Morning Market Update

Extending Last Week’s Momentum, M&A Helping Lead the Way

The US equity markets are following last week’s solid advance with an early upward move on Monday, despite the lack of major US economic data, which will be relatively scarce throughout the week. Stocks are getting some support from eased concerns regarding the political unrest in Egypt and a slew of M&A news, highlighted by the announcement that technology firm Danaher Corp reached an agreement to acquire biomedical testing equipment firm Beckman Coulter Inc for about $6.8 billion. Treasuries are lower in early action, ahead of an afternoon release of consumer credit. In other equity news, Hasbro Inc posted better-than-forecasted earnings. Overseas, Asian stocks moved higher, while European markets are trading at the highest level since 2008, following some upward moves out of the equity front and a multi-year high of a read on investor sentiment.

As of 8:49 a.m. ET, the March S&P 500 Index Globex future is 3 points above fair value, the Nasdaq 100 Index is 4 points above fair value, and the DJIA is 27 points above fair value. Crude oil is $0.43 lower at $88.60 per barrel, and the Bloomberg gold spot price is up $3.70 at $1,352.55 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.1% at 78.15.

Hasbro Inc. (HAS $45) reported 4Q EPS of $0.99, above the $0.92 consensus estimate of analysts surveyed by Reuters, with revenues declining 7.0% year-over-year (y/y) to $1.3 billion, roughly inline with the Street’s forecast. The toymaker saw revenues in the US and Canada fall 20% y/y, while its international unit revenues grew 12%, and the company said it had “strong performance in the emerging markets.”

In M&A news, diversified technology company Danaher Corp. (DHR $48) announced that it has reached an agreement to acquire biomedical testing equipment maker Beckman Coulter Inc. (BEC $75) for $83.50 per share in cash, in a transaction valued at about $6.8 billion.
Economic calendar on the lighter side for the week

Treasuries are lower in morning action as there are no major economic reports due out in the first half of trading, with the yields on the two-year note and the 10-year note 3 bps higher at 0.77% and 3.66%, respectively, while the 30-year bond yield is gaining 1 bp to 4.74%. Amid the recent backdrop of encouraging economic data and increasing concerns toward inflation, yields have risen recently despite the Federal Reserve’s stimulative measures aimed at lowering interest rates to help ease financial conditions.
However, in the final hour of today’s session, consumer credit will be released, forecasted to show an increase of $2.5 billion in December, after gaining $1.35 billion in November.

The rest of the week for the US economic calendar will be relatively light as scheduled releases include: the NFIB Small Business Optimism Index, wholesale inventories, MBA Mortgage Applications, initial jobless claims, the trade balance, and the University of Michigan Consumer Sentiment Index. Additionally, Federal Reserve Chairman Ben Bernanke is set to testify in front of the House Budget Committee.

Europe higher on optimism in the corporate sector

Stocks in Europe are higher in afternoon action, sitting at the best level since September 2008, led by technology and basic materials, on the heels of some favorable moves out of the equity front, along with a multi-year high reading on investor sentiment across the pond. Meanwhile, subdued concerns toward the political unrest in the Middle East are also supporting stocks in the region. Shares of SolarWorld AG (SRWRY $5) are nicely higher after the alternative energy firm posted better-than-expected profits and said it will propose an increase in its dividend. Elsewhere, Adidas AG (ADDYY $31) is gaining solid ground after the German sporting goods maker’s CEO offered an upbeat outlook regarding sales, especially in China, while Randgold Resources Ltd. (GOLD $80) is moving higher after the company reported a steep increase in full-year profit and proposed an increase of its dividend.

The European economic front is painting a mixed picture, with a February read on euro-zone investor sentiment improving by a larger amount than forecasted, hitting the highest level since September 2007, while a separate report showed factory orders in Germany—Europe’s largest economy—fell more than twice the drop that economists had expected.

The UK FTSE 100 Index is 0.7% higher, while France’s CAC-40 Index and Germany’s DAX Index are advancing 0.9%.

Asia mostly higher following US jobs data

The equity markets in Asia were mostly higher amid eased concerns in the Middle East, and as traders reacted to the mixed US labor report on Friday, which showed the unemployment rate unexpectedly fell, while jobs growth came in softer than expected. But the US employment data was downplayed as severe weather and labor force fluctuations impacted the results, causing traders to struggle to discern the trend in the jobs market. Japan’s Nikkei 225 Index rose 0.5%, aided by some weakness in the Japanese yen and a report showing the nation’s Leading Index improved in December. Meanwhile, South Korea’s Kospi Index increased 0.5%, while Australian stocks showed some resilience, with the S&P/ASX 200 Index posting a 0.1% gain despite some weakness out of the nation’s retail sector. Shares of Australian retailer Myer Holdings Ltd. fell sharply after the department store cut its 2011 profit forecast. Making matters worse, a report showed Australia’s retail sales in December rose by a smaller amount than economists had projected. Elsewhere, Hong Kong’s Hang Seng Index fell 1.5%, despite a report showing the nation’s Purchasing Managers Index (PMI) of business activity in the region improved, after returning from an extended Lunar New Year holiday, which kept markets in China and Taiwan closed today. Finally, India’s BSE Sensex 30 Index rose 0.1%, following a read on the nation’s 2011 GDP, which showed a growth rate that matched economists’ expectations.