Futures drop on weak data, geopolitical fears
A slew of US economic reports are on tap ahead of this shortened trading session.
U.S. equity futures declined in early premarket trade ahead of the shortened trading day on weaker than expected services PMIs around the globe. Weak data from China to the eurozone weighed on sentiment overnight.
The official China non-manufacturing PMI slipped to 53.9 in June from 54.3 in May, a four-month low, while the HSBC China non-manufacturing PMI rose to 51.3 from 51.2, but the weakness in the official number weighed on markets.
In the eurozone, the non-manufacturing PMI rose to 48.3 from 47.2 in May but missed expectations of a reading of 48.6, which was the flash reading earlier this month. Strength in Spain once again was offset by weakness in Germany and Italy.
England's non-manufacturing PMI rose sharply in June to 54.9 from 52.9 on expectations of a reading of 53.0, rising to a 16-month high.
Fears over political turmoil around the world also weighed on futures as the Egyptian President Muhammed Morsi's government is falling apart, while Prime Minister Pedro Passos Coelho's government in Portugal is also teetering as two key ministers quit, jeopardizing the coalition government.
S&P 500 futures fell 10.2 points to 1,597.00.
The EUR/USD was lower at 1.2952.
Spanish 10-year government bond yields rose 11 basis points to 4.73% on the Portugal news.
Italian 10-year government bond yields rose 9 basis points to 4.53%.
Gold rose 0.18% to $1,245.70 per ounce.
Asian shares were mostly lower on the global geopolitical news and the weak PMI data. The Japanese Nikkei 225 Index declined 0.31% and the Topix Index rose 0.17%. In Hong Kong, the Hang Seng index fell 2.48% while in China, the Shanghai Composite Index declined 0.61%. Also, the Korean Kospi fell 1.64% and Australian shares dropped 1.86%.
European shares were also sharply lower overnight on similar fears. The Spanish Ibex Index declined 2.48% and the Italian FTSE MIB Index fell 1.6%. Meanwhile, the German DAX dropped 1.38% and the French CAC 40 Index fell 1.31% while U.K. shares declined 1.38%.
Commodities were higher overnight as WTI crude futures rose through $100 per barrel. WTI crude futures rose 1.39% to $100.98 per barrel and Brent crude futures gained 0.58% to $104.60 per barrel. Copper futures gained 0.48% to $315.80 per pound. Gold was higher and silver futures gained 1.04% to $19.51 per ounce.
Currency markets were on the move overnight as the yen reversed most of Tuesday's losses in a clear risk-off environment. The EUR/USD was lower at 1.2952 and the dollar dropped 0.82% against the yen to 99.80. Overall, the Dollar Index declined 0.06% on weakness against the yen, the pound, the Canadian dollar, and the Swiss franc.
Earnings reported Tuesday
Key companies that reported earnings Tuesday include:
Constellation Brands (STZ) reported first quarter earnings per share of $0.38 vs. $0.40 expected on revenue of $673.0 million vs. $674.25 million expected.
Acuity Brands (AYI) reported third quarter earnings per share of $0.97 vs. $0.88 expected on revenue of $541.5 million vs. $518.76 million expected.
Stocks moving in the premarket included:
Credit Suisse (CS) shares declined 2.57% premarket after S&P downgraded the bank to A- from A.
Deutsche Bank (DB) shares declined 2.99% premarket as S&P also cut its rating to A from A+ Tuesday after the close.
Barclays (BCS) shares dropped 2.41% premarket as the company too was cut by S&P to A from A+.
Notable companies expected to report earnings Wednesday include:
International Speedway (ISCA) is expected to report second quarter earnings per share of $0.50 vs. $0.52 a year ago on revenue of $182.3 million vs. $179.6 million a year ago.
On the economics calendar Wednesday, MBA purchase applications are due out followed by the Challenger job cut report and the ADP employment report. Also, international trade data, jobless claims, the ISM non-manufacturing index, and the EIA petroleum and nat gas reports are due out. Overnight, watch for the Bank of England and European Central Bank rate decisions.
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