Morning Market Update

 

 

Greece Approves Austerity Plan

US equities are higher in early action after the Greek Parliament voted in favor of its austerity plan, helping to pave the way for the debt-laden nation to receive the latest installment of aid from the eurozone bailout facility. Treasuries are mixed in morning trading following a report that showed mortgage applications declined and ahead of a read on pending home sales. Meanwhile, on the equity front, Family Dollar Stores posted higher profits, but short of what analysts were expecting and Bank of America has agreed to settle claims surrounding soured mortgages for $8.5 billion. Overseas, Asian stocks finished mostly higher on cautious optimism ahead of the Greek austerity vote and after Japan’s industrial production rose at its fastest clip in more than 50 years, while the European equity markets are moving higher, with Greece firmly in the green following the parliamentary approval for Prime Minister Papandreou’s austerity package and despite violent anti-austerity protests in the nation’s streets.

As of 9:09 a.m. ET, the September S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is 4 points above fair value, and the DJIA is 17 points above fair value. WTI crude oil is $1.12 higher at $94.01 per barrel, and the Bloomberg gold spot price is up $7.20 at $1,508.45 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 74.78.

Family Dollar Stores Inc. (FDO $53) reported 3Q EPS of $0.91, below the $0.95 consensus estimate of analysts surveyed by Reuters, as revenues during the quarter rose 7.8% to $2.15 billion, but also short of the $2.17 billion expected. Same-store sales—sales at stores open at least a year—grew 4.7% on strong sales of consumables and home products. The discount retailer said it expects EPS in a range of $0.62-0.70 for the current quarter, with analysts expecting $0.65 per share, but it lowered it full-year earnings estimate to between $3.08-3.16 per share from $3.13-3.23 per share.

Bank of America Corp. (BAC $11) announced that it has agreed to pay $8.5 billion to settle claims surrounding bad mortgages it acquired after its purchase of Countrywide Financial in 2008. The settlement will add to a 2Q loss of $0.88-0.93 per share, which includes a $2.6 billion impairment charge, and BAC said it will add $5.5 billion to a liability reserve fund for future loan-repurchase demands.

Mortgage applications fall, more housing data on tap

The MBA Mortgage Application Index declined 2.7% last week, after the index that can be quite volatile on a week-to-week basis, fell by 5.9% in the previous week. The decrease came as a 2.6% drop in the Refinance Index, was accompanied by a 3.0% decline in the Purchase Index. Elsewhere, the average 30-year mortgage rate fell by 11 basis points (bps) to 4.46%.

Treasuries are mixed following the mortgage application report, with the yield on the 2-year note flat at 0.47%, the 10-year note advancing 4 bps to 3.07%, and the 30-year bond rate is 1 bp higher at 4.33%.

Later this morning, the US economic calendar will yield the release of pending home sales, with the gauge of the pipeline of existing home sales expected to decline 1.0% m/m in April.

Europe gains as Greece approves austerity plan, financials leading

Equity markets in Europe are higher in afternoon action after the Parliament vote in Greece to approve a key austerity plan narrowly passed, a crucial step for the debt-laden nation to receive further financial aid to fulfill its near-term funding needs. Financials are leading the way and stocks in Greece are markedly higher following the vote with the help of a solid advance in shares of National Bank of Greece SA (NBG $1), despite violent public protests in the streets of the troubled nation. Elsewhere, Salvatore Ferragamo Spa jumped 8.5% in the Italian luxury shoemaker’s debut on the nation’s stock exchange.

In economic news in the region, eurozone economic confidence fell to its lowest level in eight moths, according to Bloomberg, but slightly above what was expected by economists’ expectations, as the overhang of Greece’s debt problems continued to sap sentiment. Elsewhere, France’s 1Q GDP was revised slightly lower to a 0.9% quarter-over-quarter (q/q) expansion from the 1.0% q/q growth that was previously reported and expected to remain, retail sales in Spain plunged on a year-over-year basis during the month of May and mortgage approvals in the UK ticked slightly higher in May, but below economists’ forecasts.

The UK FTSE 100 Index is 1.1% higher, France’s CAC-40 Index is up 1.4%, Germany’s DAX Index is increasing 1.4%, Italy’s FTSE MIB Index is gaining 2.2%, and Greece’s Athex Composite Index is advancing 2.7%.

Asia mostly higher following Japanese industrial production

Stocks in Asia finished mostly higher following the second-straight day of gains in the US yesterday and amid optimism that the Greek austerity vote will pass, helping the debt-troubled nation solve its short-term funding needs. Japan’s Nikkei 225 Index increased 1.5% to lead the way, aided by a better-than-expected report on the nation’s industrial output during May. Industrial production in the world’s third-largest economy jumped 5.7% m/m, above economists’ forecasts and at the fastest clip since 1953, as the country tries to slowly rebound from the devastating earthquake and tsunami it suffered in March. Meanwhile, basic materials and oil & gas issues helped Australian stocks post gains, with the S&P/ASX 200 Index rising 1.2%, while South Korea’s Kospi Index gained 1.5%. Elsewhere, India’s BSE Sensex 30 Index rose 1.1% after the nation’s government maintained its economic growth target. However, stocks in China finished lower, with the Hong Kong Hang Seng Index down 0.6% and the Shanghai Composite Index 1.1% lower after China’s leading index slowed slightly from the month prior.