Market Primer: Futures Higher After Japanese Gains

Futures Higher After Japanese Gains
U.S. equity futures rose in early pre-market trade after Japanese stocks bounced back from a bear market overnight. The benchmark Nikkei 225 Index rose almost 5 percent overnight following better than expected economic data which points to a recovery being fueled by the non-traditional stimulus measures of the new regime.

Top News
In other news around the markets:

• China reported its trade balance for the month of May over the weekend, with the trade balance rising to $20.4 billion in May from $18.16 billion in April on expectations of a reading of $20.0 billion. An unexpected drop in imports masked slower than expected export growth in the month.
• China also reported weaker than expected inflation, lending, industrial production, and fixed asset investment data this weekend, while retail sales growth outpaced expectations and vehicle sales growth slowed.
• Japan's final reading for first quarter GDP rose to 1.0 percent quarterly growth from the prior estimate of 0.9 percent on expectations of a flat reading. On an annualized basis, the economy has grown 4.1 percent, better than expectations of 3.5 percent growth, which would have indicated a flat reading as well.
• Japan's seasonally adjusted current account surplus jumped unexpectedly in April to $8.64 billion vs. $3.85 billion expected and better than April's $3.47 billion in a sign that the devaluation of the yen is successfully boosting exports and leading to a recovery.
• S&P 500 futures rose 6.6 points to 1,645.20.
• The EUR/USD was marginally lower at 1.3214.
• Spanish 10-year government bond yields fell 3 basis points to 4.52 percent.
• Italian 10-year government bond yields fell 3 basis points to 4.16 percent.
• Gold fell 0.37 percent to $1,377.90 per ounce.

Asian Markets
Asian shares were mixed overnight as Japanese equities rallied sharply despite lackluster Chinese economic data. The Japanese Nikkei 225 Index closed higher by 4.94 percent, the largest one-day gain since March, and the Topix Index gained 5.21 percent. Also, the Korean Kospi gained 0.46 percent while Australian shares declined 0.91 percent.

European Markets
European shares were mixed in early trade led by German equities which now returned to the green over the past month following the move. The Spanish Ibex Index rose 0.1 percent and the Italian FTSE MIB Index fell 0.16 percent. Meanwhile, the German DAX rose 0.8 percent and the French CAC 40 dropped 0.02 percent as U.K. shares rose 0.02 percent.

Commodities
Commodities were mostly lower overnight following the renewed round of dollar strength led by declines in the yen and also on the weak China data from over the weekend. WTI Crude futures fell 0.29 percent to $95.75 per barrel and Brent Crude futures declined 0.25 percent to $104.50 per barrel. Copper futures dropped 1.16 percent to $323.05 per ounce. Gold was lower and silver futures fell 1.23 percent to $21.48 per ounce.

Currencies
Currency markets had one theme overnight, yen weakness, as the dollar gained over 1 percent against the Japanese currency. The EUR/USD was marginally lower at 1.3214 and the dollar gained against the yen to 98.70. Overall, the Dollar Index rose 0.26 percent on strength against the yen, the British pound, the Swiss franc, and slight strength against the euro. Notably, the Aussie dollar continued its string of declines, falling 0.76 percent against the U.S. dollar to 0.9425 after having made a fresh low of 0.9397.

Earnings Reported Yesterday
Key companies that reported earnings Friday include:

• JinkoSolar Holdings (JKS) reported a first quarter loss of $0.56 per share vs. a loss of $1.66 per share expected on revenue of $187.3 million vs. $168.25 million expected.

Pre-Market Movers
Stocks moving in the pre-market included:

• Cliffs Natural Resources (CLF) shares slipped 0.45 percent pre-market as the natural resources company declined weak data from China.
• 3M (MMM) shares gained 0.8 percent, extending Friday's 2.25 percent gain after Jefferies boosted its price target on the stock to $128 from $120 and maintained the stock at a buy.
• Salesforce.com (CRM) shares gained 0.48 percent pre-market, recouping some of the losses seen after announcing the acquisition of ExactTarget (ET) for $2.5 billion in cash. Analysts were out in defense of the stock following the drop early last week.

Earnings
Notable companies expected to report earnings Monday include:

• Annie's (BNNY) is expected to report fourth quarter EPS of $0.28 vs. $0.24.
• Diamond Foods (DMND) is expected to report a third quarter loss of $0.17 per share vs. a loss of $0.22 per share a year ago.
• Lululemon Athletica (LULU) is expected to report first quarter EPS of $0.30 vs. $0.32 a year ago.
• Navistar (NAV) is expected to report a second quarter loss of $1.20 per share vs. EPS of $0.67 a year ago.

Economics
On the economics calendar Monday, Canadian housing starts and the U.S. CB Employment Trends Index are due out followed by the TD Ameritrade Investor Movement Index. Also, the Fed's James Bullard is set to speak and the Treasury will hold its weekly 3- and 6-month bill auctions. Overnight, the Bank of Japan will update the markets on its current stimulus programs in its interest rate decision and accompanying policy statement.

BY Matthew Kanterman