better than expected earnings and guidance.


• J.C. Penney JCP shares rose 0.16 percent pre-market a day after Bill Ackman announced that he was leaving the board of directors.

Earnings

Notable companies expected to report earnings Wednesday include:

• Cisco CSCO is expected to report fourth quarter EPS of $0.51 vs. $0.47 a year ago on revenue of $12.4 billion vs. $11.69 billion a year ago.


• Deere and Co. DE is expected to report third quarter EPS of $2.16 vs. $1.98 a year ago on revenue of $9.28 billion vs. $8.93 billion.


• Macy's M is expected to report second quarter EPS of $0.79 vs. $0.67 a year ago on revenue of $6.28 billion vs. $6.12 billion a year ago.


• Silver Wheaton SLW is expected to report second quarter EPS of $0.26 vs. $0.40 a year ago on revenue of $194.17 million vs. $201.41 million a year ago.


• Agilent Technologies A is expected to report third quarter EPS of $0.62 vs. $0.79 a year ago on revenue of $1.64 billion vs. $1.72 billion a year ago.

Economics

On the economics calendar Wednesday, MBA Purchase Applications are due out followed by two speeches by St. Louis Fed President Bullard. Overnight, the British retail sales 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 Tuesday's market action, read Benzinga's daily market wrap here.