Morning Market Update

Nearly Unchanged Ahead of Key Greek Week

The US equity markets are little changed in morning action, pulling back modestly following a report that showed personal income and spending were below economists’ expectations, while inflation was slightly hotter than anticipated. However, Treasuries are lower despite the data and ahead a report on regional manufacturing. Meanwhile, conviction is being hamstrung by lingering default concerns in Greece before the debt-troubled nation’s Parliament votes later this week on its new austerity measures, while financials are under some pressure as global regulators are reported to be set to impose stricter capital rules for the world’s largest lenders. Equity news is light, with some M&A news worth noting, as Stanley Black & Decker Inc announced that it has made an offer to acquire Swedish-based company Niscayah for about $1.2 billion. Overseas, Asian markets were mostly lower, while European stocks are mixed in afternoon action.

As of 8:52 a.m. ET, the September S&P 500 Index Globex future is 3 points above fair value, the Nasdaq 100 Index is at fair value, and the DJIA is 10 points above fair value. WTI crude oil is $0.70 lower at $90.46 per barrel, and the Bloomberg gold spot price is down $3.30 at $1,499.25 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.1% at 75.66.

Stanley Black & Decker Inc. (SWK $69) announced that it has made an offer to acquire all of the outstanding common stock and warrants of Swedish-based commercial security and monitoring company Niscayah (NSYHF $3) for 18 kronor per share, or about $1.2 billion. Niscayah’s Board of Directors has unanimously recommended that shareholders and warrant holders accept the offer, which SWK said is expected to be accretive to EPS by approximately $0.20 per share in year one, and $0.45 per share by year three.

Personal income and spending below forecasts, regional manufacturing data due out later

Personal income increased 0.3% month-over-month (m/m) in May, just shy of expectations of economists surveyed by Bloomberg, which called for a 0.4% rise, and April’s 0.4% increase was revised to a 0.3% gain. Also, personal spending was unchanged m/m in May, compared to expectations of a 0.1% advance, and April’s 0.4% rise was revised to a 0.3% increase. The savings rate came in at 5.0% for May, after April’s unrevised 4.9% rate.

Also, the PCE Price Index, which is released with the income and spending data, was up 2.5% year-over-year (y/y) in May, matching expectations, after April’s 2.2% increase was unrevised. The core PCE Price Index, which excludes food and energy, was up 0.3% m/m, above forecasts of a 0.2% increase, while y/y, core prices moved 1.2% higher, versus the 1.1% gain that was expected.

Treasuries are lower in morning action following the data, with the yield on the 2-year note up 2 bps to 0.35%, the yield on the 10-year note increasing 1 bp to 2.87%, and the 30-year bond rate 3 bps higher at 4.21%.

Later this morning, the economic calendar will yield the release of the Dallas Fed Manufacturing Index, forecasted to improve from -7.4 in May to -3.2 in June, but remaining in contraction as denoted by a reading below zero.

For the rest of the week, the major economic releases scheduled in the US will be focused on housing and manufacturing, with tomorrow’s S&P/CaseShiller Home Price Index, forecasted to fall 0.2% m/m and decrease 4.0% year-over-year (y/y) in April. Pricing data lags sales data by a month and prices are expected to remain under pressure amid a still depressed housing market. The other major report is Friday’s ISM Manufacturing Index, forecasted to decline to 51.8 from 53.5, according to a Bloomberg survey of economists.

Other releases on this week’s US economic calendar include: Consumer Confidence, the Richmond Fed Manufacturing Index, MBA Mortgage Applications, pending home sales, initial jobless claims, the Chicago Purchasing Manager’s Index, the final University of Michigan Consumer Sentiment Index for June, construction spending, and vehicle sales.

Europe mixed as Greece austerity remains in focus

The equity markets in Europe are mixed in afternoon action, with traders treading cautiously ahead of Wednesday’s key vote on Greece’s austerity plan aimed at getting its debt crisis under control in order to qualify for further eurozone financial aid, potentially helping it avoid a default. Greece’s Parliament has begun debating the austerity plan today. If the austerity plan passes in Greece, previously agreed eurozone aid will likely follow to help it meet its short term debt obligations, with a second bailout package likely to follow, which may include voluntary rollovers of the nation’s debt by its largest private creditors, which French President Sarkozy said his nation’s banks—one of the largest holders of Greece’s debt—have reached an outline agreement to rollover holdings of Greek debt, per Reuters. Meanwhile, financials are lagging behind amid reports that the international regulators will impose tougher capital requirements, as part of the Basel III capital rules, for the world’s largest lenders. Meanwhile, in equity news, shares of Niscayah are sharply higher after the Swedish-based commercial security and monitoring company recommended its shareholders to accept a takeover offer from Stanley Black & Decker Inc. Moreover, basic materials are one of the day’s worst performers as chemical maker Akzo Nobel AZ (AKZOY $65) is sharply lower after it issued a disappointing profit outlook.

In light economic news across the pond, a read on UK business activity improved in June, while a separate report showed a UK housing survey declined in June.

The UK FTSE 100 Index is unchanged and France’s CAC-40 Index is gaining 0.1%, while Germany’s DAX Index is declining 0.1% and Greece’s Athex Composite Index is 1.1% lower.

Asia mostly lower as euro-debt concerns continue

Stocks in Asia finished mostly in the red to begin the week, as the festering uncertainty regarding a potential default by troubled eurozone peripheral nation Greece continued to dampen sentiment, ahead of this week’s key austerity vote. Also, financials were lower after reports that global regulators implementing the Basel III capital rules would require tougher capital adequacy for the world’s largest banks. Japan’s Nikkei 225 Index, Australia’s S&P/ASX 200 Index, and South Korea’s Kospi Index all dropped 1.0% in today’s trading. In economic news, Moody’s Investors Service warned that the Japanese government’s failure to meet a self-imposed June 20 deadline for a long-term fiscal plan to deal with its debt issues is “credit negative’ and the nation could face a third “lost decade.” In equity news, shares of Samsung Electronics Co. (SSNLF $800) were down solidly to weigh on the equity markets in South Korea on the heels of a patent lawsuit by US-based Apple Inc. (AAPL $326). However, stocks in China finished mixed, with the Hong Kong Hang Seng Index declining 0.6%, while the Shanghai Composite Index rose 0.4% on eased concerns about further government monetary policy tightening after China’s Premier Wen said late last week that the nation’s efforts to thwart inflation have succeeded.