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Market Primer: Futures Flat On RBA Rate Cut, European Bank Earnings

Published 05/07/2013, 06:49 AM
Updated 05/14/2017, 06:45 AM
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Futures Flat Following RBA Rate Cut, European Bank Earnings

U.S. equity futures traded near flat following a surprise rate cut from the Reserve Bank of Australia while earnings from three of Europe's largest banks reported better than expected earnings. However, futures awaited key earnings from the U.S. pre-market for direction.

Top News
In other news around the markets:

  • The Reserve Bank of Australia cut its key rate to 2.75 percent from 3.00 percent, citing below trend growth in 2013, peaking resource sector investment, and inflation lower than expected. The Board noted that the exchange rate of the Australian dollar has remained high despite worsening economic conditions and that the Board decided to use some of its "scope" it mentioned at the previous meeting to cut rates should the data demand a cut.
  • HSBC (HBC), Societe Generale, and Credit Agricole, three of Europe's largest banks, all reported earnings overnight that beat expectations and boosted European markets.
  • Diageo (DEO) CEO Paul Walsh has stepped down and will be succeeded by COO Ivan Menezes in a move that was expected by markets, although will still come as a blow to shareholders as Walsh was responsible for spearheading the new growth strategy of the company over the past decade.
  • S&P 500 futures rose 0.9 points to 1,614.30.
  • The EUR/USD was flat at 1.3077.
  • Spanish 10-year government bond yields fell 4 basis points to 4.07 percent.
  • Italian 10-year government bond yields fell 4 basis points to 3.88 percent.
  • Gold fell 0.48 percent to $1,461.00 per ounce.
Asian Markets

Asian shares were mostly tepid save for the Japanese Nikkei Index which opened for the first time following key events including the European Central Bank rate cut and the stronger than expected U.S. Non-Farm Payrolls Report. The Japanese Nikkei Index rose 3.55 percent while the Shanghai Composite Index gained 0.2 percent and the Hang Seng Index rose 0.58 percent. Also, the Korean Kospi fell 0.36 percent and Australian shares fell 0.24 percent.

European Markets
European shares rose following the stronger than expected bank earnings from around the continent. The Spanish Ibex Index rose 0.61 percent and the Italian FTSE MIB Index rose 1.08 percent. Meanwhile, the German DAX gained 0.53 percent and the French CAC 40 rose 0.33 percent while U.K. shares added 0.27 percent.

Commodities
Commodities were mostly lower overnight, reversing the previous few days of gains. WTI Crude futures fell 0.48 percent to $95.70 per barrel and Brent Crude futures declined 0.44 percent to $105.00 per barrel. Copper futures rose 0.14 percent to $331.50 per pound. Gold was lower and silver futures declined 0.79 percent to $23.77 per ounce.

Currencies
Currency markets were rather quiet overnight save for the Australian dollar which plummeted following the unexpected RBA rate cut. The EUR/USD was flat at 1.3077 and the dollar fell against the yen to 99.21. Overall, the Dollar Index was flat on strength against the Swiss franc and weakness against the yen. Notably, the Australian dollar declined 0.84 percent against the greenback to 1.0168 while it lost 1.03 percent against the yen to 100.8010.

Earnings Reported Yesterday
Key companies that reported earnings Monday include:

  • First Solar (FSLR) reported first quarter EPS of $0.69 vs. $0.75 expected on revenue of $755.0 million vs. $752.26 million expected.
  • Norwegian Cruise Line Holdings (NCLH) reported first quarter EPS of $0.06 vs. $0.03 on revenue of $527.6 million vs. $523.8 million.
  • Scotts Miracle Grow (SMG) reported second quarter EPS of $1.60 vs. $2.00.
  • Medallion Financial Corp. (TAXI) reported first quarter EPS of $0.30 vs. $0.27.
  • Vornado Realty Trust (VNO) reported first quarter EPS of $1.14 vs. $1.89.
Pre-Market Movers

Stocks moving in the pre-market included:

  • Diageo (DEO) shares fell 0.14 percent pre-market following the management shake up.
  • HSBC (HBC) shares rose 2.19 percent pre-market following its earnings beat this morning.
  • Berkshire Hathaway (BRK-A) (BRK-B) shares rose 1.36 percent following its earnings beat last Friday and comments from CEO Warren Buffett that spoke to the strength of the company.
  • Cliff's Natural Resources (CLF) shares rose 3.28 percent pre-market after gaining 5.52 percent Monday after an upgrade to outperform at FBR Capital.
Earnings

Notable companies expected to report earnings Tuesday include:

  • Acadia Pharmaceuticals (ACAD) is expected to report a first quarter loss of $0.08 per share vs. a loss of $0.12 per share a year ago.
  • BMC Software (BMC) is expected to report first quarter EPS of $0.93 vs. $0.74 a day after the company signed a definitive pact to go private to a consortium of financial buyers.
  • Discovery Communications A (DISCA) is expected to report first quarter EPS of $0.68 vs. $0.57 a year ago.
  • DirecTV (DTV) is expected to report first quarter EPS of $1.08 vs. $1.07 a year ago.
  • Molson Coors Brewing Co. (TAP) is expected to report first quarter EPS of $0.34 vs. $0.47 a year ago.
  • TripAdvisor (TRIP) is expected to report first quarter EPS of $0.46 vs. $0.38 a year ago.
Economics

On the economics calendar Tuesday, weekly chain store sales and the Redbook are due out followed by consumer credit data. Also, the Treasury is set to auction 4-week and 3-year notes. Overnight, the Chinese Trade Balance and German Industrial Production Data are expected.

BY Matthew Kanterman

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