Futures drop on China fears
Chinese stocks plummet overnight on concerns over a liquidity crunch that further slow growth in the country.
U.S. equity futures declined in early premarket trade Monday on continued fears surrounding the Chinese economy. The People's Bank of China issued a statement, to reassure markets about the state of the Chinese economy even as Goldman Sachs downgraded its growth outlook for the Chinese economy. The Shanghai Composite Index proceeded to fall 5.29% on the news.
Goldman Sachs cut its second quarter growth forecast for China to 7.5% year-over-year growth from 7.8% and cut 2013 growth to 7.4% from 7.8%. Goldman also cut 2014 growth forecasts to 7.7% from 8.4%.
The PBOC commented on the recent liquidity crunch in China, saying that liquidity is at a reasonable level and that credit growth must be kept steady. The PBOC reiterated that it stands to ready to act if needed.
The Bank for International Settlements (BIS) made some strong comments on the risks of continued non-traditional monetary policy. In its annual report, the BIS urged central banks to pull back the reigns on policy, and that delivering more expansionary policy was becoming "increasingly perilous."
S&P 500 futures fell 12.30 points to 1,571.80.
The EUR/USD was lower at 1.3116.
Spanish 10-year government bond yields rose 13 basis points to 5.04%, crossing back above the 5% level for the first time in three months.
Italian 10-year government bond yields rose 9 basis points to 4.7%.
Gold fell 0.63% to $1,283.90 per ounce.
Asian shares all closed lower -- despite after opening higher -- following increased fears over the health of the Chinese economy. The Japanese Nikkei 225 Index declined 1.26% and the Topix Index fell 0.89%. In Hong Kong, the Hang Seng Index fell 2.22% while the Shanghai Composite Index declined 5.29% in China. Also, the Korean Kospi fell 1.31% and Australian shares fell 1.47%.
European shares were also lower in early trade, taking cues from Asia. The Spanish Ibex Index fell 1.07% and the Italian FTSE MIB Index declined 0.74%. Meanwhile, the German DAX fell 0.89% and the French CAC 40 Index declined 0.96% while U.K. shares lost 0.64%.
Commodities were taking it on the proverbial chin overnight as lowered Chinese growth estimates weighed on prices. WTI crude futures fell 0.31% to $93.40 per barrel and Brent crude futures declined 0.23% to $100.68 per barrel. Copper futures tumbled a whopping 3.18% to $300.15 per pound, the lowest in over a year. Gold was lower and silver futures declined 1.62% to $19.64 per ounce.
Currency markets were on the move overnight as early yen weakness was canceled out as the session went on. The EUR/USD was lower at 1.3116 and the dollar fell against the yen by 0.03% to 97.87 after touching 98.60 overnight. Overall, the Dollar Index rose 0.28% on strength against the Canadian dollar, the pound, the Swiss franc, and the euro.
Earnings reported Friday
Key companies that reported earnings Friday include:
Darden Restaurants (DRI) reported fourth quarter earnings per share of $1.01 vs. $1.04 expected on revenue of $2.3 billion vs. $2.27 billion expected. The company also raised its quarterly dividend to $0.55 per share from $0.50 per share.
CarMax (KMX) reported first quarter earnings per share of $0.64 vs. $0.58 expected on revenue of $3.31 billion vs. $3.15 billion expected.
Stocks moving in the premarket included:
Advanced Micro Devices (AMD) shares gained 1.25% after rising over 3% Friday.
U.S. Steel (X) shares declined 2.46% premarket on Chinese fears.
Cliff's Natural Resources (CLF) shares declined 1.4% premarket on lower commodity prices in the face of Chinese fears.
Freeport-McMoRan Copper and Gold (FCX) shares fell 1.31% premarket as copper prices plunged.
Notable companies expected to report earnings Monday include:
Gencorp (GY) is expected to report a second quarter loss of $0.01 per share vs. earnings per share of $0.03 a year ago.
Sonic (SONC) is expected to report third quarter earnings per share of $0.26 vs. $0.24 a year ago.
On the economics calendar Monday, the Chicago Fed National Activity Index and the Dallas Fed Manufacturing Index are due out followed by the weekly 3- and 6-month bill auctions and speech from Fed President Richard Fisher. Overnight, Italian retail sales and a Spanish bill auction are expected.
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John Stumpf acknowledges that growth has been slow, but he says he's still optimistic.
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