Futures Up Despite Increasing Chinese Inflation

Includes: FXE, FXI, PTR, SPY
by: optionMONSTER

By Bryan McCormick

US stock index futures are higher this morning, following on a mixed performance in Asian markets, with China the weakest, and a stronger eurozone and UK markets start.

The situation in China is one to highlight as, at the moment, credit concerns in the eurozone are overshadowing "conventional" news. The Chinese central bank is using additional mechanisms to reabsorb liquidity provided to the markets during the height of the crisis last year.

Moreover, Chinese companies reporting results are doing something unexpected by markets - they are failing to meet their objectives. The latest is PetroChina (NYSE:PTR), which missed net estimates on higher costs. Inflationary pressures, while not being seen in the US are creeping into the bottom line in other geographies. With China as the engine of global recovery, along with India which is also seeing inflation spikes, this is a potentially troubling new development.

Elsewhere, credit concerns eased markedly following yesterday's downgrade of Portugal. The ECB will take steps to ease the credit crunch in Greece, though by less direct means, largely through easier collateral rules. German Chancellor Merkel attempted to soothe markets by suggesting a dual-role for the IMF and EU in the event of a potential Greek default. European stocks were at 17-month highs.

Simultaneously, Dubai agreed to provide capital to Dubai World and to pay Nakheel's bonds at full value. This step also helped to ease spreads in credit instruments, which had grown wider yesterday. In summary, global governments are reacting quickly to perceived market risk issues. These actions helped trim the US dollar gains of yesterday by almost half at time of writing, as the euro, UK pound, and yen all moved higher.

For the US markets, the jobless claims numbers at 8:30 a.m. ET and the testimony by Ben Bernanke later this morning at 10 a.m. ET will be the key catalysts for the day. As a reminder, Oracle (NASDAQ:ORCL) reports after market close today. That report will be watched closely in tech trading circles. There are no earnings scheduled for this Friday amongst S&P 500 companies. On Monday, there will be just one report, Apollo Group (NASDAQ:APOL).

Disclosure: No positions