Futures sharply lower on Cyprus bailout deal
US markets are set for a lower open on concerns over the terms of the Cypriot rescue, especially the bank deposit levy.
U.S. equity futures were sharply lower in early premarket trade Monday after EU leaders agreed to help fund a bailout of Cyprus. The deal however, penalizes savers in the country by taxing their bank deposits. The EU leaders want to impose a percentage levy on the deposits in exchange for the bailout.
In other news, Chinese Premier Li, having just assumed office, said he expects a 7.5% growth rate through 2020, as his predecessor did. Economists seem reluctant to take officials seriously in forecasting growth since estimates differ from those of the government.
Chinese home prices rose 1.1% February, or 2.2% from a year ago, fueling concerns of a property bubble in China and increasing the likelihood that the People's Bank of China would need to tighten policy. The data marks the seventh monthly increase in the past eight months.
The loan period for the bailout packages for both Ireland and Portugal were extended by EU leaders, as they were with Greece, in a sign of good faith as the two countries have taken strong steps in implementing austerity measures.
- S&P 500 futures fell 13.3 points to 1,540.30.
- The EUR/USD was lower at 1.2956.
- Spanish 10-year government bond yields rose rose 11 basis points to 5.03%, crossing back above the dreaded 5% level.
- Italian 10-year government bond yields rose 8 basis points to 4.67%.
- Gold rose 0.68% to $1,603.40 per ounce.
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Asian shares were weak overnight on both the Cyprus bailout news threatening depositors and also on the negative news out of China. The Japanese Nikkei Index fell 2.71% and the Shanghai Composite Index fell 1.68% while the Hang Seng Index declined 2.00%. Also, the Korean Kospi fell 0.92% and Australian shares declined 2.05%.
European shares traded lower but off of session lows as financials led stocks lower following the bailout of Cyprus. The Spanish Ibex Index fell 2.00% and the Italian FTSE MIB Index fell 2.22% both led lower by banks. Meanwhile, the German DAX declined 0.96% and the French CAC fell 1.13% while U.K. shares declined 0.76%.
Commodities were lower overnight on global growth fears resulting from the negative Chinese home data as well as the confidence shock from the Cyprus bailout. WTI crude futures fell 0.92% to $92.59 per barrel and Brent crude futures declined 1.1% to $108.61 per barrel. Copper futures declined 2.2% to $344.30 per pound. Gold was higher and silver futures declined 0.16% to $28.82 per ounce.
Currency markets were in broad risk-off mode as investors fled to the safe-haven currencies in the dollar and the yen and sold the euro. The EUR/USD was nearly 1% lower at 1.2956 and the dollar fell against the yen to 95.00. Overall, the Dollar Index rose 0.4% on strength against the euro, the Swiss franc, and the Canadian dollar. The Australian dollar was also sharply lower overnight on global growth fears and the EUR/JPY was a big mover, declining 1.2% overnight.
Stocks moving in the premarket included:
- Citigroup (C) shares fell 2.79% premarket as banks globally declined following the Cyprus bailout.
- Alcoa (AA) shares fell 2.67% premarket after steel prices declined on Chinese tightening fears.
- Kimberly Clark (KMB) shares fell 1.68% premarket on fears that global sales could slow in the face of global economic headwinds.
- Carnival (CCL) shares declined 3.58% premarket following analysts' negative comments about the company's new pricing policies.
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Notable companies expected to report earnings Monday include:
- Focus Media (FMCN) is expected to report fourth quarter earnings per share of $0.72 vs. $0.70 a year ago.
- Horizon Pharmaceuticals (HZNP) is expected to report a fourth quarter loss of $0.47 per share vs. a loss of $.097 per share a year ago.
- Kior (KIOR) is expected to report a fourth quarter loss of $0.32 per share vs. a loss of $0.15 per share a year ago.
- Micron Technology (MU) is expected to report a second quarter loss of $0.20 per share vs. a loss of $0.29 per share a year ago.
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On the economics calendar Monday, the NAHB housing market index is expected to be released and the Treasury is set to auction three- and six-month bills. Overnight, Italian industrial production and the German ZEW Economic Sentiment Index could move markets.
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