Pre-Market Brief:
Market tone: Stocks called higher; euro and pound surge against the dollar; Treasurys lower; Nymex crude up 46c at $98.80; gold up at $1,724.0.
Overnight action: The EU has been unable to get backing for treaty changes from all 27 member-states. The UK blocked the creation of a new EU treaty.
Watch for: University of Michigan consumer confidence survey; Trade balance data.
Europe divided on Friday in a historic rift over building a closer fiscal union to preserve the euro, with an overwhelming majority of countries led by Germany and France agreeing to forge ahead with a separate treaty, leaving the EU’s third biggest economy Britain isolated.
The outcome of a two-day European Union summit left financial markets uncertain whether and when more decisive action would be taken to stem a debt crisis that began in Greece, spread to Portugal, Ireland, Italy and Spain and now threatens France and even economic powerhouse Germany.
A new treaty could take three months to negotiate and may require referendums in some countries. Two ECB sources told Reuters the European Central Bank would keep purchases of euro zone government bonds capped for now and not take extra action. Debt markets were wary. Interbank lending rates eased but Italian 10-year bond yields remained around 6.5 percent.
Twenty-six of the 27 EU leaders agreed to pursue tighter integration with stricter budget discipline in the single currency area, but Britain said it could not accept proposed EU treaty amendments after failing to secure concessions.
After 10 hours of talks that ran into the early hours of Friday, all 17 members of the euro zone and nine countries that aspire to join resolved to negotiate a new agreement alongside the EU treaty with a tougher deficit and debt regime to avoid a repetition of the debt crisis in future.
The nine non-euro states said they would consult their parliaments, where appropriate, on taking part in the process. After a long night of wrangling, Britain’s few allies melted away in the Brussels dawn.
“Not Europe, Brits divided. And they are outside of decision making. Europe is united,” Lithuanian President Dalia Grybauskaite said in blunt English.
Stocks to watch this morning include Texas Instruments, Altera and more.
Texas Instruments lowered its fourth-quarter guidance, citing broadly lower demand in all markets except for its wireless applications processor business. Shares dropped 4.7% to $28.51 premarket on the downbeat view.
Chip maker Altera slashed its already-downbeat guidance, calling for a sequential revenue decline of 13% to 16%. The company’s October view projected a drop of 7% to 11%, which would have delivered between $465 million and $485.9 million. Altera’s shares were recently off 4.2% at $33.98 premarket.
Credit rating agency Moody’s has downgraded France’s three big banks due to their difficulty borrowing money.
The agency cut Credit Agricole and BNP Paribas from Aa2 to Aa3, and Societe Generale from Aa3 to A1.
The move follows a previous rating cut by Moody’s for Credit Agricole and Societe Generale in September.
“Liquidity and funding conditions have deteriorated significantly” for each of the banks, Moody’s said, adding that the problem was likely to worsen.
“The probability that the bank will face further funding pressures has risen in line with the worsening European debt crisis,” the rating agency said of each of the three.
It also assigned a negative outlook to all three banks’ ratings, warning that it will continue to monitor the European bank debt markets, and would downgrade them again if conditions look set to worsen.