Morning Update

China Trade Data Excites as 4Q Earnings Season Looms

Sentiment regarding the sustainability of the global economic recovery is being supported by reports out of China that exports and imports surged more than expected, boosting commodity issues and stocks on Wall Street in early action. Asian and European markets are higher following the news out of China, which also included the nation surpassing the US as the world's largest auto market. Treasuries are mixed in morning trading as there are no economic reports slated for today but a busy rest of the week lies ahead. Equity news is light as Dow member Alcoa is in focus ahead of its profit report, which will unofficially kick off 4Q earnings season, and Jarden Corp slightly increased its 4Q and full-year revenue forecasts.

As of 8:48 a.m. ET, the March S&P 500 Index Globex future is 4 points above fair value, the Nasdaq 100 Index is 3 points above fair value, and the DJIA is 33 points above fair value. Crude oil is up $0.81 at $83.56 per barrel, and the Bloomberg gold spot price is higher by $20.28 at $1,158.53 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.6% at 77.02.

Dow member Alcoa (AA $17) is in focus today as its 4Q earnings report, which is expected to follow the closing bell today, unofficially kicks off the start to earnings season. The aluminum producer is expected to post a profit of $0.06 per share on revenues of $4.8 billion.

In other earnings news, Jarden Corp. (JAH $33) reported that it expects to post 4Q revenue of $1.35 billion, slightly up from its previous guidance of $1.30 billion, and full year revenue to be approximately $5.10 billion. Analysts are expecting the company to report 4Q revenue of $1.33 billion and full-year revenue of $5.08 billion. The consumer product provider said that during 2009, it exceeded the financial goals it set despite the challenges in the macro environment, and it expects to return to organic revenue growth in 2010. Separately, JAH proposed a $400 million bond offering aimed at repaying debt.

Quiet today but key reports are on the way

Treasuries are mixed in morning action as there are no major economic releases on today's docket, but the rest of the week will have plenty of reports for traders to digest in their quest to determine if the economy is healthy enough for the Fed to begin to withdraw stimulus efforts and whether enough cogs are in place for the economy continue down the recovery path when these "training wheels" come off. Key reports on inflation, manufacturing, and the consumer will highlight the economic calendar.

Thursday and Friday will bring the releases of the Import Price Index and the Consumer Price Index, respectively, with import prices forecasted to be flat, while prices at the consumer level are forecasted to remain subdued, rising 0.2% on a headline level and 0.1% at the core rate-excluding food & energy. Inflation has not shown any meaningful signs of becoming a threat to the price pressure side of the Federal Reserve's dual mandate, which has given them wiggle room to fight the promoting full employment side of its dual mandate and allowed them to keep the fed funds rate at "exceptionally low" levels for an "extended period."

Manufacturing will be in focus on Friday, with the releases of the Empire Manufacturing Index, expected to improve from 2.55 in December to 12.00 in January, along with industrial production and capacity utilization, with production forecast to increase 0.6% for December after November's respectable gain of 0.8%, while utilization is expected come in at 71.7%, remaining almost 10 percentage points below historical average. But Wednesday's release of the Federal Reserve's Beige Book-anecdotal information on current economic conditions from all twelve Fed districts across the nation-will get the ball rolling and employment conditions are likely to garner attention in the report, following Friday's disappointing labor report.

However, the keynote report this week will likely be Thursday's report of advance retail sales for the pivotal month of December for the sector. Sales are forecast to rise 0.5% and excluding autos, sales are expected to increase 0.3%. These projected advances will come on the heels of November's much stronger-than-expected report, which showed sales more than doubled economists estimates at the headline level, while stripping out the more volatile component of autos, sales tripled the Street's forecast. Based on last week's generally better-than-expected same-store sales reports in the sector, which showed traffic in stores for the month was strong and internet sales soared, the report could help confirm that the consumer caught the shopping spirit and could be poised to contribute further to the economic recovery.

Other reports on this week's economic calendar that deserve a mention include the trade balance on Tuesday, MBA mortgage applications on Wednesday, weekly initial jobless claims and business inventories on Thursday, with the preliminary University of Michigan Consumer Sentiment Index rounding out the day on Friday.

Europe advancing on China reports and M&A activity

Stocks in Europe are higher in afternoon action, led by oil and gas issues on increasing optimism about continuation of the global economic recovery, supported by upbeat trade data out of China, which helped lead the global economy out of the recession. M&A activity is also in focus across the pond, with Heineken (HINKY $24) announcing that it has agreed to purchase the beer unit of Fomento Economico Mexicano SAB (FMX $50), which makes Dos Equis and is also known as FEMSA, for about 5.3 billion euros ($7.7 billion) including debt ad pension obligations. Additionally, media reports are suggesting that German insurance firm Allianz (AZSEY $13) could make an offer to acquire Swiss Life Holding (SZLMY $7). Shares of Swiss Life are solidly higher. Both companies declined to comment. In economic news, separate reports showed industrial and manufacturing production in France both rose more than economists surveyed by Bloomberg had anticipated on a month-over-month (m/m) basis in November.

Asia moves higher as China data supports sentiment

Stocks in Asia were mostly higher, led by commodity-related issues as global economic recovery optimism was boosted by much better-than-expected trade data out of China. Exports in China grew 17.7% year-over-year (y/y) in December, compared to the forecast of economists surveyed by Bloomberg, which called for exports to increase by 0.5%. Meanwhile, imports surged by 55.9% y/y in December, compared to the 32.5% that had been expected. In equity news, Aluminum Corp of China (ACH $32), also known as Chalco, rose solidly after the company increased alumina prices for a second time in a week. China's Shanghai Composite and Hong Kong's Hang Seng Indexes both grew 0.5% on the heels of the data. The advance in commodities on the upbeat economic data helped Australia's S&P/ASX 200 Index pace the advance in the region. Elsewhere, Taiwan's Taiex Index rose 0.5%, while India's BSE Sensex 30 Index and South Korea's Kospi Index both finished 0.1% lower. Markets in Japan were closed for a holiday. In other economic news, the China Association of Automobile Manufacturers reported that 13.6 million cars, buses, and trucks were sold in the nation for 2009, a 46% jump and the fastest pace in at least 10 years, helping China pass the US, which sold 10.4 million vehicles, as the world's largest auto market.