Futures Drop On China Growth Fears, Dollar Gains
U.S. equity futures declined in early pre-market trade following
a weak initial reading of manufacturing in China. The Flash HSBC
Manufacturing PMI for June declined to 48.3 from 49.2 in May, with
every internal figure showing negative signs for the Chinese
economy. Markets were already weak following the
FOMC rate and policy decision
and the weak China data further weighed.
In other news around the markets:
The Chinese overnight lending market continued to see stress
overnight as the overnight SHIBOR rate rose to an average 12.5
percent from an average 7.87 percent Wednesday and the 7-day rate
rose to an average 10.96 percent vs. an average 8.26 percent
yesterday. China now not only faces a slowing economy but a massive
liquidity and cash-shortage crisis across its country which could
lead to bank runs. The Eurozone Manufacturing PMI posted a slight
beat of expectations this morning, rising to 48.7 from 48.3 on an
expected reading of 48.6. Strength was seen in France while
Germany's PMI unexpectedly dropped to 48.7 vs. 49.4 previously on
an expected rise to 49.8. Meanwhile, the Services PMI was better
than expected at 48.6 with both countries showing improvement.
British retail sales were stronger than expected in May, with
retail sales rising 2.1 percent from the prior month vs. an
expected gain of 0.8 percent. Core retail sales also grew 2.1
percent, again beating expectations. S&P 500 futures dropped
9.3 points to 1,614.40. The EUR/USD was lower at 1.3212. Spanish
10-year government bond yields rose 16 basis points to 4.69 percent
following a very weak bond auction. Italian 10-year government bond
yields rose 18 basis points to 4.43 percent. Gold plummeted 4.54
percent to $1,311.60 per ounce.
Asian shares saw sharp declines overnight that began at the
open, as markets played catch-up to the U.S. post-Bernanke sell-off
and continued lower on the weaker than expected China PMI data. The
Japanese Nikkei 225 Index declined 1.74 percent while the Topix
Index fell 1.33 percent. In Hong Kong, the Hang Seng Index fell
2.88 percent while the Shanghai Composite Index shed 2.76 percent
in China. Also, the Korean Kospi fell 2.00 percent and Australian
shares lost 2.12 percent.
European shares tracked Asian markets lower and continued to
trade lower following the weaker than expected German manufacturing
data. The Spanish Ibex Index fell 1.49 percent and the Italian FTSE
MIB Index declined 1.15 percent. Meanwhile, the German DAX fell
1.82 percent and the French CAC 40 declined 1.88 percent while U.K.
shares shed 1.91 percent.
Commodities were torched overnight as the Fed cut its growth
forecasts and then as China's PMI was weak. WTI Crude futures
dropped 2.11 percent to $96.17 per barrel and Brent Crude futures
fell 1.9 percent to $104.10 per barrel. Copper futures dropped 2.03
percent to $308.75, approaching a new 52-week low. Gold was much
lower and silver futures were absolutely pummeled, declining 6.3
percent to $20.26 per ounce.
Currency markets showed broad dollar strength overnight as
Bernanke's comments put confidence under the dollar. The EUR/USD
was was lower at 1.3212 and the dollar gained against the yen by
1.66 percent to 98.05. Overall, the Dollar Index rose 0.58 percent
on strength against the yen, the euro, the Canadian dollar, the
Swiss franc and the pound. Also, the Australian dollar was broadly
weak as a proxy for China, touching a new 3-year low against the
Earnings Reported Yesterday
Key companies that reported earnings Wednesday include:
) reported fourth quarter EPS of $2.13 vs. $1.97 expected on
revenue of $11.4 billion vs. $11.44 billion expected. However,
guidance for FY2014 was slightly below forecasts. Actuant (NYSE:
) reported third quarter EPS of $0.62 vs. $0.66 expected on revenue
of $344.21 million. Also, the company announced the divestiture of
a business segment. Finisar (NASDAQ:
) reported fourth quarter EPS of $0.20 vs. $0.17 expected on
revenue of $243.4 million vs. $242.95 million expected. Micron
) reported third quarter EPS of $0.04 vs. $0.02 expected on revenue
of $2.3 billion vs. $2.25 billion expected. Red Hat (NYSE:
) reported first quarter EPS of $0.32 vs. $0.31 expected on revenue
of $363.0 million vs. $359.77 million expected.
Stocks moving in the pre-market included:
SandRidge Energy (NYSE:
) shares rose 4.33 percent as the company announced a new CEO.
Micron Technology (NASDAQ:
) shares declined 1.65 percent pre-market despite the better
earnings. Finisar (NASDAQ:
) shares rose 8.95 percent pre-market as the company reported
better earnings and gave revenue guidance. Red Hat (NYSE:
) shares climbed 3.42 percent pre-market after the company reported
better first quarter results.
Notable companies expected to report earnings Thursday
) is expected to report fourth quarter EPS of $0.87 vs. $0.82 a
year ago. Pier 1 Imports (NYSE:
) is expected to report first quarter EPS of $0.19 vs. $0.16 a year
ago. Kroger (NYSE:
) is expected to report first quarter EPS of $0.88 vs. $0.78 a year
ago. Rite Aid (NYSE:
) is expected to report first quarter EPS of $0.09 vs. a loss of
$0.03 per share a year ago.
On the economics calendar Thursday, initial jobless claims are
due out followed by the Flash Markit U.S. Manufacturing PMI,
existing home sales, Philly Fed survey, and leading indicators. The
Treasury is set to auction 30-year TIPS as well. Overnight, Bank of
Japan Governor Kuroda speaks.
Good luck and good trading.
Tune into Benzinga's PreMarket Info show with Dennis Dick and
For a recap of yesterday's market action, read Benzinga's daily
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