Futures lower on Chinese data, Fed tapering fears
Still ahead Monday are April retail sales and business inventories.
By Matthew Kanterman
U.S. equity futures were lower in early premarket trade following some weak economic data out of China and on the heels of an article fromT he Wall Street Journal's Jon Hilsenrath about the Federal Reserve. Hilsenrath wrote that the Fed is now considering the methodology of its exit strategy -- that is, reversing its current easing policies. The real question is when to start tapering asset purchases.
In other news, China reported weaker than expected industrial production and fixed asset investment for April. Industrial production rose 9.3% from the same period a year ago, better than March's 8.9% but below forecasts of a reading of 9.5%. Also, fixed asset investment grew 20.6%, slower than March's 20.9% growth and below forecasts of 21% growth.
Carlo Cottarelli, the head of the International Monetary Fund's fiscal affairs division, said that Italy and Germany have completed most of their fiscal adjustments while France still has room to go.
Japan once again got the green light on its easing programs from the G7, sending the USD/JPY through the 102 level initially before retreating back below the level.
S&P 500 futures fell 6.3 points to 1,623.30.
The EUR/USD was lower at 1.2969.
Spanish 10-year government bond yields fell 1 basis point to 4.20%.
Italian 10-year government bond yields rose 1 basis point to 3.91%.
Gold fell 0.32% to $1,432.00 per ounce.
Asian shares were mixed overnight as Japanese shares led and Chinese shares lagged. The Japanese Nikkei Index rose 1.2% while the Shanghai Composite Index fell 0.22% and the Hang Seng Index lost 1.42%. Also, the Korean Kospi rose 0.2% while Australian shares rose 0.08%.
European shares were lower this morning as bond spreads crept higher, while the euro weakened. The Spanish Ibex Index fell 1.39% and the Italian FTSE MIB Index fell 1.00%. Meanwhile, the German DAX declined 0.59% and the French CAC 40 lost 0.29% while U.K. shares fell 0.29%.
Commodities were lower overnight as the dollar continued to strengthen, following moves from late last week. WTI crude futures fell 0.9% to $95.18 per barrel and Brent crude futures fell 0.71% to $103.17 per barrel. Copper futures rose 0.07% to $335.55 per pound on hopes that China has bottomed. Gold was lower and silver futures declined 0.18% to $23.62 per ounce.
Currency markets continued to show dollar strength overnight despite the yen erasing its losses against the greenback. The EUR/USD was lower at 1.2969 and the dollar rose against the yen to 101.64. Overall, the Dollar Index rose 0.09% on strength against the Canadian dollar, the euro, the Swiss franc, the pound and the yen. Notably, the Australian dollar continued to weaken overnight against the greenback, falling to 0.9960 through parity.
Earnings reported Friday
Key companies that reported earnings Friday include:
Horizon Pharmaceutical (HZNP) reported a first quarter loss of $0.03 per shares vs. a loss of $0.35 loss per share expected on revenue of $9.17 million vs. $9.47 million expected.
Lufkin Industries (LUFK) reported first quarter earnings per share of $0.56 vs. $0.47 expected on revenue of $318 million vs. $300.47 million expected.
Stocks moving in the premarket included:
Corning (GLW) shares rose 1.32% premarket as the company was selected to provide a new fiber optic cable line between Atlanta and Miami.
Raytheon (RTN) shares fell 5.52% premarket after the shares hit a 52-week high on Friday on news that the company received a new $50 million Air Force contract.
Carnival Corp. (CCL) shares declined 1.91% premarket on news that 2 passenger went overboard unnoticed off the coast of Australia.
Newmont Mining (NEM) shares fell 1.27% premarket on weaker gold prices.
Notable companies expected to report earnings Monday include:
Interoil (IOC) is expected to report a first quarter loss of $0.12 vs. earnings per share of $0.19 a year ago.
Renren (RENN) is expected to report a first quarter loss of $0.07 per shares vs. a loss of $0.03 per share a year ago.
Take-Two Interactive (TTWO) is expected to report first quarter earnings per share of $0.23 vs. a loss of $0.60 per share a year ago.
On the economics calendar Monday, monthly retail sales and business inventories are the only key data points to be released. Also, the Treasury is set to auction three- and six-month bills. Overnight, German inflation and the German ZEW Economic Sentiment Index are both expected to be released.
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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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