Futures lower as eurozone escapes recession
US markets may decline at the open even as Europe's recovery finds a more solid footing.
U.S. equity futures dropped in early Wednesday trade despite a new report indicating that the eurozone has finally escaped the longest recession in the currency bloc's history. Also, a strong employment report in the U.K. boosted confidence that the global economy is starting to find its footing.
The eurozone economy grew 0.3% in the second quarter, outpacing economists' forecast of 0.2% growth and outpacing the first quarter's -0.2% reading. As of this first estimate, the eurozone is officially out of recession.
Germany's economy grew 0.7% in the second quarter, better than the estimated 0.6%, while France's economy grew 0.5% vs. the 0.2% expected. In all, only four eurozone nations contracted in the second quarter, including Spain and Italy.
The number of people claiming unemployment benefits in the U.K. fell faster than expected in July with 29,200 fewer people claiming benefits compared to the expected decline of 15,000. The unemployment rate was flat at 7.8%, in line with estimates.
The Bank of England released the minutes of the last Monetary Policy Committee meeting. The minute showed that the MPC voted 9-0 to keep the QE program flat and 8-1 to adopt forward guidance. In the minutes, most MPC members noted that short-term interest rates are not consistent with short-term economic projections.
S&P 500 futures fell 3.5 points to 1,687.30.
The EUR/USD was lower at 1.3249.
Spanish 10-year government bond yields were flat at 4.49%.
Italian 10-year government bond yields fell 1 basis point to 4.22%.
Gold rose 0.17% to $1,322.80 per ounce.
Asian shares rallied on thin volume as trading in Hong Kong was closed due to a typhoon. The Japanese Nikkei 225 Index rose 1.32% and the Topix Index gained 1.23%. In China, the Shanghai Composite Index fell 0.29% while the Korean Kospi gained 0.57% and Australian shares edged lower by 0.01%.
European shares were mixed following the multitude of economic data. The Spanish Ibex Index fell 0.28% and the Italian FTSE MIB Index declined 0.3%. Meanwhile, the German DAX rose 0.15% and the French CAC 40 Index gained 0.26% while U.K. shares dropped 0.24%.
Commodities were mixed overnight as oil sold off and silver rallied. WTI crude futures declined 0.3% to $106.51 per barrel and Brent crude futures fell 0.31% to $109.48 per barrel. Copper futures rose 0.17% to $332.25 per pound. Gold was higher and silver futures gained 0.57% to $21.47 per ounce.
Currency markets were rather quiet overnight as the dollar eked out a slight gain. The EUR/USD was lower at 1.3249 and the dollar was flat against the yen. Overall, the Dollar index gained 0.04% on strength against the Swiss franc, the euro, and the Canadian dollar despite weakness against the pound.
Earnings reported Tuesday
Key companies that reported earnings Tuesday include:
Brocade Communications (BRCD) reported third quarter earnings per share of $0.26 vs. $0.12 expected on revenue of $536.06 million vs. $518.85 million expected. The company also guided fourth quarter earnings per share and revenue above the Street.
Cree (CREE) reported fourth quarter earnings per share of $0.38, in line, on revenue of $375.0 million vs. $377.21 million expected. However, the company guided earnings per share and revenue for the first quarter below expectations.
JDS Uniphase (JDSU) reported fourth quarter earnings per share of $0.13, in line, on revenue of $421.3 million vs. $430.64 million expected. However, revenue guidance was weak for the first quarter.
Stocks moving in the premarket included:
Cree (NASDAQ: CREE) shares fell 15.52% premarket on the weak guidance for the first quarter.
Brocade Communications (BRCD) shares rose 16.52% premarket on the better than expected earnings and guidance.
J.C. Penney (JCP) shares rose 0.16% premarket a day after Bill Ackman announced that he was leaving the board of directors.
Notable companies expected to report earnings Wednesday include:
Cisco (CSCO) is expected to report fourth quarter earnings per share of $0.51 vs. $0.47 a year ago on revenue of $12.4 billion vs. $11.69 billion a year ago.
Deere and Co. (DE) is expected to report third quarter earnings per share of $2.16 vs. $1.98 a year ago on revenue of $9.28 billion vs. $8.93 billion.
Macy's (M) is expected to report second quarter earnings per share of $0.79 vs. $0.67 a year ago on revenue of $6.28 billion vs. $6.12 billion a year ago.
Silver Wheaton (SLW) is expected to report second quarter earnings per share of $0.26 vs. $0.40 a year ago on revenue of $194.17 million vs. $201.41 million a year ago.
Agilent Technologies (A) is expected to report third quarter earnings per share of $0.62 vs. $0.79 a year ago on revenue of $1.64 billion vs. $1.72 billion a year ago.
On the economics calendar Wednesday, MBA purchase applications are due out followed by two speeches by St. Louis Fed President James Bullard. Overnight, the British retail sales report is due out.
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