Futures Rise on Fiscal Cliff Resolution Hopes
U.S. equity futures rose in pre-market trading as comments
from President Obama on Friday signaled that Congressional
leaders and the White House may be able to reach a deal to either
avert the fiscal cliff for good or kick the can further down the
road. Either situation would relieve short term pressures on
In other news around the markets:
- Israel appears set to launch a ground assault into the Gaza
Strip as a cease fire has yet to be agreed upon and Israeli air
strikes have increased.
- BP (NYSE:
) will use the funds raised from the sale of its Russian joint
venture to increase its buyback and dividend, despite needing
to pay massive fines resulting from the Gulf oil spill.
- The shadow banking system, consisting of money market
funds, monoline insurers, and off-balance sheet investment
vehicles, grew to $67 trillion in 2012 from $61 trillion in
- S&P 500 futures rose 5.9 points to 1,359.88.
- The EUR/USD was higher at 1.2767.
- Spanish 10-year government bond yields rose to 5.884
- Italian 10-year government bond yields rose to 4.877
- Gold rose 0.43 percent to $1,722.10 per ounce.
Asian shares rose overnight led once again by Japanese shares
as the political opposition leader Abe, who is expected to win
the elections for Prime Minister, vows to require the Bank of
Japan to buy bonds in an unlimited capacity in order to meet a
higher inflation target. The Japanese Nikkei Index rose 1.43
percent and the Shanghai Composite Index rose 0.11 percent while
the Hang Seng Index rose 0.49 percent. Also, the Korean Kospi
rose 0.93 percent and Australian shares jumped 0.57 percent.
European shares were also higher overnight on hopes that a
fiscal cliff deal was within reach in Washington. The Spanish
Ibex Index rose 0.61 percent and the Italian MIB Index rose 1.12
percent while Greek shares rallied 0.67 percent. Meanwhile, the
German DAX rose 1.27 percent and the French CAC rose 1.28 percent
as U.K. shares jumped 1.01 percent.
Commodities were stronger overnight, buoyed by the positive
tone in markets due to fiscal cliff hopes. WTI Crude futures rose
0.95 percent to $87.85 per barrel and Brent Crude futures rose
0.55 percent to $109.55 per barrel. Oil is rising on the
increasing tensions in the Middle East, however analysts believe
that it would take larger players entering the conflict for oil
to truly spike higher. Copper futures jumped 0.97 percent to
$349.50 per barrel on hopes that averting the fiscal cliff is
bullish for growth. Gold was higher and silver futures rose 0.71
percent to $32.60.
Currency markets show a clear risk-on tone in early trading,
as the dollar and the yen were weak and risky currencies rallied.
The EUR/USD was higher at 1.2767 and the dollar rose against the
yen to 81.17. Overall, the Dollar Index fell 0.28 percent to
81.03 on weakness against the euro, the Swedish krone, and the
Canadian dollar. In addition, the Aussie dollar was stronger with
the AUD/USD rising back towards the 1.04 level and the EUR/AUD
falling below 1.23. Also, the Israeli shekel was stronger against
the dollar, hinting that markets expect some sort of cease fire
deal before an invasion.
Notable companies expected to report earnings Friday
- Brocade Communications Systems (NASDAQ:
) is expected to report fourth quarter EPS of $0.14 vs. $0.16 a
- Lowe's Companies (NYSE:
) is expected to report third quarter EPS of $0.35 vs. $0.35 a
On the economics calendar Monday, existing home sales data and
the NAHB Housing Market Index are due out. In addition, the
Treasury is set to auction 3- and 6-month bills. Overnight, the
Bank of Japan is expected to release its monetary policy and
interest rate decisions. The Bank is expected to keep interest
rates on hold and maintain its asset purchase program despite
calls from political opposition leaders to triple the inflation
target to 3 percent and embark on unlimited QE to boost
Good luck and good trading.
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