Market Primer: Monday, September 16: Summers Withdraws From Race For Fed Chairmanship
President Obama’s top choice to replace the current Federal Reserve Chairman Ben Bernanke has dropped out of the race. Lawrence Summers withdrew on Sunday after weeks of criticism for being too close to Wall Street and a reputation for being abrasive.
The news put Fed Vice Chairman Janet Yellen at the top of the list for a replacement, someone most are expecting to be more cautious about tapering the Fed’s stimulus program. US Treasuries jumped at the news, the 10 year Treasury yield fell to 2.08 percent, the lowest it has been since September 3.
In other news around the markets:
- Just one week before German national elections conclude, German Chancellor Angela Merkel and her coalition government are facing some setbacks. Early results of Bavarian state elections showed that Merkel’s Christian Social Union party won 49 percent of the vote, but her junior coalition partner, the Free Democratic Party, is only expected to have garnered 3 percent of the votes.
- The US and Russia have agreed on a nine month UN program to destroy the Syrian government’s chemical weapons. President Obama has been under fire about the decision, however he defended the agreement saying a diplomatic solution will have more of a lasting impact, but stressed that military force could still be necessary.
- Germany has been working together with EU officials to move plans for a eurozone banking union forward. After insisting that the banking union’s creation would require changing the eurozone’s treaty, German officials are finding a way to shift the power to fix struggling banks from the national level and make it a responsibility of the region as a whole.
- With the Federal Reserve meeting on the horizon, markets are bracing for the bank to cut back on its asset buying stimulus program. Although most are expecting the bank to cut back by $10 to $15 billion, the months of anticipation and guidance from the bank could keep the taper from having a huge impact on markets. Provided the bank doesn’t surprise markets in the size of the cut back or future intentions, equity and bond markets may be able to take the Fed taper without much volatility.
Asian markets were mostly higher on Monday, the South Korean KOSPI was up 0.96 percent, the Hang Seng index was up 1.47 percent and New Zealand’s NZ50 was up 0.92 percent. The NIKKEI was up 0.12 percent and the Shanghai composite lost 0.22 percent.
European markets were up across the board on Monday. The UK’s FTSE was up 0.90 percent and the STOXX 600 was up 0.81 percent. The German DAX gained 1.21 percent and the Spanish IBEX was up 1.06 percent.
With easing tension in Syria, crude futures fell on Monday. Brent futures for November delivery were down 0.33 percent and WTI futures for October delivery were down 0.28 percent. Gold and silver were up 0.83 percent and 0.81 percent respectively and copper was up 0.58 percent.
The dollar lost 0.43 percent against the pound and the euro after reports that Lawrence Summers withdrew from the race to lead the Fed. The yen gained 0.53 percent against the dollar and rupee was up 1.24 percent against the greenback.
No Notable Earnings Reported on Friday
Stocks moving in the pre-market included:
- Stratasys, Ltd. (NASDAQ: SSYS) was down 4.80 percent in pre-market trade after announcing that it has priced its public offering of 4,500,000 ordinary shares at $93.00 per share.
- NXP Semiconductors N.V (NASDAQ: NXPI) was down 2.08 percent after announcing that certain principal stockholders have begun an offering of 25 million shares.
- Zynga Inc. (NASDAQ: ZNGA) gained 0.66 percent in pre-market trade after announcing that it had settled a law suit over alleged theft of game secrets.
- Sirius XM Radio Inc. (NASDAQ: SIRI) gained 0.40 percent in pre-market trade after announcing that the Wharton School of Business would be featured on a new business talk channel.
- Farmer Brothers Company (NASDAQ: FARM) is expected to report EPS of $0.18, compared to last year’s loss of $0.06 per share.
Economic releases expected on Monday include US industrial production, Eurozone CPI, Italian trade balance, and Norwegian trade balance. Also notable will be a speech by ECB President Mario Draghi.
Happy trading and good luck!
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