Stock Futures Rise As German Court Signs Off On ESM
Stock futures were signaling a stronger open on Wall Street Wednesday with investor sentiment getting a boost from the decision by Germany’s Federal Constitutional Court to throw out the request for an injunction against the European Stability Mechanism bailout fund.
While ruling in favor of the ESM, the court also imposed conditions whereby German liability on the fund should not rise beyond €190 billion without parliamentary approval.
“Beyond this soft cap, the court is clear that political decisions on European integration and crisis management have to be taken by democratically elected people, which is a very soft stance as there seems to be nothing in terms of constitutional constraints on further integration,” said Chris Walker, a strategist at UBS. “It is probably the most market-friendly outcome investors could have hoped for.”
“Focus will now shift to Thursday’s FOMC meeting.”
Futures for the Dow Jones Industrial Average were rising 55 points, or 32.64 points above fair value, at 13,348. Futures for the S&P 500 were up more than 7 points, or 4.94 points above fair value, at 1438. Futures for the Nasdaq were rising more than 16 points, or 11.31 points above fair value, at 2796.
The ESM can now be formally approved soon; the ESM’s first board meeting is expected in October.
The FTSE in London was rising 0.22% on Wednesday, while the DAX in Germany was gaining 0.87%. The Hong Kong Hang Seng index settled up 1.10% and the Nikkei in Japan closed ahead by 1.73%.
“The ruling simply removed a near term item that was more speed bump than hurdle,” commented Dan Greenhaus, chief global strategist at BTIG. “The constraints specified by the court aside, what matters for U.S. investors is less clear.”
Investors were also eagerly awaiting the Federal Reserve’s policy announcement Thursday after the two-day meeting that kicks off Wednesday. Investors expect to hear more about how the central bank plans to shore up the economy.
The major U.S. equity indices closed higher Tuesday amid optimism about the likelihood of a pledge for additional stimulus arriving from the Fed.
“It is our view the Fed will extend its current zero interest policy language from late 2014 to mid 2015,” said Craig Bishop, head of U.S. Fixed Income Strategies at RBC Wealth Management. “The Fed has been targeting 0.00%-0.25% for its benchmark overnight rate since December 2008.”
“We feel the Fed will extend this target to mid-2015. We also believe that because economic growth in the U.S. remains weak and employment growth is very weak that they will implement another round of Large Scale Asset Purchases, better known to the markets as Quantitative Easing. This is being called QE3.”
Bishop said he thinks the Fed is least likely to change its Interest on Excess Reserves (IOER) policy or take no action at all.
The Census Bureau is set to provide wholesale inventories data for July at 10 a.m. EDT. A rise of 0.3% is expected after a decline of 0.2% in June.
The Bureau of Labor Statistics is scheduled to release import and export prices for August at 8:30 a.m.
The benchmark 10-year Treasury was down 10/32 Tuesday, lifting the yield to 1.741%. The greenback was falling 0.36%, according to the dollar index.
October crude oil futures were rising 69 cents at $97.86 a barrel and December gold futures were surging $12.40 at $1,747.30 an ounce.
On the corporate front, Apple (AAPL) holds a big media event in San Francisco Wednesday where it’s widely expected the tech giant will launch the iPhone 5.
Texas Instruments (TXN), the chipmaker, on Tuesday maintained the top end of its earnings outlook for its fiscal third quarter.
Facebook (FB) CEO Mark Zuckerberg said he was disappointed in the performance of the social networking giant’s stocks since its IPO at an appearance at a media conference in San Francisco on Tuesday.
Zuckerberg also disclosed the company wasn’t building a Facebook phone, saying that “building a phone is the wrong strategy for us.
Ford’s (F) board is expected this week to discuss a succession plan for CEO Alan Mulally, who is expected to retire by the end of 2013, according to Bloomberg, which cited a person familiar with the matter.
via The Street