As of 8:52 a.m. ET, the September S&P 500 Index Globex future is 20 points above fair value, the Nasdaq 100 Index is 41 points above fair value, and the DJIA is 174 points above fair value. WTI crude oil is $1.32 higher at $83.73 per barrel, and the Bloomberg gold spot price is up $11.42 at $1,863.50 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 73.91.
A more than two-week strike at Dow member Verizon Communications Inc. (VZ $35), impacting 45,000 workers has ended, but the labor contract continues to be negotiated, as they reached an accord to work under the expired contract until a new labor agreement is reached. A VZ spokesperson said “both sides were making progress on local and regional issues,” and the Wall Street Journal reported that the unions said they decided to return to work because they had succeeded in getting VZ to take their concerns seriously and negotiate more equitably at the bargaining table.
In M&A news, Dollar Thrifty Automotive Group Inc. (DTG $62) asked Hertz Global Holdings Inc. (HTZ $10) and Avis Budget Group Inc. (CAR $12), which already have issued competing bids to acquire DTG, to submit their “best and final definitive proposals” by early October. DTG said it believes that it is time to ascertain whether a transaction can be accomplished with HTZ and CAR or another party that is in the best interests of the company and its shareholders. DTG requested the takeover offer as it believes HTZ and CAR are both “well positioned to complete the regulatory process in a manner that would permit a combination to be completed with limited economic impact.”
GDP and Fed’s Jackson Hole gathering headline economic calendar this week
Treasuries are lower in early trading as there are no major US reports scheduled for today’s economic calendar, with the yield on the 2-year note up 1 bp to 0.20%, the yield on the 10-year note 5 bps higher at 2.12%, and the 30-year bond rate rising 2 bps to 3.41%.
This week’s economic focus will likely begin with preliminary August PMI readings overseas, while the US will takeover late in the week with Thursday’s read on weekly initial jobless claims kicking things off, forecasted to decline slightly to 405,000, while Friday will bring the first revision to US 2Q GDP and the Federal Reserve’s annual gathering.
After the very disappointing first reading, traders may look to see the extent of revisions in the second reading of 2Q gross domestic product (GDP), due out on Friday. The consensus of a Bloomberg survey of economists expects 2Q GDP to be revised lower to a quarter-over-quarter (q/q) annualized rate of 1.1% growth from 1.3%, after inching ahead by 0.4% in 1Q. The largest component of GDP, personal consumption, is expected to be revised higher to 0.2% from the initially reported 0.1%, after advancing 2.1% in 1Q. The inflation readings are expected to be unrevised at a 2.3% rise for the GDP Price Index, and 2.1% for the core PCE Index, which excludes food and energy.
However, the main focus for the market is likely to be on Friday’s speech at the Federal Reserve’s annual gathering in Jackson Hole, Wyoming, by Fed Chair Bernanke at 10:00 am EST. Bernanke first hinted at QE2 at last year’s meeting, and investors may be wondering if central banks will pursue more accommodative policies with market volatility, weak economic data and a continued crisis of confidence in Europe potentially threatening economic growth.
Other releases on this week’s US economic calendar include: new home sales, the Richmond Fed Manufacturing Index, the MBA Mortgage Applications Index, durable goods orders, and the final University of Michigan Consumer Sentiment Index reading for August.
Europe rebounding from recent slide
European equity markets are solidly higher in afternoon action, with oil & gas stocks leading the way on optimism regarding an end to the civil war in Libya as opposition forces have entered the capital city of Tripoli and are making headway in forcing out Muammar Qaddafi. Meanwhile, financials are also gaining ground but are lagging behind as concerns about the eurozone contagion crisis remain, with German Chancellor Angela Merkel further dampening expectations of the creation of a Eurobond in the near-term. Merkel noted in an interview that bringing in Eurobonds at this time would further undermine economic stability, per Bloomberg. Meanwhile, traders are awaiting Friday’s speech in Jackson Hole, Wyoming, from US Federal Reserve Chairman Ben Bernanke, looking for any signs of further stimulus efforts amid the growing concerns about the possibility of a return to a recession.
Also, European Central Bank President Trichet is expected to speak at the Fed’s annual gathering on Saturday at 12:25 pm EST, and traders will likely be looking for any comments by the ECB chief indicating how committed the central bank is to buying sovereign debt to help stabilize the financial markets until the European Financial Stability Facility (EFSF) is ratified and can take over. There were no major European economic reports released today, but tomorrow, we will get a plethora of PMI data in Europe, depicting manufacturing activity across the pond amid the backdrop of increasing eurozone recession worries.
The UK FTSE 100 Index is 2.2% higher, France’s CAC-40 Index is gaining 2.5%, and Germany’s DAX Index is rising 1.4%.
Asia under pressure again, South Korea extends sell-off
Stocks in Asia finished mostly lower to begin the week with concerns about the eurozone debt crisis and worries about a recession in the US and Europe continuing to hamper sentiment. South Korea’s Kospi Index fell 2.0%, extending the sharp sell-off the equity markets have seen recently, led by solid weakness in oil & gas stocks and auto-related issues. Meanwhile, Japan’s Nikkei 225 Index declined 1.0%, Australia’s S&P/ASX 200 Index decreased 0.5%, and China’s Shanghai Composite Index fell 0.7%.
The UK FTSE 100 Index is 2.2% higher, France’s CAC-40 Index is gaining 2.5%, and Germany’s DAX Index is rising 1.4%.
Asia under pressure again, South Korea extends sell-off
Stocks in Asia finished mostly lower to begin the week with concerns about the eurozone debt crisis and worries about a recession in the US and Europe continuing to hamper sentiment. South Korea’s Kospi Index fell 2.0%, extending the sharp sell-off the equity markets have seen recently, led by solid weakness in oil & gas stocks and auto-related issues. Meanwhile, Japan’s Nikkei 225 Index declined 1.0%, Australia’s S&P/ASX 200 Index decreased 0.5%, and China’s Shanghai Composite Index fell 0.7%.
Elsewhere, Thailand’s SET Index inched 0.1% lower, as some late-day resiliency pared a large portion of losses that followed a report that showed the nation’s 2Q GDP unexpectedly contracted, declining by 0.2% q/q, after expanding by 2.0% in 1Q. However, Hong Kong’s Hang Seng Index rose 0.5%, aided by strength in telecommunications stocks, and India’s BSE Sensex 30 Index gained 1.2%, with oil & gas issues rising solidly to offset weakness in technology-related equities. In other economic news, Hong Kong’s consumer prices rose 7.9% year-over-year (y/y) in July—the fastest pace since 1995—compared to the 8.2% increase that was estimated, and an acceleration from the 5.6% y/y gain that was seen in June. The data was released after the closing bell in Hong Kong.
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