What’s the Story?

by CC July 9, 2012 9:23 am • Commentary


U.S. stock futures fell as rising Spanish bond yields and concerns about China’s slowing economy fed investor jitters ahead of the second-quarter earnings season…

…Shares of Alcoa AA -2.23% eased 0.2% in premarket trading. The blue-chip aluminum company is to report second-quarter results after the closing bell, marking the unofficial kick-off of the reporting season.

The economic calendar is relatively light, with only data on consumer credit in May due at 3 p.m. EDT.

European markets were mostly lower, with the Stoxx Europe 600 down 0.2%, as investors were skeptical that a Monday meeting of euro-zone finance ministers will make any progress in stabilizing the euro zone’s debt crisis.

Yields on Spain’s benchmark 10-year bond rose above 7%, a level than economists say is unsustainable, and Spain’s IBEX-35 stock index lost 0.6%.

Euro-zone finance ministers are discussing details on how to bail out the Spanish banking system, as well as the creation of a common regulator for the region’s banks.

Asian markets were broadly lower, led by the 2.4% tumble in China’s Shanghai Composite to a six-month low after Premier Wen Jiabao said over the weekend that there was “huge pressure” on the Chinese economy. Japan’s Nikkei Stock Average shed 1.4%.

Crude-oil futures gained 0.5% to $84.85 a barrel, while gold futures added 0.4% to $1584.90 an ounce. The U.S. dollar slipped against both the euro and the yen.


Spain’s bond yields have climbed to dangerously high levels again. European leaders tried to calm markets last month by agreeing on measures to reduce borrowing costs for Spain and Italy. But investors want details. The yield on Spain’s 10-year government bond fell early this month to 6.30% from 6.95% but has returned to nearly 7% — a level considered unsustainable.



Japan’s current-account surplus was the smallest for the month of May since at least 1985 and machinery orders fell the most in more than a decade.

The excess in the widest measure of trade shrank 63 percent from a year earlier to 215.1 billion yen ($2.7 billion), the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for a surplus of 493.1 billion yen. Machinery orders, an indicator of capital spending, fell 14.8 percent in May from the previous month, the Cabinet Office said, the biggest drop since 2001.


Amerigroup [AGP  64.34        ] – The managed care provider will be bought by rival WellPoint [WLP  59.91        ] for $92 a share, or $4.9 billion in cash. The deal represents a better than 40 percent premium over Friday’s closing price for Amerigroup.

FX Alliance [FX  15.70        ] – The provider of foreign-exchange trading platforms agreeing to be acquired by Thomson Reuters [TRI  28.47  —  UNCH    ] for $22 a share in cash. That represents a 40 percent premium over Friday’s closing price of $15.70.

Activision Blizzard [ATVI  12.04        ] – Multiple reports say Vivendi is interested in selling its 60 percent stake in the video game maker, a sale that reportedly could raise as much as $10 billion. Reuters reports that Time Warner [TWX  38.59  —  UNCH    ] and Microsoft [MSFT  30.185        ] could be among possible bidders.

Facebook [FB  31.73        ] – The company could see its $1 billion purchase of Instagram approved by the Federal Trade Commission by mid-August, according to the New York Post.

Yahoo [YHOO  15.78        ] – The company’s board will meet Wednesday to discuss the status of the company’s CEO search, according to CNBC’s Kayla Tausche. Interim CEO Ross Levinsohn is still considered the leading candidate for the permanent job, but it’s unclear if the board will make a final decision at that Wednesday meeting.

Sirius XM Radio [SIRI  2.045        ] – The satellite radio provider has raised its full-year subscriber and revenue guidance, now expecting 1.6 million net new subscribers and revenue approaching $3.4 billion.

Youku [YOKU  20.29        ] – JPMorgan Chase has begun coverage of the China-based online video company with a rating of “overweight.”

Visa [V  125.28        ], MasterCard [MA  441.63        ] – UBS has downgraded the stock of both credit-card companies to “sell” from “neutral.”

Wells Fargo [WFC  33.05        ] – Jefferies has started coverage of Wells Fargo with a “buy” rating and a $39 price target, saying the bank has above-average growth potential.