Futures flat on China, Italy
China's manufacturing PMI comes in below expectations, and Italy's president spooks markets with resignation talk.
U.S. equity futures slipped slightly in early premarket trade and were near flat before Wall Street opened Monday as China's economy took a small setback in March and Italy's political crisis flared over the weekend. China's manufacturing sector grew slower than expected last month, with the official China manufacturing PMI rising to 50.9 in March from 50.1 in February versus expectations of a reading of 52. Also, the HSBC China manufacturing purchasing managers index (PMI) for March ticked down to 51.6 from 51.7 in February against expectations of a reading of 51.7.
In other news around the markets, Italy's political crisis revived over the weekend as President Giorgio Napolitano threatened to step down from office early, only to later backtrack on the comments. Should he resign early, it could disrupt the most likely needed next round of elections in Italy.
Cyprus President Nicos Anastasiades could be thrust to the center of the crisis in the near future as new reports surfaced that his in-laws transferred 21 million euros out of the country just days before the country's banks were shuttered.
HSBC Chief Economist Paul Bloxham, in comments on Australia, said he sees the easing cycle as over and that markets could even see rate hikes from the Royal Bank of Australia as early as fourth-quarter 2013. This would be bullish for the Australian dollar and is a bullish signal for the global economy, considering Australia's ties to China economically.
- S&P 500 futures fell 2.5 points to 1,560.00.
- The EUR/USD was lower at 1.2816.
- Spanish 10-year government bond yields were flat at 5.06%.
- Italian 10-year government bond yields were flat at 4.76%.
- Gold rose 0.12% to $1,598.00 per ounce.
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Asian shares were lower overnight on economic data from both China, with the weaker-than-expected manufacturing PMI, and Japan, with the Tanken Industry Surveys showing weakness as well. The Japanese Nikkei Index fell 2.12%, and the Shanghai Composite Index declined 0.1%. Also, the Korean Kospi lost 0.44%.
European shares were closed Monday for the Easter Monday holiday.
Commodities were lower overnight on global growth fears following the weak Asian data. WTI crude futures declined 0.46% to $96.75 per barrel, and Brent crude futures fell 0.33% to $109.66 per barrel. Copper futures fell 1.43% overnight to $334.95 per pound following weakness in Chinese equities. Gold was higher, and silver futures fell 1.14% to $27.98 per ounce.
Currency markets were mostly flat overnight save for the yen crosses, which saw massive yen strength overnight on fears that easing hopes may not be producing results. The EUR/USD was lower at 1.2816, and the dollar fell against the yen to 93.55. Overall, the Dollar Index declined 0.07% on weakness against the yen, the pound and the Canadian dollar. Notably, the major yen crosses all fell below 0.7% in an otherwise quiet market.
Stocks moving in the premarket included:
- Coca-Cola (KO) shares rose 0.4% premarket on positive comments from a Motley Fool post highlighting the stock as a favorite of Warren Buffett.
- General Mills (GIS) shares fell 0.63% on fears of inflating supply costs as commodities guru Jim Rodgers sees strong inflation in the near future in grains and agricultural commodities.
- Pfizer (PFE) shares rose 0.14% premarket after last week's European Commission approval of a new leukemia drug called BOSULIF.
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Notable companies expected to report earnings Monday include:
- Cal-Maine Foods (CALM) is expected to report third-quarter EPS of $1.40 vs. $1.09 a year ago.
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On the economics calendar Monday, motor vehicle sales data will be released throughout the day as well as the Markit U.S. PMI this morning. Also, the ISM manufacturing PMI is expected to be released, and construction spending data will also be reported. In addition, the Treasury is set to auction 4-week, 3-month, and 6-month bills. Overnight, Australia's RBA will release its interest rate decision, and Spanish unemployment and eurozone manufacturing PMI will 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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