Morning Market Update

Stocks Higher to Begin the Week as the US Gets Its Man

The US equity markets are higher as M&A activity and earnings reports continue to support stocks, while news that a US military action resulted in the death of Osama bin Laden over the weekend is helping boost the advance in early trading. Dow member DuPont sweetened its bid to acquire Danish food ingredients maker Danisco to $6.6 billion, and Israel’s Teva Pharmaceutical Industries Ltd reached a definitive agreement to acquire Cephalon Inc for about $6.8 billion. Elsewhere, Dish Network Corp posted 1Q earnings that trounced that Street’s forecasts. Treasuries are lower amid the rise in the equity markets, while a read on national manufacturing activity and construction spending are set to be released later this morning. Overseas, Asia stocks moved mostly higher in low volume action, while manufacturing data is helping European markets move higher.

As of 8:49 a.m. ET, the June S&P 500 Index Globex future is 7 points above fair value, the Nasdaq 100 Index is 13 points above fair value, and the DJIA is 72 points above fair value. WTI crude oil is $1.55 lower at $112.38 per barrel, and the Bloomberg gold spot price is down $11.72 at $1,551.98 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is flat at 73.05.

In M&A news, after not winning enough shareholder support initially, Dow member DuPont (DD $57) raised its offer to acquire Danish food ingredients maker Danisco (DNSCY $17) by 5% to 700 Danish kroner ($139) per share in cash, or about $6.6 billion. DD also lowered the minimum number of shares required to complete the takeover to 80% from 90%. DD said this is the company’s “best and final offer,” and Danisco repeated its unanimous recommendation to shareholders to accept the offer.

Elsewhere, Israel-based Teva Pharmaceutical Industries Ltd. (TEVA $46) reached a definitive agreement to acquire Cephalon Inc. (CEPH $77) for $81.50 per share in cash, valued at about $6.8 billion. TEVA said the deal is expected to be accretive to earnings ex-items immediately, and is estimated to achieve at $500 million in cost synergies. The announcement comes as Canada’s Valeant Pharmaceuticals International Inc. (VRX $53) was attempting a hostile takeover of CEPH for $5.7 billion.

In earnings news, Dish Network Corp. (DISH $25) reported 1Q EPS of $1.22, well above the $0.67 consensus estimate of analysts surveyed by Reuters, with revenues rising 5.5% year-over-year (y/y) to $3.2 billion, roughly inline with the Street’s expectations. The satellite-TV service provider said it added about 58,000 net new subscribers during the quarter.

Reads on national manufacturing and construction to kick off the economic calendar

Treasuries are lower amid the gains in the equity markets ahead of reports on manufacturing and construction later this morning, with the yield on the 2-year note up 2 bps to 0.62%, while the yields on the 10-year note and the 30-year bond are increasing 1 bp to 3.30% and 4.41%, respectively.

Later today, the US economic calendar will yield the releases of the ISM Manufacturing Index, forecasted to decline to 59.5 in April from 61.2 in March, as well as construction spending, expected to rise 0.4% month-over-month (m/m) in March.

However, employment will be the main focus for the week, with readings within the ISM reports, as well as both the ADP Employment Change and initial jobless claims set to be released. The week concludes with the Labor Department’s nonfarm payrolls on Friday, expected to grow 190,000 in April, after finally posting two consecutive months of solid gains, with March increasing 216,000 and February rising 194,000. The unemployment rate is estimated to remain flat at 8.8% after declining four-straight months.

Other releases on this week’s US economic calendar include: factory orders, the ISM Non-Manufacturing Index, MBA Mortgage Applications, unit labor costs and nonfarm productivity, and consumer credit.

Europe higher following upbeat manufacturing data

Stocks in Europe are higher in afternoon action, as the enthusiasm following the report that Osama bin Laden has been killed is being amplified by some favorable reports on manufacturing activity in the euro-zone. Led by unexpected upward revisions to manufacturing reports out of France and Germany—more than offsetting a larger-than-expected deceleration in Italy—the euro-zone PMI Manufacturing Index was revised from an initial reading of 57.7 to 58.0 for April, supporting sentiment across the pond, while economists forecasted an unrevised figure. Meanwhile, some M&A and earnings news are also helping push the equity markets to the upside, with shares of Danisco solidly higher on the sweetened bid by Dow member DuPont, while Demag Cranes (DMGCF $52) is sharply higher after the harbor crane maker received a $1.3 billion bid to be acquired by US-based Terex Corp. (TEX $35). Finally, shares of Commerzbank (CRZBY $6) are moving nicely higher to contribute to the advance after the German bank posted a sharp increase in quarterly profit as its reserves for loan losses rose by a smaller amount than expected. However, action may be lighter than usual as the UK markets remained closed for a holiday.

France’s CAC-40 Index is 0.3% higher, Germany’s DAX Index is gaining 0.8%, and Italy’s FTSE MIB Index is rising 0.2%.

Asia mostly higher in light action

The equity markets in Asia moved mostly higher after the news of Osama bin Laden’s death, which added to recent optimism that has come amid a plethora of better-than-expected global earnings reports. Japan’s Nikkei 225 Index rose 1.6% on the day, after being closed on Friday, aided by a solid gain in shares of Seiko Epson Corp. (SEKEF $16) after the printer maker reported profits that exceeded expectations. Meanwhile, South Korea’s Kospi Index increased 1.7% to lead the way, supported by strength in construction issues after the government unveiled measures to try to aid the nation’s construction sector. Elsewhere, Australia’s S&P/ASX 200 Index erased solid losses that came as its currency moved to record highs, finishing flat amid the news of Bin Laden’s demise, while India’s BSE Sensex 30 Index declined 0.7%, despite a report that showed the country’s manufacturing activity accelerated slightly in April. The report accompanied a plethora of manufacturing data in the region, which showed activity in China and South Korea both slowed, while Australian manufacturing improved. However, trading in Asia was light, as markets in China, Hong Kong, Singapore, Taiwan and Thailand were all closed for holidays.