Morning Market Update

Modest Ascension, But Oil Dominates Street’s Attention

The US equity markets are slightly higher in early action as there are no major economic reports scheduled for the first half of today’s session, while the persistent advance in oil prices is keeping sentiment in check, and markets are well off of the best levels of the morning. Treasuries are lower amid the modest increase in stocks and ahead of the afternoon release of consumer credit. The US economic calendar will be relatively light this week, with Friday’s release of retail sales being the lone major report. Equity news is also light, with Dow member AT&T Inc announcing its CFO will resign, while Western Digital Corp reported an agreement to acquire Hitachi’s global storage technology subsidiary for more than $4 billion. Overseas, Asia was lower amid the continued surge in oil prices, while European equities are gaining ground on some M&A news, which is overshadowing oil uneasiness and a credit rating downgrade of Greece by Moody’s.

As of 8:52 a.m. ET, the March S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is 7 points above fair value, and the DJIA is 6 points above fair value. Crude oil is $2.35 higher at $106.77 per barrel, and the Bloomberg gold spot price is up $9.95 at $1,440.85 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% at 76.25.

Dow member AT&T Inc. (T $28) announced that its Chief Financial Officer (CFO) Rick Lindner will retire effective June 1, 2011, and will be replaced by the company’s Controller, John Stephens, who has been with the firm for 19 years. The company said, “Rick and John have worked together closely for more than 15 years, and we expect a seamless transition.”

In M&A news, Western Digital Corp. (WDC $30) announced that it has reached a definitive agreement with Hitachi Ltd. (HIT $61), whereby WDC will acquire Hitachi Global Storage Technologies, a subsidiary of HIT, in cash and stock valued at about $4.3 billion.

Retail sales to highlight week’s short economic docket

Treasuries are lower in early action to begin the week as there are no major US economic reports scheduled for release in the first half of the trading session, with the yield on the 2-year note up 3 bps to 0.71%, while the yields on the 10-year note and 30-year bond are rising 4 bps to 3.53% and 4.64%, respectively.

However, in the final hour of trading consumer credit will be released, forecasted to increase by $3.4 billion in January, after rising by $6.1 billion in December.

This week is expected to be light on US economic data, with the sole major release being Friday’s advance retail sales, forecasted to rise 1.0% month-over-month (m/m) in February, after gaining 0.3% in January, while sales ex-autos are estimated to grow 0.7%, after advancing by 0.3% in January. Same-store sales results-sales at stores open at least a year-reported by retailers were generally better-than-expected. The retail sales report includes spending at supermarkets and gas stations.

Other releases on this week’s US economic calendar include: the NFIB Small Business Optimism Survey, MBA Mortgage Applications, wholesale inventories, weekly initial jobless claims, the trade balance, the preliminary University of Michigan Consumer Sentiment Index, and business inventories.

M&A helping Europe overcome Middle East fray

Stocks in Europe are mostly higher in afternoon action, overcoming early losses amid some M&A announcements in the region, which are helping offset uneasiness regarding the continued surge in oil prices amid exacerbated geopolitical concerns in the Middle East and North Africa. Shares of Bulgari SpA (BULIF $11) are up over 50% after LVMH Moet Hennessy Louis Vuitton SA (LVMUY $31) agreed to acquire the Italian jeweler for about 3.7 billion euros ($5.2 billion). Also, Tognum AG (TGNMF $25) is rising over 20% after Daimler AG (DDAIY $67) and Rolls-Royce Group Plc. (RYCEY $49) confirmed that they are in talks to jointly acquire the German maker of diesel engines. Economic news is very light across the pond, with the lone release worth a mention being an improvement in euro-zone investor confidence, which came in a tick lower than economists had forecasted.

Meanwhile, the markets are able to gain modest ground in the wake of Moody’s Investors Service cutting Greece’s credit rating by three notches to B1 from Ba1, while assigning a negative outlook on the bailed out euro-zone nation. Moody’s cited significant risks to the government’s fiscal consolidation program and difficulties in reforming healthcare and state-owned companies, per Reuters. Greece’s Finance Ministry said, “The rating downgrade announced by Moody’s today is completely unjustified.”

The UK FTSE 100 Index is up 0.6%, France’s CAC-40 Index is 0.1% higher, Germany’s DAX Index is gaining 0.5%, Italy’s FTSE MIB Index is rising 1.0%, and Greece’s Athex Composite Index remains closed.

Asia mostly lower amid escalated Middle East tensions

The equity markets in Asia finished mostly lower amid festering concerns toward the Middle East and North Africa as anti-government fighting continued and oil prices remained on their solid upward path. Transportation issues, particularly airlines, in the region found heavy pressure to pace the decline, while mining firms also posted broad-based decreases amid uneasiness regarding the impact of higher energy costs on the global economy. Japan’s Nikkei 225 Index fell 1.8% to lead the decline in Asia, with Toyota Motor Corp. (TM $91) dropping solidly amid the higher oil prices and following Standard & Poor’s downgrade of the world’s largest automaker’s debt rating to AA- from AA due to “weak profitability.” Meanwhile, the resignation of Japan’s Foreign Minister Maehara over political donations received by a Korean resident garnered some attention as it damaged Prime Minister Kan’s fight to implement his budget and remain in his job. In economic news, Japan’s Leading Index improved by a smaller amount than economists had expected.

Elsewhere, declines were seen in Australia, with the S&P/ASX 200 Index dropping 1.4%, South Korea, with the Kospi Index falling 1.2%, and Taiwan, with the Taiex Index declining 0.8%, as losses were limited by a report showing the nation’s trade surplus narrowed by a smaller amount than forecasted after exports exceeded estimates. However, stocks in China were mixed, with the Hong Kong Hang Seng Index declining 0.4%, while the Shanghai Composite Index rising 1.8%, led by consumer and energy issues after the government said domestic consumption will drive economic growth, per Reuters.