Futures Higher On Dovish Bernanke
U.S. equity futures rose sharply as a speech from Federal
Reserve Chairman Ben Bernanke after the close Wednesday was much
more dovish than expected. The comments show that the Fed is not
looking to end its easy money policies any time soon.
In other news around the markets:
Bernanke said in the Q&A after his speech that both sides of
the Fed's dual mandate, full employment and stable inflation, argue
for more easing and that interest rate hikes are no where near the
horizon even if the tapering of purchases were to begin soon.
However, he did close with slightly hawkish statements by saying
that inflation is low due to transitory factors and should moderate
back towards the medium-term target. The Bank of Japan raised its
forecast for the Japanese economy overnight citing a moderate
recovery and inflation that is likely to turn positive. The BoJ
raised its 2013 Real GDP forecast to +2.5-3.0 percent from +2.4-3.0
percent in April and raised the median CPI forecast to +0.7 percent
from +0.6 percent. Australia's employment report once again showed
strength in June as the Australian economy added 10.3 thousand jobs
vs. an expected flat reading and the unemployment rate ticked up
unexpectedly to 5.7 percent from 5.6 percent due to an increase in
the labor force. Part-time jobs drove jobs gains in June, a similar
theme to those jobs added in the U.S. in June. The Shanghai
Composite Index closed 3.2 percent higher, its best gain of 2013,
building on the more than 2 percent gain from Wednesday. The
Financial Times is attributing the strength in Chinese markets to a
speech by Premier Li Keqiang which suggested the government will
focus on restructuring the economy and focus on reforms. S&P
500 futures rose 16.5 points to 1,665.10. The EUR/USD was higher at
1.3041, well off the post-Bernanke highs near 1.32. Spanish 10-year
government bond yields fell 8 basis points to 4.73 percent as Prime
Minister Rajoy is set to roll out new taxes, according to
Bloomberg. Italian 10-year government bond yields fell 8 basis
points to 4.37 percent. Gold gained 3.05 percent to $1,285.50 per
Asian shares were mostly higher following the dovish comments
from Bernanke and the comments from Chinese Premier Li. The
Japanese Nikkei 225 Index rose 0.39 percent and the Topix Index
fell 0.04 percent. In Hong Kong, the Hang Seng Index rose 2.55
percent and the Shanghai Composite Index rose 3.23 percent in
China. Also, the Korean Kospi gained 2.93 percent and Australian
shares rose 1.31 percent.
European shares were also higher overnight on the back of the
bullish sentiment from around the world. The Spanish Ibex Index
rose 0.11 percent and the Italian FTSE MIB Index gained 0.58
percent. Meanwhile, the German DAX rose 1.03 percent and the French
CAC 40 Index gained 0.72 percent while U.K. shares rose 0.77
Commodities were mostly higher, especially metals, after
Bernanke talked down the dollar. WTI Crude futures rose 0.17
percent to $106.70 per barrel and Brent Crude futures gained 0.04
percent to $108.55 per barrel. Copper futures rose 3.12 percent to
$318.75 per pound. Gold was higher and silver futures gained 4.41
percent to $20.01 per ounce.
Currency markets showed broad dollar weakness overnight however
moves in most major dollar pairs were off of extreme levels. The
EUR/USD was higher at 1.3041 after touching nearly 1.32 and the
dollar fell against the yen to 99.39 after falling as far as 98.60.
Overall, the Dollar Index fell 1.13 percent on weakness against the
Swiss franc, the Canadian dollar, the pound, the euro, and the
Earnings Reported Yesterday
Key companies that reported earnings Tuesday include:
Yum! Brands (NYSE:
) reported second quarter EPS of $0.56 vs. $0.54 expected on
revenue of $2.9 billion vs. $2.93 billion expected. The company
also announced that it was reaffirming full year guidance despite
second quarter China comps were down 20 percent but said that
Chinese comps in the fourth quarter "could be positive." Family
) reported third quarter EPS of $1.05 vs. $1.03 expected on revenue
of $2.57 billion, in line. Family Dollar narrowed its full-year
earnings forecast to $3.77 to $3.82 per share, versus its earlier
view of $3.73 to $3.93 per share. Fastenal (NASDAQ:
) reported second quarter EPS of $0.41, in line, on revenue of
$847.6 million vs. $857.13 million expected. MSM Industrial (NYSE:
) reported third quarter EPS of $1.05 vs. $0.97 on revenue of
$636.9 million vs. $635.18 million. However, guidance for the
fourth quarter was weak with the company seeing EPS of $0.87-0.91
vs. $1.01 estimate and revenue of $661-673 million vs. $687.73
million estimate. PriceSmart (NASDAQ:
) reported third quarter EPS of $0.61 vs. $0.64 on revenue of
$571.1 million vs. $568.33 million.
Stocks moving in the pre-market included:
) shares gained 0.39 percent pre-market as the company reported
that same-store sales rose 6.0 percent in June vs. an expected gain
of 5.4 percent.Net sales rose 8 percent to $9.92 billion in June.
) shares fell 2.88 percent pre-market as the company reported
weaker than expected third quarter EPS. Yum! Brands (NYSE:
) shares rose 0.88 percent pre-market after reporting better than
expected EPS despite weaker than expected revenue. Also, some of
the China related comments were worrisome.
Notable companies expected to report earnings Thursday
Commerce Bancshares (NASDAQ:
) is expected to report second quarter EPS of $0.71 vs. $0.76 a
year ago on revenue of $262.43 million vs. $265.92 million a year
On the economics calendar Thursday, initial jobless claims and
import and export prices are due out followed by the Bloomberg
Consumer Comfort Index. Also, Fed Governor Daniel Tarullo is
expected to speak and the Treasury is set to auction 30-year bonds
and give its budget statement. Overnight, the Spanish CPI report
and Eurozone Industrial Production data are due out.
Good luck and good trading.
Tune into Benzinga's PreMarket Info show with Dennis Dick and
For a recap of Wednesday's market action, read Benzinga's daily
market wrap .
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