Futures flat ahead of a wave of earnings reports
China reports a slew of economic data as investors await US economic reports.
U.S. equity futures were effectively flat in early Thursday trading as China reported a slew of economic data indicating that the recent slowdown in the growth of its economy may have begun to bottom a few months ago.
China reported that home prices fell 1.3% in September from August, slower than the rate of a 1.4% decline in August. Also, Chinese GDP for the third quarter was grew 7.4%, in line with economist expectations, but below the second quarter's growth rate of 7.6% year-over-year.
Meanwhile, industrial production, a leading indicator for growth, was surprisingly strong, rising 9.2% in September as compared to a year ago, and higher than estimates of a 9.0% rise. It was also stronger than August's 8.9% increase. Chinese retail sales, too, rose in September a strong 14% year-over-year as compared to estimates of a 13.2%, which was the same as the previous reading.
Finally, Chinese fixed asset investment rose 20.5% as compared to a year ago on estimates of a 20.2% rise and growing faster than the August reading of 20.2%.
- Standard and Poor's managing director Kraemer reportedly said that further downgrades of European sovereign credits are to be expected, especially as leaders fall into a complacency trap and do not act quick enough to tackle the crisis.
- Pimco expects the U.S. to get downgraded again should the nation goes over the fiscal cliff, which would enact billions in spending cuts and tax increases, pushing it into recession.
- Spanish banks' bad loan percentage rose to 10.5% in August from 9.9% in July, putting further strains on its already troubled banking sector. On Wednesday, it was reported that Italy saw continued capital flight, showing the weakness of the banking sector in peripheral nations.
- Spain sold a total of 4.614 billion euros of bonds, with the 10-year auction pricing with a yield of 5.458%, below the previous auction's 5.666%, and with a bid-to-cover ratio of 1.88 from 2.5 previously.
- S&P 500 futures were flat at 1,456.00.
- The EUR/USD was higher at 1.3126.
- Spanish 10-year government bond yields were lower at 5.401%.
- Italian 10-year government bond yields fell to 4.763%.
- Gold fell 0.25% to $1,748.70 per ounce.
Commodities were mixed in early trade with energy outperforming the sector. WTI Crude futures rose 0.04% to $92.16 per barrel, and Brent Crude futures rose 0.16% to $113.40 per barrel. Copper futures were higher after the China data, rising 0.09% to $375.15 per pound. Gold was lower and silver futures fell 0.22% to $33.16 per ounce.
Currency markets continued to show broad euro strength but even more so Aussie dollar strength following the strong Chinese data. The EUR/USD was higher in overnight trade and the dollar was higher against the yen, rising above 79.
On Wednesday, the Financial Times circulated a report that the Bank of Japan is considering pegging the USD/JPY to weaken the currency in a similar manner that the Swiss National Bank did with the EUR/CHF at 85. Notably, the EUR/AUD fell back near 1.26 as the Aussie rallied broadly, including gains against the U.S. dollar, the Canadian dollar, the Japanese yen, and the New Zealand dollar.
- Verizon Communications (VZ) rose 0.56% pre-market, ahead of its earnings release.
- Clearwire Corporation (CLWR) fell 0.44% in the pre-market despite Standard and Poor's maintaining its credit rating.
- Shares of Apollo Group (APOL) rose 0.14% in the pre-market after falling over 22% Wednesday after it slashed guidance for the rest of the year.
- Morgan Stanley (MS) fell 0.49% ahead of its earnings release.
- Advanced Micro Devices (AMD) is expected to report third quarter earnings of $0.01 vs. $0.15 a year ago.
- The Blackstone Group (BX) is expected to report third quarter earnings per share of $0.41 vs. a loss of $0.31 per share a year ago.
- Chipotle Mexican Grill (CMG) is expected to report third quarter earnings per share of $2.30 vs. $1.90 a year ago.
- E-trade Financial (ETFC) is expected to report third quarter earnings per share of $0.08 vs. $0.16 a year ago.
- Google (GOOG) is expected to report third quarter earnings per share of $10.58 vs. $9.72 a year ago.
- Microsoft (MSFT) is expected to to report third quarter earnings per share of $0.56 vs. $0.68 a year ago.
- Morgan Stanley (MS) is expected to report third quarter earnings per share of $0.24 vs. $1.14 a year ago.
- Southwest Airlines (LUV) is expected to report third quarter earnings per share of $0.13 vs. $0.15 a year ago.
- Travelers Corp. (TRV) is expected to report third quarter earnings per share of $1.49 vs. $0.79 a year ago.
- Verizon Communications (VZ) is expected to report third quarter earnings per share of $0.65 vs. $0.56 a year ago.
On the economic calendar Thursday, weekly jobless claims are due out as well as the Philadelphia's Fed's Regional Activity Index and the Conference Board's Leading Indicators. Also, the Treasury is set to sell $7 billion of 30-year TIPS at 1 p.m. ET and the EIA natural gas report is due out as well.
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