Futures tip higher despite Korean tensions
Investors also appear ready to put Friday's disappointing US employment report behind them, as earnings season gets started.
U.S. equity futures crept higher in early premarket trade Monday despite North Korea's increasingly threatening rhetoric over a missile test and following Friday's much-weaker-than-expected payroll report. It's widely expected that North Korea will test-fire a missile, one that had been reported as being moved to launch centers last week, in a show of strength.
In other news around the markets, the Bank of Japan announced that this week it will purchase 1 trillion yen of 5- to 10-year Japanese government bonds ($10 billion) and 200 billion yen ($2 billion) of bonds with maturity greater than 10-years. Overall, the BoJ's announced purchases are nearly on par with the size of the Fed's, however for an economy only about one-third of the size.
The Bank of Japan also formally received the authorization to purchase exchange-traded funds and real estate investment trusts as part of its increased easing efforts.
German Chancellor Angela Merkel and Russian Prime Minister Vladimir Putin spoke together on the Cyprus bailout, reiterating the fact that Cyprus' bailout/bail-in is not a template for future crises.
- S&P 500 futures rose 3.6 points to 1,549.60.
- The EUR/USD was higher at 1.3005.
- Spanish 10-year government bond yields fell to 4.7% from 4.73%. Also notably, the 2-year bond yield fell below 2%for the first time since October 2010.
- Italian 10-year government bond yields fell to 4.3% from 4.38%.
- Gold rose 0.06% to $1,578.30.
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Asian trading was mixed overnight as shares popped on increased BoJ stimulus despite weakness in other markets. The Japanese Nikkei Index rose 2.8%, the Shanghai Composite Index fell 0.62% and the Hang Seng Index declined 0.04%. Also, the Korean Kospi dropped 0.44%, and Australian shares added 0.29%.
European shares were higher overnight despite fears over Portugal's finances as the euro gained. The Spanish Ibex Index rose 0.34%, and the Italian FTSE MIB Index gained 0.51%. Meanwhile, the German DAX rose 0.34%, the French CAC added 0.68% and U.K. shares gained 0.33%.
Commodities were higher overnight following a slump on Friday on the weaker-than-expected economic data. WTI crude futures rose 0.76% to $93.43 per barrel, and Brent crude futures rose 0.85% to $105.11 per barrel. Copper futures rose 0.78% premarket to $337.05 per pound after briefly touching a 2013 low last week on supply fears. Gold was higher, and silver futures were flat at $27.24 per ounce.
Currency markets were in flux as the yen continued its move lower against all major pairs, dropping more than 1% against most major partners. The EUR/USD was higher at 1.3005, and the dollar gained against the yen to 98.60, or 1.06%. Overall, the Dollar Index rose 0.17% on strength against the yen, the Canadian dollar and the Swiss franc. Notably, the yen also lost 1.17% against the euro and 1.09% against the Australian dollar.
Stocks moving in the premarket included:
- EMC (EMC) shares fell 1.47% on fears that government spending reductions will continue to hurt the company.
- Carnival (CCL) shares fell 1.04% premarket after the ship that broke down in the Gulf of Mexico broke away from the dock during repairs with workers still on board.
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Notable companies expected to report earnings Monday include:
- A. Shulman (SHLM) is expected to report second-quarter EPS of 40 cents vs. 38 cents a year ago.
- Market bellwhether Alcoa (AA) is expected to report first quarter EPS of 10 cents, flat with 10 cents a year ago.
- Pep Boys (PBY) is expected to report fourth-quarter EPS of 5 cents vs. a loss of 6 cents a year ago.
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On the economics calendar Monday, the TD Ameritrade Investor Movement Index is expected to be released, and the U.S. Treasury is set to auction 4-week, 3-month and 6-month bills. Also, Fed Chairman Ben Bernanke is expected to speak at 7:15 pm. Overnight, Chinese inflation data and British industrial production could move markets.
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