Futures Rise Ahead of Fed
U.S. equity futures rose in pre-market trading ahead of the
FOMC rate decision. Also, Fiscal Cliff talks seem to be
progressing and Democrats are willing to discuss completely
rewriting the tax code, a key point of the Republican caucus.
However, such a move might delay any deal into the new year.
In other news around the markets:
- North Korea launched a new rocket, sending a satellite into
space. The rocket's trajectory took it over the Japanese island
- Goldman Sachs, in a new research note, believes that the
Reserve Bank of Australia (
) should cut rates to two percent throughout 2013 from the
current three percent to weaken the Aussie dollar and spur
- Eurozone Industrial Production for October was reported at
a -1.4 percent rate of contraction as compared to September, or
a -3.6 percent annualized rate, worse than economist forecasts
of a 0.2 percent monthly rise and a -2.3 percent annual
- S&P 500 futures rose 2.3 points to 1,433.80.
- The EUR/USD was higher at 1.3024.
- Spanish 10-year government bond yields fell to 5.405
- Italian 10-year government bond yields fell to 4.68
- Gold rose 0.3 percent to $1,714.70 per ounce.
Asian shares were higher in overnight trade ahead of the FOMC
despite the North Korean rocket and satellite launch. The
Japanese Nikkei Index rose 0.59 percent while the Shanghai
Composite Index gained 0.39 percent and the Hang Seng Index rose
0.8 percent. In addition, the Korean Kospi rose 0.55 percent and
Australian shares gained 0.17 percent.
European shares were mostly higher in early trade, rising on
hopes of further easing from the FOMC and tighter spreads of
peripheral bonds. The Spanish Ibex Index rose 0.38 percent and
the Italian MIB Index gained 0.25 percent. Meanwhile, the German
DAX rallied 0.22 percent and the French CAC fell 0.12 percent
while U.K. shares rose 0.23 percent.
Commodities were higher ahead of the FOMC decision and also on
general risk-on sentiment in markets. WTI Crude futures rose 0.43
percent to $86.16 per barrel and Brent Crude futures rose 0.58
percent to $108.64 per barrel. Copper futures gained 0.49 percent
to $370.45 on hopes that the Aussie dollar would weaken, boosting
Australian exports of Dr. Copper. Gold was higher and silver
futures rose 0.48 percent to $33.18 per ounce.
Currency markets were in clear risk-on mode as investors sold
the dollar and the yen and bought riskier currencies. The EUR/USD
was higher at 1.3024 and the dollar rose against the yen to
82.85, the highest since April. Overall, the Dollar Index fell
0.09 percent with notable weakness seen against the euro, the
Swiss franc and the Swedish krone. The AUD/USD was also higher
despite the Goldman call, rising 0.11 percent to 1.0540. One of
the biggest movers was the EUR/JPY, which gained 0.56 percent to
Stocks moving in the pre-market included:
- Apple (NASDAQ:
) shares rose 0.85 percent pre-market as the company is
reportedly testing different models of an Apple TV, signaling
that the product could come to market in the near future.
- E. I. Du Pont De Nemours (NYSE:
) shares rose 2.52 percent pre-market as the company announced
a new share buyback of $1 billion, or about 2.5 percent of the
company's market cap.
- Berkshire Hathaway (NYSE: BRK-B) shares rose 0.3 percent
pre-market following positive comments from a
Seeking Alpha post
- Bank of America (NYSE:
) shares rose 0.48 percent pre-market ahead of the expected
Notable companies expected to report earnings Wednesday
- Costco Wholesale (NASDAQ:
) is expected to report first quarter EPS of $0.93 vs. $0.80 a
- Joy Global (NYSE:
) is expected to report fourth quarter EPS of $1.91 vs. $1.83 a
On the economics calendar Wednesday, MBA Purchase Applications
are due out and import and export prices will shed further light
on Tuesday's trade data. However, all eyes will be on the FOMC
decision released at 2:30 pm and the ensuing updated economic
forecasts and press conference. Many economists are calling for
the Fed to roll the purchases of the ending Operation Twist into
QE3, thus increasing the size of the latter program. In addition,
economists have been speculating that the Fed will abandon its
target date guidance and adopt an indicator-based methodology,
setting policy goals to line up with improvement in key economic
indicators such as the unemployment rate.
Good luck and good trading.
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