Cyprus bailout deal gives futures a lift
The last-minute $13 billion agreement lifted stocks in Asia and Europe, and it look set to do the same on Wall Street today.
U.S. equity futures rose in early premarket trade as Cyprus and the "troika" of eurozone creditors reached an agreement to bail out the nation with $13 billion in exchange for drastically reducing the size of its banking sector and freezing deposits greater than 100,000 euros. The plan does protect smaller deposits, most of which are held by Cypriot citizens and not by foreigners seeking a tax haven.
In other news, Moody's reiterated its negative view on French banks overnight by releasing a note in which it said they remained on negative watch. However, the agency did not downgrade any banks in its latest revisions. Moody's also commented on the Cyprus bailout, saying it didn't remove the risk of Cyprus exiting the euro and that the deal is credit-negative for all EU sovereigns.
Japanese Prime Minister Shinzo Abe is set to meet with European leaders this week, both to discuss the terms of the Cyprus bailout and to hash out a long-term trade deal with the EU.
- S&P 500 futures rose 5.8 points to 1,558.50.
- The EUR/USD was higher at 1.3013 but was well off session highs.
- Spanish 10-year government bond yields fell to 4.8% from 4.85%.
- Italian 10-year government bond yields fell to 4.45% from 4.53%.
- Gold fell 0.11% to $1,606.20 per ounce.
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Asian shares were mixed overnight despite the euphoria over the Cyprus bailout as Japanese shares popped and Chinese shares lagged. The Japanese Nikkei Index rose 1.69%, the Shanghai Composite Index fell 0.07% and the Hang Seng Index rose 0.61%. Also, the Korean Kospi rose 1.49%, and Australian shares rose 0.46%.
European shares were sharply higher in early trade following the Cyprus bailout as leaders averted another crisis. The Spanish Ibex Index rose 1.18%, and the Italian FTSE MIB Index rose 0.76%. Meanwhile, the German DAX gained 1.49%, the French CAC added 1.66% and U.K. shares rose 0.72%.
Commodities were mixed overnight as energy futures rose and metals futures declined. WTI crude futures rose 0.38% to $94.07 per barrel, and Brent crude futures rose 0.47% to $108.17 per barrel. Copper futures declined 0.17% on Chinese weakness to $346 per pound. Gold was lower, and silver futures rose 0.18% to $28.75 per ounce.
Currency markets were in flux overnight as the euro gained and the yen weakened in a clear risk-off manner overnight following the bailout deal in Cyprus. The EUR/USD was higher at 1.3013, and the dollar rose against the yen to 94.79. Overall, the Dollar Index fell 0.09% on weakness against the euro, the Canadian dollar and the Swiss franc.
Stocks moving in the premarket included:
- Sprint (S) shares rose 2.28% premarket after the company said it would hold a press conference in which it is rumored to announce new phones running Microsoft's (MSFT) Windows Mobile operating system.
- J.C. Penney (JCP) shares declined 1.81% on fears that spinning off assets into a REIT would not be enough to save the ailing retailer.
- Freeport-McMoRan (FCX) shares rose 1.33% after the Angolan government announced it was to reopen a railway between Congo and Zambia that would decrease the costs of shipping mined copper.
- Bank of America (BAC) shares rose 0.72% as financial stocks globally rallied on the Cyprus bailout.
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Notable companies expected to report earnings Monday include:
- Apollo Group (APOL) is expected to report fourth-quarter EPS of 18 cents vs. 58 cents a year ago.
- Dollar General (DG) is expected to report fourth-quarter EPS of 90 cents vs. 87 cents a year ago.
- JA Solar (JASO) is expected to report a fourth-quarter loss of $1.53 per share vs. a loss of 55 cents per share a year ago.
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On the economics calendar Monday, the Chicago Fed National Activity Index and the Dallas Fed Manufacturing Business Index are expected. Also, the Treasury is set to auction four-week and three-month bills. In addition, New York Fed President William Dudley is set to speak at the Economic Club of New York, and Chairman Ben Bernanke will speak alongside Bank of England Governor Mervyn King at the London School of Economics on lessons learned from the crisis.
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These hot movers could rise by double digits in coming months.
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