Morning Update

Uncertainty in the US

The New Year is bringing with it some cheer as equities in Europe and Asia push ahead but early gains in the US have evaporated amid continued caution. There is not much to discuss in early action in what may be another session of thin trading. However, investors will be taking a close look at a key factory report that will be released about 30 minutes after market opens. Meanwhile, Time Warner and Viacom reached a deal to prevent a disruption in programming. Treasuries are higher.

As of 8:28 a.m. ET, the March S&P 500 Index Globex futures is 2 points below fair value, the Nasdaq 100 Index is 7 points below fair value, and the DJIA is 6 points below fair value. Crude oil is down $2.04 to $42.56 per barrel, and gold is down $12.50 at $871.80. The overnight LIBOR rate fell 2 bp at 0.12%, and the three-month LIBOR rate dropped 2 bp to 1.41%.

Time Warner (TWC $21) and Viacom (VIAB $19) struck a compromise to keep Viacom's content flowing to Time Warner. Details were not immediately available but Time Warner subscribers may have lost access to popular channels such as MTV and Nickelodeon if Time Warner did not agree to what it called a "huge increase" in fees. Viacom countered that it receives 8% of total license fees but pulls in about 20% of viewers.

Latest look at manufacturing

The ISM Manufacturing Index will be released at 10 a.m. ET. Economic forecasters per Bloomberg expect the closely-watched gauge of manufacturing to fall 0.8 points to 35.4 - the lowest level in 28 years and barely below the low point hit during the severe recession of 1982. Consumers and businesses around the world have cut back on expenditures, which have hurt US exports, while the credit crisis has dampened auto sales and continued to pressure the housing market.

Receding demand has caused a surplus in raw materials purchased by manufacturers, putting downward pressure on prices. The prices paid subcomponent of the index is expected to drop from 25.5 in November to 20.0 in December, the lowest reading in almost 60 years. In front of the report, Treasuries are up following big losses on Wednesday. The bond market will close at 2 p.m. ET today.

Cheer replaces fear

Traders are greeting the New Year in an ebullient mood in Europe, brushing aside weak economic data, with mining and steel companies leading a broad-based advance. News remains light during this holiday week. A key index of manufacturing activity for the eurozone economy was revised downward in December, signaling that the recession is deepening, while home prices in the UK fell more than expected last month. The latest reading on eurozone manufacturing is likely to raise pressure on the European Central Bank to cut rates when it meets later in the month, but policymakers have tried to downplay expectations of another rate cut.

Markets in China and Japan were closed today, while South Korea's Kospi Index closed up 2.9% and the Hang Seng Index in Hong Kong added 4.6%, ending up. Makers of LCD screens jumped after a report by DisplaySearch that panel prices may bottom in January. Shipbuilders also pushed ahead on expectations that restructuring could aid the industry. Meanwhile, India posted a modest gain as investors await a second stimulus packaged designed to offset sagging economic activity. Another rate cut by the central bank in India also lent support to stocks.