Morning Market Update

Modest Pressure as the Week Begins

The US equity markets are slightly lower in early trading after last week’s solid declines, the fifth-straight weekly decline for stocks, which has not been seen since 2004. Global economic uncertainty, courtesy of signs of slowing activity, exacerbated by Friday’s dismal US labor report, has hampered sentiment recently, leading to the downward pressure on the equity markets and bond yields. Treasuries are modestly lower in morning action as there are no major economic reports scheduled for release today, and the calendar will be light for the week, with Wednesday’s Federal Reserve’s Beige Book highlighting the docket. Meanwhile, equity news is light, as Apple Inc is set to begin in worldwide developers conference later today, while Fitch Ratings upgraded its outlook for Humana Inc. Overseas, Asia was lower amid the growing global economic uneasiness, while euro-area debt concerns are weighing on European trading.

As of 8:52 a.m. ET, the June S&P 500 Index Globex future is 3 points below fair value, the Nasdaq 100 Index is 3 points below fair value, and the DJIA is 17 points below fair value. WTI crude oil is $1.14 lower at $99.08 per barrel, and the Bloomberg gold spot price is up $0.26 at $1,542.54 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.2% to 73.85.

Apple Inc. (AAPL $343) is expected to commence its worldwide developers conference today in San Francisco, with CEO Steve Jobs giving the conference’s keynote address at 1:00 p.m. ET. No new gadgets are anticipated to be unveiled but the focus will be on the company’s newest versions of its operating systems and a new service called iCloud.

Meanwhile, on late-Friday, Fitch Ratings affirmed the credit ratings for healthcare benefits firm Humana Inc. (HUM $78), while revising its ratings outlook from stable to positive. Fitch said the revised outlook reflects HUM’s profitability and interest coverage trends, which “compare favorably to rating category medians.”

Fed data to highlight short weekly economic docket

The US economic calendar is void of any major releases today, and Treasuries are lower in early action, with the yield on the 2-year note up 1 bp to 0.43%, the yield on the 10-year note 3 bps higher at 3.02%, and the 30-year bond rate advancing 4 bps to 4.26%.

The only major release on the US economic calendar this week is Wednesday’s midday Federal Reserve Beige Book, wherein Fed staffers summarize anecdotal economic data from all twelve Federal Reserve districts in preparation for the next Federal Open Market Committee (FOMC) meeting scheduled for June 21-22. At the April meeting, the Fed downgraded its view on the economy, but noted that the slowdown and increase in inflation were expected to be transitory, or temporary.

Other US economic releases scheduled for this week include: consumer credit, MBA Mortgage Applications, initial jobless claims, the trade balance, wholesale inventories, and the import price index.

Europe under pressure as euro-debt and global economic concerns weigh on sentiment

The equity markets in Europe are mostly lower in afternoon action, led by financials as eurozone debt concerns continue to stymie sentiment, along with worries toward the global economic recovery on the heels of Friday’s much smaller-than-anticipated increase in US jobs. The debt concerns in the region come even after Friday’s announcement from Greece that austerity talks with European Union (EU) and International Monetary Fund (IMF) officials went “positively,” likely opening the door for a second bailout for the debt-laden nation. Also, fellow troubled nation Portugal is finding some support after the nation’s Social Democrats defeated the ruling Socialists in elections over the weekend, boosting hopes that the nation can deliver its aggressive austerity measures that are required in the EU/IMF’s bailout package for the nation. Elsewhere, airline companies are moving to the downside after the International Air Transport Association cut its 2011 industry profit forecast by more than 50%, due to higher fuel costs and the tragedy in Japan and geopolitical turmoil in the Middle East.

In economic news, a read on UK employment confidence improved, while eurozone producer prices came in hotter than economists projected for April, exacerbating inflation concerns ahead of Thursday’s policy meeting by the European Central Bank (ECB). Although the ECB is expected to keep its benchmark interest rate unchanged at 1.25%, traders will be paying close attention to ECB President Trichet’s comments at the press conference after the meeting, to see if he mentions a “strong vigilance” stance towards inflation that most ECB watchers see as a precursor to an imminent increase in rates. The Bank of England (BoE) is also expected to make its monetary policy announcement on Thursday, and is anticipated to keep its benchmark rate unchanged at 0.50%.

The UK FTSE 100 Index is up 0.2%, while France’s CAC-40 Index is declining 0.6%, Germany’s DAX Index is 0.1% lower, Greece’s Athex Composite Index is decreasing 0.4%, and Portugal’s PSI 20 Index is falling 0.9%.

Japan falls following disappointing US jobs data

Stocks in Asia finished lower amid growing concerns about the health of the global economy, exacerbated by Friday’s lackluster job growth in the US, with Japan’s Nikkei 225 Index falling 1.2%. However, volume was light in Asia as markets in China, South Korea, and Taiwan were closed for holidays. The decline in Japan was led by a sharp drop in Shares of Tokyo Electric Power Co. (TKECY $4) amid a report that Tokyo Stock Exchange (TSE) President Saito said the operator of the nuclear facility that was damaged by the March earthquake and tsunami and is at the heart of the nation’s nuclear crisis should be delisted, which fostered concerns about the company’s future. However, the TSE said the company does not currently meet requirements for its shares to be delisted, per Bloomberg. The pressure on the stock also came from a media report that suggested the utility company will report a net loss of nearly $7 billion, though TKECY said it was not the source of the information. Elsewhere, Australia’s S&P/ASX 200 Index declined 0.3% amid the soured global economic sentiment, while India’s BSE Sensex 30 Index rose 0.2%.