Futures higher on Italian bond auction
Bryan McCormick | [email protected]
Italy's borrowing costs hit a new euro-era record today, with a 3-year bond offering yielding 7.89 percent. Demand at the auction however was strong, which helped send bonds, the euro, and equities higher. Poland's foreign minister Radoslaw Sikorski also called on Germany to save the euro, which he said that only Germany could do.
Asian markets also posted gains in the overnight session, with the exception of India's Sensex. It fell less than 1 percent after a plan to allow foreign direct investment in its retail sector was viewed as too restrictive.
Ratings agencies were back in the spotlight after a story in business newspaper La Tribune stated that Standard & Poor's would lower France's AAA credit rating within 10 days. While there was no confirmation of the report, it did initially send equity prices lower.
A credit downgrade would potentially hurt the country's ability to support a leveraging of the EFSF bailout fund because France is a key guarantor. Moody's also said it may cut the subordinated debt of 87 banks in the euro zone on worries that their debt-laden governments won't be able to bail them out.
Europe was not the only target for potential rating actions. Fitch lowered its outlook on the U.S. to negative and gave Washington until 2013 to enact a credible debt-reduction plan, or face a possible loss of its AAA rating.
In currency markets the euro, Swedish krona, and Swiss franc climbed against the U.S. dollar. All currencies in the U.S. dollar index basket were stronger against the greenback. The weaker dollar was having only a moderate impact on commodity prices.
Energy, most agricultural products, and industrial metals enjoyed a small bounce as well. Copper gained 0.50 percent, while gold was flat and silver fell by more than 1 percent.
In stock specific news, AMR, the parent of American Airlines, filed for Chapter 11 bankruptcy protection after failing to win concessions from unions. Tiffany fell sharply in pre-market action, last down 7 percent, after forecasting earnings in the current quarter of $1.48 to $1.58 per share. Estimates for this quarter were seen at $1.63.
Yahoo shares are trading up over 2 percent in the pre-market after a story in the Wall Street Journal suggested that Netscape founder Marc Andreessen might consider a leadership role in Yahoo as part of his joint bid for the company with partner Silver Lake.
In forthcoming S&P 500 earnings, H&R Block, and Kroger are set to report on Thursday. Big Lots will release its results on Friday.