Futures indicate lower open on imminent cliff

With less than 24 hours until the deadline, talks are still ongoing in Washington and investors brace for the worse.

By Benzinga Dec 31, 2012 9:16AM
zurbar age fotostockU.S. equity futures were higher but the futures fair value was lower, indicating a lower open for Wall Street Monday. Late Friday, futures crashed as investors feared that politicians were heading into the weekend with neither a deal nor a framework for such an agreement. As of this writing, there are about 18 hours until the fiscal cliff.

In other news, in an attempt to devalue the yen, Japanese authorities may spur trade agreements with G20 nations and push for massive devaluations. These attempts would be in contrast to 2009 agreements between G20 nations, where they pledged not to devalue their own currencies intentionally. As economist Nouriel Roubini wrote on twitter, global trade is a zero sum game; some win, some lose.

Two key members of the European Central Bank, Jens Weidmann and Jorg Asmussen, spoke late Sunday and warned that the key causes of the debt crisis have not been cured and that complacency risks another crisis shock. The speeches were very gloomy on the European economy.

France's Constitutional Council has rejected the 75% upper income tax bracket, thus sending the French fiscal situation into turmoil. Part of President Francois Hollande's plan to close the deficit was to tax the rich at high tax rates however now this seems unlikely and cuts will have to come from elsewhere.
  • S&P 500 futures rose 4.5 points to 1,388.50.
  • The EUR/USD was lower at 1.3189.
  • Spanish 10-year government bond yields rose to 5.265%.
  • Italian 10-year government bond yields fell to 4.497%.
  • Gold 0.53% to $1,664.70 per ounce as going over the fiscal cliff most likely means more QE from the Fed.

Asian markets
Asian shares were mixed overnight with strength in China and Japan offset by weakness in Australia and Hong Kong. The Japanese Nikkei Index rose 0.7% in Tokyo trading while the Shanghai Composite Index rose 1.61% on positive manufacturing data while Hong Kong shares slipped 0.04%. In addition, the Korean Kospi rose 0.49% as weak inflation data signaled more room for monetary easing and Australian shares dropped 0.48%.

European markets
European shares were mostly lower on fiscal cliff fears in early Monday trade. The Spanish Ibex Index fell 0.43% and the Italian MIB Index fell 0.43%, leading peripheral shares lower. Meanwhile, the German DAX fell 0.57% while the French CAC rose 0.37% and U.K. shares fell 0.41%.

Commodities
Commodities were mixed overnight as weakness in the energy complex was offset by strength in metals. WTI crude futures fell 0.09% to $90.72 per barrel and Brent crude futures fell 0.37% to $110.21 per barrel. Copper futures rose on the positive HSBC China Manufacturing PMI, which rose to 51.5 in December from 50.5 in November; copper futures rose 0.68% to $361.40 per pound. Gold was higher and silver futures rose 0.53% to $30.14 per ounce.

Currencies
Currency markets showed broad euro weakness overnight as fiscal cliff fears sent investors to the safety of the dollar. The EUR/USD was lower at 1.3189 and the dollar rose against the yen to 86.11. Overall, the Dollar Index rose 0.13% on strength against the euro, the yen, and the Swiss franc. The notable mover is the EUR/GBP cross, falling 0.35% to 0.8152 as the pair is stalling out at strong neckline resistance on the one-year chart.

Pre-market movers
Stocks moving in the premarket included:
  • Bank of America (BAC) shares fell 0.97% premarket along with other financials as the fiscal cliff looms.
  • Apache (APA) shares fell 0.58% premarket as oil prices fell ahead of the fiscal cliff.
  • Nokia (NOK) shares fell 0.52% premarket along with other European companies listed in the U.S. as European shares fell on fiscal cliff fears and also on fears of the European economy's health.
Earnings
No notable companies are expected to report earnings Monday.

Economics
On the economics calendar Monday, the Dallas Fed Manufacturing Survey is due out at 10:30 a.m. ET. Overnight, the official Chinese Manufacturing PMI for December is due out, and early Wednesday, European manufacturing PMI's from the major countries as well as the pan-European manufacturing PMI are expected.

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1Comment
Dec 31, 2012 10:20AM
avatar

Obama's lack of Leadership and Laziness will take us over the cliff.

 

He continues to demand tax increases, and the House has said NO CHANCE repeatedly, until he presents a BALANCED budget  with 1 trillion in cuts this year, 10 trillion over 10 years.

 

He refuses to cut a dime, and INSISTS on raising taxes.  He can sign the House passed W tax cuts anytime he wants.

 

But wait till he demands we raise his credit limit.  This is just the beginning.  We will hit the debt ceiling within 10 days.  There will be NO increase in the Debt ceiling either.   Obama the Lazy, has done ZERO work since the election.   He has not proposed anything of substance.  He just continues to want to SPEND, BORROW, TAX and PRINT...  Are you democrats stupid enough to believe that is the road to prosperity?  

 

We know the 47% will always VOTE for the guy that says they can contionue to pay ZERO.   But if taxes go up they MUST go up on EVERYONE, especially those that pay ZERO now.  We shall see if they like PAYING for Obamanomices, or just want SOMEONE else to pay for it...

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