Futures lower on weak European growth data
US market are set for a flat open ahead of several economic reports, including manufacturing, housing and inflation figures.
U.S. equity futures were lower in early premarket trade following a weaker than expected GDP report from the eurozone for the first quarter. GDP contracted by 0.2% on a quarterly basis, up from a 0.6% in the previous quarter, but missed forecasts of a 0.1% contraction. Weakness was notable in Germany, France and Italy, with the annualized rate of growth of Germany dropping to -1.4% vs. a 0.2% growth forecast.
In other news, the U.K. had fewer people claim unemployment benefits in April than expected, a positive sign for the labor market as the unemployment rate fell. The claimant count change in the U.K. fell by 7,300 people vs. a forecast decline of 3,000. The unemployment rate unexpectedly declined by one percentage point to 7.8%. However, most of the drop was due to people leaving the labor force.
The Bank of England issued an upbeat forecast for the U.K. economy in its latest inflation report, the last of Governor Mervyn King's tenure at the BOE. The BOE forecasts that the U.K. will grow 0.5% in the second quarter with growth accelerating to 1.7% in the second quarter of 2014 and 2.2% in the same period of 2015. Notably, the BOE mentioned that it sees the effects of the financial crisis finally easing.
Wal-Mart (WMT) has refused to sign a new safety pact for its suppliers in Bangladesh but has announced that it will increase inspections in the country in the wake of the disaster that left numerous workers dead and more injured.
S&P 500 futures fell 3.7 points to 1,644.30.
The EUR/USD was lower at 1.2887.
Spanish 10-year government bond yields rose 2 basis points to 4.37%.
Italian 10-year government bond yields rose 5 basis points to 4.06%.
Gold fell 0.95% to $1,410.90 per ounce.
Asian shares were mostly higher overnight save for Australia following mixed trading on Wall Street. The Nikkei crossed the 15,000 level for the first time since 2008 as the yen continued to devalue. The Japanese Nikkei gained 2.29% and the Shanghai Composite Index rose 1.96% while the Hang Seng Index added 0.5%. Also, the Korean Kospi rose 0.12% while Australian shares declined 0.56%.
European shares were mixed in early trade following the weaker than expected GDP data from the eurozone and the BOE's quarterly inflation report. The Spanish Ibex Index rose 0.55% and the Italian FTSE MIB Index declined 0.02%. Meanwhile, the German DAX fell 0.1% and the French CAC 40 declined 0.23% while U.K. shares shed 0.21%.
Commodities were weaker overnight as the dollar continued to strengthen following the eurozone GDP data. WTI crude futures fell sharply by 0.72% to $93.53 and Brent crude futures declined 0.32% to $102.27. Copper futures shed 1.09% to $325.20 per pound on continued fears that the Australian mining boom has peaked. Gold was lower and silver futures fell 1.9% to $22.94 per ounce.
Currency markets were in flux overnight as the dollar reigned, especially against the euro. The EUR/USD was lower at 1.2886 and the dollar rose against the yen to 102.44 after failing to hold above 102.50. Overall, the Dollar Index rose 0.28% on strength against the euro, the Swiss franc, the Canadian dollar, and the yen.
Earnings reported Tuesday
Key companies that reported earnings Tuesday include:
Valspar Corp. (VAL) reported second quarter earnings per share of $0.91 vs. $0.91 expected on revenue of $1.03 billion vs. $1.05 billion expected.
VOXX International (VOXX) reported fourth quarter earnings per share of $0.43 vs. $0.19 expected.
Stocks moving in the premarket included:
The Gap (GPS) shares rose 1.2% premarket after Stephen Mandel's Lone Pine reported an increased stake in the company, and the stock was raised to 'buy' vs. 'neutral' at Citi.
Apple (AAPL) shares declined 0.42% premarket after falling 2.39% Tuesday following reports that France wants to place a tax on smartphones and tablets.
Sony (SNE) shares gave back 1.49% of the gains from Tuesday premarket following reports that Dan Loeb wants to restructure the company to boost value.
Notable companies expected to report earnings Wednesday include:
Arctic Cat (ACAT) is expected report a fourth quarter loss of $0.40 vs. a loss of $0.49 a year ago.
Cisco (CSCO) is expected to report third quarter earnings per share of $0.49 vs. $0.48 a year ago.
Deere and Co. (DE) is expected to report second quarter earnings per share of $2.72 vs. $2.61 a year ago.
Macy's (M) is expected to report first quarter earnings per share of $0.53 vs. $0.43 a year ago.
Sketchers (SKX) is expected to report first quarter earnings per share of $0.19 vs. a loss of $0.07 per share a year ago.
On the economics calendar Wednesday, MBA purchase applications, producer prices, and the Empire State manufacturing index are due out. Also, TIC flows, industrial production, the NAHB housing price index, and E-Commerce retail sales are expected. Overnight, Japanese GDP, Chinese FDI data, and French nonfarm payrolls are due out.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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