Futures Creep Higher Despite Korean Tensions, Weak Payrolls
U.S. equity futures crept higher in early pre-market trade Monday despite North Korea increasing rhetoric over a missile test and following Friday's much weaker than expected Non-Farm Payrolls report. It is widely expected that North Korea will test a missile, one that had been reported as being moved to launch centers last week, in a show of strength.
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In other news around the markets:
- The Bank of Japan announced it is to purchase 1 trillion yen of 5- to 10-year Japanese government bonds ($10 billion) and 200 billion yen ($2 billion) of bonds with maturity greater than 10-years this week. Overall, the BoJ's announced purchases are nearly on par with the size of the Fed's rate, however for an economy nearly a third of the size.
- German Chancellor Angela Merkel and Russian Prime Minister Vladimir Putin spoke together on the Cyprus bailout, reiterating the fact that Cyprus' bailout/bail-in is not a template for future crises.
- The Bank of Japan also formally received the authorization to purchase ETF's and REIT's as part of its increased easing efforts.
- S&P 500 futures rose 3.6 points to 1,549.60.
- The EUR/USD was higher at 1.3005.
- Spanish 10-year government bond yields fell to 4.7 percent from 4.73 percent. Also notably, the 2-year bond yield fell below two percent for the first time since October 2010.
- Italian 10-year government bond yields fell to 4.3 percent from 4.38 percent.
- Gold rose 0.06 percent to $1,578.30.
Asian shares were mixed overnight as shares popped on increased BoJ stimulus despite weakness in other markets. The Japanese Nikkei Index rose 2.8 percent as the Shanghai Composite Index fell 0.62 percent and the Hang Seng Index declined 0.04 percent. Also, the Korean Kospi dropped 0.44 percent and Australian shares added 0.29 percent.
European shares were higher overnight despite fears over Portugal's finances as the euro gained. The Spanish Ibex Index rose 0.34 percent and the Italian FTSE MIB Index gained 0.51 percent. Meanwhile, the German DAX rose 0.34 percent and the French CAC added 0.68 percent while U.K. shares gained 0.33 percent.
Commodities were higher overnight following weakness Friday on the weaker than expected economic data. WTI Crude futures rose 0.76 percent to $93.43 per barrel and Brent Crude futures rose 0.85 percent to $105.11 per barrel. Copper futures rose 0.78 percent pre-market to $337.05 per pound after briefly touching a 2013 low last week on supply fears. Gold was higher and silver futures were flat at $27.24 per ounce.
Currency markets were in flux as the yen continued its move lower against all major pairs, dropping more than 1 percent against most major partners. The EUR/USD was higher at 1.3005 and the dollar gained against the yen to 98.60, or 1.06 percent. Overall, the Dollar Index rose 0.17 percent on strength against the yen, the Canadian dollar, and the Swiss franc. Notably, the yen also lost 1.17 percent against the euro and 1.09 percent against the Australian dollar.
Stocks moving in the pre-market included:
- EMC Corp. (NYSE:EMC) shares fell 1.47 percent on fears that government spending reductions will continue to hurt the company.
- Carnival Corporation (NYSE:CCL) shares fell 1.04 percent pre-market after the ship that broke down in the Gulf of Mexico broke away from the dock during repairs with workers still on board.
Notable companies expected to report earnings Monday include:
- A. Shulman Inc. (NASDAQ:SHLM) is expected to report second quarter EPS of $0.40 vs. $0.38 a year ago.
- Market bell-wheather Alcoa (NYSE:AA) is expected to report first quarter EPS of $0.10 vs. $0.10 a year ago.
- Pep Boys (NYSE:PBY) is expected to report fourth quarter EPS of $0.05 vs. a loss of $0.06 a year ago.
On the economics calendar Monday, the TD Ameritrade Investor Movement Index is expected to be released and the Treasury is set to auction 4-week, 3-, and 6-month bills. Also, Fed Chairman Ben Bernanke is expected to speak at 7:15 pm. Overnight, Chinese inflation data and British industrial production could move markets.
Good luck and good trading.
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