EmailThe S&P futures are catching a bid this morning as global markets have settled down. Nothing has actually been settled, though, so this rebound effort could simply be a case of quarter-end settlement activity. At the moment, the S&P 500 is indicated to open about 0.6% higher, matching the percentage decline on Wednesday.
The upside bias is being attributed largely to the strong gains in China's Shanghai Composite, which jumped 2.6%. That rally was allegedly spearheaded by speculation that Chinese authorities might take steps to boost the market. We have since learned that, after China's close, authorities merely announced new rules pertaining to the securities and futures markets, but nothing that could be construed as an attempt to boost prices artificially.
We'll have to see how the Shanghai trades in the coming session since the impetus for Thursday's rally did not measure up to speculative expectations.
On a related note, there are other reports noting that China's central bank made its largest weekly cash injection ever into the money market. That was more of a housekeeping maneuver, though, as the central bank is aiming to ensure there is adequate liquidity ahead of an upcoming week-long holiday.
More germane to the story surrounding China, and the global economy, is that the country's largest listed steelmaker announced it was suspending production at a 3 mln metric tons-a-year plant on account of weak demand. Like most things these days, this fundamental story was overshadowed by the hope that equity prices would be lifted by an artificial stimulus.
Moving on, European bourses have also waged a rebound effort with Spain's debt market cooling off. The yield on its 10-year debt has dipped 9 bps to 5.91% ahead of the government's announcement of its 2013 budget. That plan is expected to be divulged later this morning and could be a market mover.
Strikingly, there hasn't been a lot of movement following this morning's economic releases, which included a better-than-expected initial claims reading, a much worse-than-expected durable orders number, and a surprising downward revision to Q2 GDP.
Q2 GDP growth was revised to 1.3% in the third estimate versus 1.7% in the second estimate. While the headline is eye-opening, the report itself has been discounted due to its dated nature (we're three days away from the end of the third quarter) and the realization already, based on the Fed's actions, that the U.S. economy is weak.
To be sure, the August durable goods orders report spoke to the latter point as it showed a 13.2% decline in new orders. A 101.8% decline in new orders for nondefense aircraft and parts had a whole lot to do with that, but going down the lines of the report it can be seen that new orders for primary metals, fabricated metal products, machinery, computers and electronic products, motor vehicles and parts, and capital goods all declined as well.
Notwithstanding the softness in those areas, orders for nondefense capital goods, excluding aircraft -- a proxy for business investment -- actually increased 1.1% after a 5.2% decline in July. Still, the 0.9% drop in shipments will act as a drag on Q3 GDP forecasts.
Initial claims for the week ended September 22 fell by 26,000 to 359,000. That was comfortably below the Briefing.com consensus estimate of 379,000 and dropped the four-week moving average to 374,000 from 378,500.
Continuing claims for the week ended September 15 fell slightly to 3.271 mln (Briefing.com consensus 3.270 mln). The four-week moving average for that series decreased by 15,000 to 3.296 mln.
The S&P futures are near their highs for the morning. It should be a good start then for the equity market as the hope of central bank support overrides the unsettling state of the real economy.
