EmailThe continuing crisis in Cyprus and a terrible economic number for the euro-zone have pushed S&P futures lower this morning, despite an upbeat report on new claims for unemployment benefits.
There is no resolution in sight to the banking crisis in Cyprus. The European Central Bank has informed Cyprus that it will supply emergency funds only through Monday unless a deal is reached with the European Union and International Monetary Fund.
Two problems exist. First, Cypriots are strongly opposed to the bailout as currently structured. Second, German Chancellor Angela Merkel has seen a bump in her approval due to her strong stance towards Cyprus. Someone has to take a hit, whether it be debtors, Cypriots themselves, or European Union taxpayers. There will be a lot of hard negotiating over the weekend and it could end up ugly. Cyprus is small, but the terms of a compromise could have significant implications for other European debtor nations.
Of more direct economic relevance is the extremely disappointing Markit Purchasing Managers Survey (PMI) for the euro-zone. The March level of 46.5 reflects not only significant contraction, but also a worsening from the 47.9 February reading. Even the German manufacturing reading dipped below 50. The recession in Europe deepened in the fourth quarter, and now it looks like the first quarter could be even worse. The survey was taken before the Cyprus crisis exploded.
New claims for unemployment for the week ended March 16 rose slightly to 336,000 from a revised 334,000 the prior week. This was below expectations of a 345,000 level, however, and claims are at a level that suggests solid nonfarm payroll gains. This is a good economic number.
At 10:00 ET today data on existing home sales, the Leading Indicators Index, and the Philadelphia Fed index on regional manufacturing will all be released. Oracle stock is down over 7% after a disappointing earnings report.
Asian stock markets were mostly higher, but European stock indices are lower across the board because of the Cyprus situation. That is also the main drag on US stocks ahead of the open.
