Futures Sharply Lower on Failed Fiscal Cliff
U.S. equity futures traded sharply lower overnight as House
leader Boehner failed to gain enough votes to pass his Plan B to
avoid the Fiscal Cliff. It is now unlikely that an agreement will
be reached before Christmas, meaning leaders will have nearly one
week to solve the crisis before going over the Cliff.
In other news around the markets:
- The U.K. economy had its third quarter GDP growth figures
revised lower in the latest estimate, with the government
reporting that the economy grew 0.9 percent in the third
quarter, less than the previous estimate of 1.0 percent growth
for the quarter.
- Japan's Ishiba, a leader of the newly elected LDP party,
has stated that the party should target USD/JPY between 85 and
90 in the short-term to help kick-start growth.
- Jens Weidmann, ECB Governing Council Member and Bundesbank
President, spoke overnight stating that he sees no risks of
inflation in the eurozone but that the Bank must act if
inflation pressures do rise. Also, he said that the OMT
Conditionality is not credible and that the OMT is the first
step on a slippery slope.
- S&P 500 futures fell 23.25 points to 1,417.25.
- The EUR/USD was was lower at 1.3219.
- Spanish 10-year government bond yields rose to 5.273
- Italian 10-year government bond yields rose to 4.491
- Gold rose 0.3 percent to $1,651.00 per ounce.
Asian shares were strongly lower overnight following the
failed Plan B in the U.S. House overnight. The Japanese Nikkei
Index fell 0.99 percent and the Shanghai Composite Index fell
0.69 percent while the Hang Seng Index fell 0.68 percent. In
addition, the Korean Kospi fell 0.95 percent and Australian
shares dropped 0.6 percent.
European shares were lower overnight, tracking Asian markets
lower. The Spanish Ibex Index fell 0.49 percent and the Italian
MIB Index fell 0.8 percent on Fiscal Cliff fears. Meanwhile, the
German DAX dropped 0.9 percent and the French CAC slid 0.74
percent while U.K. shares fell 0.94 percent.
Commodities were mixed overnight with weakness in energy
futures offset by gains in precious metals on hopes of more
easing following a smaller chance of resolving the Fiscal Cliff.
WTI Crude futures fell 1.41 percent to $88.86 per barrel and
Brent Crude futures dropped 0.83 percent to $109.28 per barrel.
Copper futures bucked the risk-off trend and actually rose
overnight, gaining 0.08 percent to $353.90 per barrel. Gold was
higher and silver futures rose 0.98 percent to $29.98 per
Currency markets were in clear risk-off mode overnight as the
dollar and the yen reigned. The EUR/USD was lower at 1.3219 and
the dollar fell against the yen to 84.11. Overall, the Dollar
Index rose 0.08 percent on strength against the euro, the pound,
the Swiss franc, the Canadian dollar and the Swedish krone. Also,
the Aussie dollar was broadly weak, marking another sign of
risk-off and other growth currencies tracked lower overnight.
Stocks moving in the pre-market included:
- Arcelor Mittal (NYSE:
) shares fell 3.2 percent pre-market as the company reported
that it will take a large, $4.3 billion write-down of
- AIG (NYSE:
) shares fell 2.65 percent pre-market as the breakdown in
Fiscal Cliff negotiations means that the U.S. faces another
downgrade, which could trigger credit default swaps of which
AIG is most likely a seller.
- J.P. Morgan Chase (NYSE:
) led big banks lower overnight, dropping 1.41 percent
pre-market on the breakdown in Fiscal Cliff talks.
- Peabody Energy (NYSE:
) shares fell 2.36 percent pre-market on weakened demand for
coal exports abroad.
Notable companies expected to report earnings Friday
- Walgreen Company (NYSE:
) is expected to report first quarter EPS of $0.70 vs. $0.63 a
On the economics calendar Friday, it is a Quadruple Witching
day, meaning stock index futures, stock index options, single
stock options, and single stock futures all expire. Also, durable
goods orders, personal income, and the Chicago Fed National
Activity Index are due out. Later, consumer sentiment and Kansas
City Fed manufacturing Index are expected.
Good luck and good trading.
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