U.S. equity futures rose in early pre-market trade as Cyprus and the Troika of 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 thousand euros. The plan does protect smaller deposits, most of which are held by Cypriot citizens and not by foreigners seeking a tax haven.
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In other news around the markets:
- Moody's reiterated its negative view on French banks overnight by releasing a note in which it reiterated that French banks 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 that the bailout does not remove the risk of Cyprus exiting the euro from the table and 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 but also in order 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 of the session highs.
- Spanish 10-year government bond yields fell to 4.8 percent from 4.85 percent.
- Italian 10-year government bond yields fell to 4.45 percent from 4.53 percent.
- Gold fell 0.11 percent to $1,606.20 per ounce.
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 percent and the Shanghai Composite Index fell 0.07 percent while the Hang Seng Index rose 0.61 percent. Also, the Korean Kospi rose 1.49 percent and Australian shares rose 0.46 percent.
European Markets
European shares were sharply higher in early trade following the Cyprus bailout as leaders averted another crisis. The Spanish Ibex Index rose 1.18 percent and the Italian FTSE MIB Index rose 0.76 percent. Meanwhile, the German DAX gained 1.49 percent and the French CAC added 1.66 percent while U.K. shares rose 0.72 percent.
Commodities
Commodities were mixed overnight as energy futures rose and metals futures declined. WTI Crude futures rose 0.38 percent to $94.07 per barrel and Brent Crude futures rose 0.47 percent to $108.17 per barrel. Copper futures declined 0.17 percent on Chinese weakness to $346.00 per pound. Gold was lower and silver futures rose 0.18 percent to $28.75 per ounce.
Currencies
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 percent on weakness against the euro, the Canadian dollar, and the Swiss franc.
Pre-Market Movers
Stocks moving in the pre-market included:
- Sprint (S) shares rose 2.28 percent pre-market after the company announced 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 percent pre-market on fears that spinning off company assets into a REIT would not be enough to save the ailing retailer.
- Freeport-McMoRan Copper and Gold (FCX) shares rose 1.33 percent pre-market after the Angolan government announced it was to reopen a railway between Congo and Zambia which would decrease the costs of shipping mined copper.
- Bank of America (BAC) shares rose 0.72 percent pre-market as financial stocks globally rallied on the Cyprus bailout.
Notable companies expected to report earnings Monday include:
- Apollo Group (APOL) is expected to report fourth quarter EPS of $0.18 vs. $0.58 a year ago.
- Dollar General (DG) is expected to report fourth quarter EPS of $0.90 vs. $0.87 a year ago.
- JA Solar (JASO) is expected to report a fourth quarter loss of $1.53 per share vs. a loss of $0.55 per share a year ago.
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 is set to speak alongside Bank of England Governor Mervyn King at the London School of Economics on lessons learned from the crisis. Overnight, Reserve bank of Australia Governor Glenn Stevens is set to speak.
BY Matthew Kanterman