Market Snapshot
Asia: Japan -1.2% to 19653. Hong Kong -0.3% to 27653. China +2.2% to 4288. India -0.8% to 28442.
Europe: London -0.5%. Paris -1.4%. Frankfurt -1.6%.
Futures: Dow -0.8%. S&P -0.8%. Nasdaq -1%. Crude -0.7% to $57.71. Gold +0.7% to $1205.90.
Ten-year Treasury Yield -2 bps to 1.88%
Economic News
8:30 Consumer Price Index
9:55 Consumer Sentiment
10:00 Leading Indicators
Key earnings before the open
CMA, FHN, GE, HON, RAI, STX, SYF
Markets
Equity futures are off their earlier lows, but still indicating a much lower open, as concerns over the ongoing Greek debacle along with new regulatory concerns out of China quickly spread throughout global markets overnight and sparked some rotation into safety.
Stock futures took a sharp dive overnight, with traders attributing the news to heavy selling of futures of H shares on Hong Kong’s Hang Seng index, which were last down nearly 6%. The move coincided with news that Chinese regulators will now allow fund managers to lend stocks for short selling. The new rules also will expand the number of stocks investors can short sell.
Also affecting global markets was an outage of Bloomberg terminals. Traders’ access to the terminals went down around the same time Asian markets closed at about 3:15 a.m. Eastern Time. The company says it is working to restore access to the Bloomberg Professional service, the company’s key product.
On the back of a string of soft U.S. economic data, the dollar hovers near a one-week low against a basket of major currencies and is on track for its biggest weekly drop in a month. The dollar index set a fresh one-week low this morning – down 1.8% so far this week. If U.S. consumer inflation data due later today also disappoints, it could reinforce the view the Fed will delay a rate hike in June and add further pressure against the dollar.
In a change of heart, the Federal Reserve will allow big U.S. banks to use some types of municipal bonds to meet new rules that ensure they have enough cash during a market meltdown. At issue is the treatment of municipal debt under new liquidity requirements, which call for large banks to hold enough “high-quality liquid assets” to fund their operations for 30 days.
German government bonds continued to break records this morning, buoyed by the ECB’s commitment to stimulus, coupled with investors’ appetite for low-risk assets amid growing concerns over Greece. In early trade, the yield on Germany’s 10-year bond slipped to 0.070%, breaking through Thursday’s all-time low. The yield on the country’s 30-year debt was just below half a percentage point.
Saudi Arabia will open its $530B stock market to foreign investments on June 15, giving international investors direct access to the Middle East’s largest economy. In 2008, Saudi Arabia began permitting foreign investors indirect access to the market through swaps, but is now looking to fully open the market as it pushes to diversify its petrodollar-dependent economy by boosting the private sector. The Saudi Tadawul Index is up 10% YTD.
Technical Comments
Is CNBC just fear-mongering again, or is there a correction ahead? A technical analyst told CNBC on Friday that he expects major global benchmarks to begin correcting over the next month. “I think the correction has started on the DAX, and the S&P 500 we are probably on the top today,” Yacine Kanoun, managing director at PivotHunters, a U.K.-based portfolio management company, said Friday. Kanoun expects the expiration of options contracts on Friday to kick off a correction, and he expects the S&P 500 to come down 10% from its current peak. He sees the DAX bottoming at 11,650.
Stocks
Hurt by a stronger dollar and the loss of several co-branded tie-ups, American Express (AXP) reported quarterly revenue that fell short of analysts’ estimates, dropping 2.7% to $7.95B vs. $8.2B consensus. AmEx recently ended its co-branded relationship with JetBlue (JBLU) and Costco (COST) in Canada, while its agreement with Costco in the U.S. is due to expire next March.
AMD (AMD) takes a hit In the premarket after the chipmaker announced a wider-than-expected first-quarter loss and missed revenue expectations. The company also announced it would exit its high-density server business. For the current quarter, the company forecast a revenue decrease of 3% Q/Q, implying a range of $970M-$1.03B and below a $1.13B consensus.
Lafarge (LFRGY) and Holcim (HCMLY) have given details regarding their asset disposals in the U.S., as part of their planned $44B merger due to close in July. Lafarge will sell its Davenport cement plant in Iowa and seven terminals along the Mississippi River to Summit Materials (SUM) for $450M in cash plus Summit’s Bettendorf, Iowa cement terminal. Holcim will dispose of three terminals in Michigan and Illinois, as well as slag grinding stations in Illinois and New Jersey.
Growth in emerging markets helped Nestle (NSRGY) beat expectations for organic sales last quarter, but strength in the Swiss franc kept a lid on overall revenues. The Swiss company reported 4.4% organic growth, ahead of estimates of 4.2%, but revenue of 20.92B Swiss francs ($21.86B) was slightly below expectations of 21.2B francs. With sales higher in all geographies, Nestle confirmed its full-year outlook for 5% organic growth this year.
Schlumberger (SLB) topped first-quarter earnings projections, although revenue missed. Excluding charges, the company booked a per-share profit of $1.06, beating estimates of $0.91, but down from $1.21 a year earlier. Blaming a decline in drilling activity, the company said it now plans to cut 11,000 more jobs in addition to the 9,000 job cuts announced in January.
Starting April 19, Verizon’s (VZ) FiOS service will offer new TV packages aimed at giving customers flexibility to purchase only certain groups of channels they want to watch. “While this is not all-the-way a la carte, customers have the ability to consolidate and collapse the kind of content they want to view,” announced President of Verizon FiOS Tami Erwin. FiOS’s cheapest plan will cost $55/month and include two channel packs, while each additional package (which can consist of 10-17 channels) will cost $10/month.
Volkswagen is expected to issue a statement today following a meeting of top executives on Thursday afternoon to discuss the leadership rift at the German automaker. Chairman Ferdinand Piech, who has spent almost 22 years leading VW (VLKAY) including nine as CEO, said last week he had “distanced” himself from CEO Martin Winterkorn, prompting a full-blown crisis in the company’s top management.