Slovakia's failure to pass the European Financial Stability Fund bill had European markets off to a weak start Wednesday, but hope that it would still be passed later in the week reversed sentiment and has stocks now climbing, including U.S. futures. 

"Slovakia is still the hold out," said BMO Capital Markets. "The country failed to pass the EFSF yesterday and since all governments of the 17 countries in the Euro Area must approve it, that means the EFSF has to hold off using its yet-to-be-approved-broadened powers for good, such as backstopping government bonds, not evil. There is, however, another vote later on this week and it is expected that the EFSF will pass." 

Treasuries are at cheapest levels in at least five weeks. The benchmark 10-year Treasury yield is six basis points higher at 2.22%, the two-year yield is steady at 0.30%, and the 30-year yield is eight basis points higher at 3.19%.

S&P 500 futures are 10.2 points higher (+0.86%) at 1,199.80 and Dow futures are 105 points higher (+0.93%) at 11,435. 

In Asia, China's Shanghai index jumped 3.6% and shares in Hong Kong jumped 1.04%, but Japan's Nikkei 225 finished 0.40% lower. Europe's ongoing session has The FTSE 100 rising 0.46% and Germany's DAX is trading 1.34% higher.

Light crude oil rose 0.47% overnight to $86.21 per barrel, while gold prices moved 1.56% higher at $1,686.90 per ounce.

In fresh data, the MBA mortgage index climbed 1.3% in the first week of October. Both purchases and refinancings ticked up.

The Senate passed legislation calling China a currency manipulator. According to the Wall Street Journal, the bill is unlikely to pass the House but it underscores the frustration the U.S. has with one of its largest trading partners.

Also, the Senate shot down President Obama's $447 billion jobs with a 50 to 49 vote (60 votes in favor are required to pass it).

Key Events Today:

1:20 - Richard Fisher, president of the Dallas Fed, speaks on Fed operations and the economy to a Dallas Fed community forum.

1:30 - Charles Plosser, president of the Philadelphia Fed, speaks on the economic outlook at Wharton in Philadelphia.

2:00 - The FOMC Minutes should provide Fed-watchers more detail on the underpinnings of Operation Twist - the effort to flatten the yield curve by swapping $400 billion of short-term notes for longer-duration securities. The Sept. 21 decision to purchase bonds as lengthy at 30 years surprised the market and pancaked the spread between 10-year 30-year yields, all without adding to the Fed's balance sheet.

"The most notable move was the Fed's announcement that it would 'support conditions in mortgage markets" by reinvesting 'principle payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities,' says Nomura Global Economics. "In the minutes of the September meeting, we hope to get more details on the 'significant downside' risk to the outlook, but more importantly, what tools were discussed as indicated by the Committee's statement that, 'The Committee discussed the range of policy tools available to promote a stronger economic recovery.'

2:15 - Sandra Pianalto, president of the Cleveland Fed, speaks on leadership in challenging times at the University of Akron, Ohio

 

  • Treasury Auctions:
  • 11:30 -  4-Week Bills
  • 1:00 - 10-Year Notes