In the U.S.: Stock futures up on hope for central bank action

7 August 2012

ECB stimulus hopes set to boost markets for yet another day running.

Stock index futures edged higher on Tuesday, pointing to a third straight day of gains on Wall Street, bolstered by expectations the European Central Bank will act soon to contain the bloc’s credit crisis.

Spanish benchmark 10-year yields ticked down 3 basis points but were still near the unsustainable 7 percent level, underscoring the cautious tone in a market that has been previously disappointed by lack of coordination among euro zone officials.

Adding to expectations of central bank stimulus, Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a New York Times interview the Fed should expand its holdings of mortgage bonds and Treasury securities until it is satisfied with the health of the economy.

Investors are also betting a larger-than-expected fall in German industrial orders in June will underscore the importance of quick action from the ECB.

The softening data “is going to force the ECB to take action and is probably going to mean more Fed stimulus,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

“Feds are outlining a plan that they are leaning towards more stimulus. When you have Fed members openly say it, it is a good, educated guess that that is the road map they are laying out,” he said.

Equity markets have rallied since Friday on hopes the ECB will start buying Italian and Spanish debt in an effort to stabilize the bloc’s credit crisis and protect the euro, even as no details on the bank’s course of action have been made public.

European stock markets edged slightly higher .FTEU3, but were pressured by bank stocks. Standard Chartered (STAN.L) tumbled as much as 25.7 percent in London after New York’s top bank regulator threatened to remove the British lender’s state banking license for allegedly hiding billions of dollars worth of transactions linked to Iran.

A group of investors rescued Knight Capital Group (KCG.N) in a $400 million deal that kept the market maker in business, all but wiping out existing shareholders. Knight shares were up nearly 4 percent in premarket trading.

S&P 500 futures rose 5 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 29 points, and Nasdaq 100 futures added 14.5 points.

Pfizer (PFE.N) and Johnson & Johnson (JNJ.N) scrapped further studies of an anticipated experimental drug for Alzheimer’s disease after it failed in a second trial. U.S.-traded shares of their partner Elan Corp (ELN.N) dropped 11 percent in premarket trading. Pfizer shares fell 1.8 percent.

A massive fire that struck Monday at the core of Chevron’s (CVX.N) large Richmond, California, refinery was contained, but not extinguished, according to the company.

Fashion accessories maker Fossil Inc (FOSL.O) posted a higher quarterly profit on improved sales in its wholesale business And its shares jumped 16.2 percent premarket.

Stocks closed at three-month highs on Monday, extending last week’s rally on the hope for more assistance for the troubled euro zone.


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