Morning Update

Overseas Rally Helping Wall Street Open with a Positive Tally

Stocks are nicely higher in early action on the heels of a broad-based advance in Asian markets after the Bank of Japan held an emergency policy meeting, where the central bank decided to make short terms loans available to support the economic recovery. European stocks are also moving solidly higher following the BoJ's announcement and amid a plethora of economic data that is boosting sentiment of the global economic recovery. Treasuries are mixed as the equity markets gain ground, while traders are awaiting some key economic data, headlined by the release of the ISM Manufacturing Index, which is due out shortly after the opening bell. Equity news in light, taking a backseat to the economic docket, with Dow member General Electric and Vivendi being reportedly agreeing to a deal that could pave the way for Comcast Corp to gain control of NBC Universal, while Staples Inc. posted profits that topped analysts' expectations.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 9 points above fair value, the DJIA is 64 points above fair value, and the Nasdaq 100 Index is 16 points above fair value. Crude oil is higher by $0.80 at $78.08 per barrel, and the Bloomberg gold spot price is up $13.13 at $1,192.72 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.6% at 74.45.

Several media outlets are reporting that Dow member General Electric (GE $16 ¹) has come to a tentative agreement to purchase partner Vivendi's (VIVDY $29) 20% stake in NBC Universal for $5.8 billion, according to people familiar with the discussions. The agreement would pave the way for GE, which owns 80% of NBC Universal, to complete an entertainment joint venture, which would include NBC Universal and be controlled by Comcast Corp. (CMCSA $15). None of the entities involved have commented on the reports.

Staples Inc. (SPLS $23) reported 3Q EPS ex-items of $0.39, one penny ahead of the expectation of Wall Street analysts, with revenues declining 6% versus last year to $6.5 billion, which was slightly above the $6.4 billion that the Street had anticipated. The office supply firm's CEO said, "With North American Retail growing again, improving trends in our Catalog business, solid profitability in our European office products portfolio, and record free cash flow, we're increasingly optimistic about the future." SPLS issued a 4Q revenue outlook that topped analysts' forecasts.

Key data on the way

Treasuries are mixed in morning action as traders await a few major releases from the economic calendar just after the opening bell that will likely influence sentiment. Today's economic docket will be highlighted by a national look at manufacturing activity in the form of the release of the ISM Manufacturing Index, which is forecasted to retreat from 55.7 to 55.0 in November, giving back some of last month's significant jump from the 52.6 reading in September. That would still indicate expansion in the manufacturing sector, albeit at a slower pace, as the 50.0 level represents the separation point between expansion and contraction.

The regional manufacturing reports already released for the month of November have painted a somewhat mixed picture, with the Empire index showing a larger-than-expected deterioration but the Philly index increasing more than had been forecasted, and yesterday's Chicago PMI also showing a surprising gain. These conflicting signals in regional data have cast some doubt over what the nationwide report will show today, but it is important to note that these purchasing manager indices can be somewhat unpredictable, as they are not constructed of hard data but merely a diffusion index that reflects the number of people saying conditions are better compared to the number saying conditions are worse. They also do not account for the size of the firm responding or the degree of better/worse conditions that the firm is expecting.

Other reports due out in conjunction with the aforementioned national manufacturing release include pending home sales, expected to decrease by 1% for October, and construction spending, which is forecast to drop by 0.5% for the month of October.

Europe higher following a plethora of data

Following the favorable advance in Asia, stocks in Europe are solidly higher across the board as a slew of upbeat economic data in the eurozone boosted the outlook for the continuation of the global economic recovery. Basic materials and industrials issues are leading the way after a favorable revision to eurozone PMI for November, which showed manufacturing activity expanded at a faster pace than economists surveyed by Bloomberg had expected. Additionally, data out of Germany-Europe's largest economy-came in better than expected, with unemployment unexpectedly falling, retail sales rising more than anticipated, and the nation's PMI for November expanding at a faster pace than initially forecast. Other economic data across the pond included home prices in the UK rising more than expected and 3Q GDP in Switzerland showing the economy returned to growth after rising 0.3% quarter-over-quarter to match expectations. However, a report showed PMI in the UK depicted manufacturing activity growing at a slower pace than economists predicted. Financials are also helping lead the advance as concerns about the Dubai debt crisis is waning to alleviate some of the pressure on firms that have exposure to liabilities of the member of the United Arab Emirates.

Asian shares advance as Bank of Japan eases monetary stance

Stocks in Asia were broadly higher, led by a 2.4% gain in Japan's Nikkei 225 Index after the Bank of Japan held an unplanned meeting and decided to "further enhance easy monetary conditions" by introducing a new funds-supplying operation to encourage a further decline in longer-term rates. At the meeting, the BoJ announced further quantitative easing measures by offering three-month loans at 0.1%, while maintaining its monthly government bond purchase target, and keeping its overnight lending rate at 0.1%. The central bank said it believes that the decision made today will "firmly support Japan's economic developments toward recovery," and that the bank recognizes that it is a critical challenge for Japan's economy to overcome deflation and return to a sustainable growth path with price stability. In other Asian central bank announcements, the Reserve Bank of Australia announced that it will raise its key lending rate by 25 basis points to 3.75%, as expected, making it the third rate increase in as many meetings. The RBA said the risk of serious economic contraction in Australia has passed and its material adjustments to the stance of monetary policy will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead. Australia's S&P/ASX 200 Index rose 0.4% after the RBA's announcement.

In other economic news, China's Shanghai Composite and Hong Kong's Hang Seng indexes rose 1.3% after a government report on PMI held at an 18-month high, while a separate PMI report constructed by HSBC showed Chinese manufacturing accelerated in November. Elsewhere, South Korea's Kospi Index rose 0.9% and India's BSE Sensex 30 Index increased 1.6%.