Markets This Morning (DJ Morning Briefing)
SNAPSHOT
Stocks set to gain; Treasurys steady; dollar lower; Nymex crude higher at $83.91/bbl; gold higher at $1,170.10/oz
Watch for: Jobless Claims at 0830 ET; Geithner testimony at 1430 ET; earnings ExxonMobil, ConocoPhillips, Procter & Gamble, Burger King
OPENING CALL
Stocks are expected to open higher Wednesday as investors shrug off sovereign debt issues in the euro-zone and look to the earnings calendar for support following a slew of positive European releases.
"The U.S. markets have weathered the Greek situation well and investors still have an appetite for stocks," said David Jones at U.K. spreadbettor IG Index. "Earnings season has been positive and if it continues the recent trend we will have a good day."
EQUITIES
In M&A news, German utility company E.ON (EOAN.XE) agreed to sell its regulated U.S. electricity and natural gas business to PPL (PPL) for $7.63 billion.
With the acquisition, PPL will add two utilities in Kentucky supplying more than 1.2 million customers as it increases focus on the less risky, utility side of its business. PPL was down 7.13% in Frankfurt at 0501 ET.
Setting a high bar for its debut in the advertising business, Apple (AAPL) aims to charge close to $1 million for ads on its mobile devices this year and perhaps even more to be among the first, ad executives say.
Apple is hitting the road to showcase its new mobile-device advertising capability, dubbed iAd, and has indicated it could charge as much as $10 million to be part of a handful of marketers at the launch, a person familiar with the matter told the Wall Street Journal. Ad executives say they are used to paying between $100,000 and $200,000 for similar mobile deals. Apple stock was flat in Frankfurt at 0524 ET.
Citigroup (C) Chief Executive Vikram Pandit said it was understandable that Americans were angry at the financial world but that Citi was undergoing a "process of soul searching," was committed to clients, and was supporting financial reform to help stop the market from falling into the same traps.
In a speech at Columbia University on Wednesday night, Pandit said the unemployment rate, high foreclosures and the economic slump were all fueling anger directed at his industry and he understood why. And he continued, as he has recently, to call for a new global order for regulation and increased transparency.
"They're hurt and they're angry, and much of that anger has been directed at the financial-services industry," Pandit said of Americans. "And I don't blame them." Citigroup was up 0.8% in Frankfurt at 0522 ET.
The SEC in recent weeks has questioned executives of a little-known firm that played a key role in the business of arranging mortgage investments, as part of the agency's probe into now-controversial deals struck at the height of the housing bubble.
GSC Group was one of several firms that helped banks including Goldman Sachs (GS) put together deals that allowed investors to bet on the housing market. The New Jersey investment firm turned down Goldman's request to select assets for the debt deal at the center of the agency's fraud lawsuit against Goldman, according to a person familiar with the matter and an email released by a Senate subcommittee this week. The concern: The deal was too risky for investors, according to the person and the email. Goldman was up 0.13% in Frankfurt at 0504 ET.
BONDS
Treasurys were steady in London trading as niggling concerns over sovereign finances in peripheral euro zone countries continued to support safe havens in general. Treasury prices had fallen Wednesday after the Federal Reserve presented a favorable assessment of the economy while holding rates near zero.
The Treasury will auction $32 billion of 7-year notes later Thursday, wrapping up this week's record $129 billion debt supply. Chicago Fed's national activity index and weekly jobless claims are the highlights of the economic calendar, while Geithner's testimony before a Senate panel will be keenly watched. The new 2-year note was unchanged at 99 30+/32 to yield 1.024%%, the 10-year was up at 98 31+/32 to yield 3.750%, with the 30-year bond up at 100 03+/32, yielding 4.617%.
CORPORATE BONDS
Spreads on European corporate credit derivatives indexes tightened in early trading Thursday as market sentiment improved slightly following news that the International Monetary Fund and European Union rescue package for Greece could now total up to EUR120 billion over three years.
FOREX
The euro rebounded slightly in Europe Thursday, helped by a small improvement in global market sentiment, but the currency remains vulnerable to continuing negotiations over Greece's debt rescue package.
he improved sentiment came largely from the Federal Reserve's upbeat statement on the U.S. economy and its decision to leave policy unchanged for "an extended period."
Nevertheless, focus remains on the negotiations for Greece's rescue plan, which according to some officials, could now amount to EUR100 billion over the next three years.
Some analysts are speculating that pressure from U.S. President Barack Obama for an early resolution, expressed in a phone call to German Chancellor Angela Merkel earlier this week, could mean that details of a package could emerge as soon as this weekend. However, it is evident that investors remain wary of celebrating too soon. While the euro may have rebounded from its one-year low at $1.3114, it is hardly racing ahead.
By 05920 ET, the dollar fell to Y94.04 from Y94.11 and to CHF1.0833 from CHF1.0856, while the pound rallied to $1.5221 from $1.5192.
COMMODITIES
Oil futures were firmer Thursday, reversing earlier losses, amid rising equity markets and a slightly stronger euro versus the dollar.
"Basically, some risk appetite is returning," said Michael Hewson, analyst at CMC Capital. But the markets are staying within an $80-$87/bbl range, he noted, with concerns about an overhang of supplies capping gains.
Spot gold traded higher in Europe on steady safe haven demand for the metal, and any dips are likely to be bought, said a senior trader in London. "With what's going on at the moment, I don't think [gold's] going to back off far." The trader tipped $1,175/oz as the next resistance target for gold in dollar-terms. "If we get above $1,175, the all-time high [of $1,226.30/oz] is back in play."
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