Morning Market Update

Gains as Focus Across the Pond Remains

The US equity markets are pushing higher in early action but conviction is being stymied by tomorrow’s key austerity vote in Greece and a report that showed US home prices declined again, but were higher compared to last month on a non-seasonally adjusted basis. Treasuries are mixed in morning trading following the housing price report and ahead of reads on consumer confidence and regional manufacturing activity. Meanwhile, Nike Inc is headlining a light dose of equity news, as the athletic footwear and apparel maker posted 4Q profits and revenues that exceeded analysts’ forecasts. Overseas, Asian stocks finished mostly higher in cautious trading amid the euro-area debt uncertainty, while the European equity markets are moving higher, with Greece trading nicely to the upside despite austerity protests in the nation’s streets.

As of 8:55 a.m. ET, the September S&P 500 Index Globex future is 5 points above fair value, the Nasdaq 100 Index is 8 points above fair value, and the DJIA is 53 points above fair value. WTI crude oil is $1.26 higher at $91.87 per barrel, and the Bloomberg gold spot price is up $2.22 at $1,500.15 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.1% at 75.23.

Nike Inc. (NKE $82) reported 4Q earnings of $1.24 per share, above the $1.16 consensus estimate of analysts surveyed by Reuters, with revenues rising 14% year-over-year (y/y) to $5.8 billion, exceeding the $5.5 billion that the Street had forecasted. The athletic apparel and shoe company said its revenues were driven by growth in all geographies except Japan and Central and Eastern Europe. NKE reported that futures orders for its products scheduled for delivery from June through November 2011, totaled $10.3 billion, an increase of 15% y/y.

Home prices decline, regional manufacturing and consumer confidence reads set to follow

Just before the opening bell, the S&P/Case-Shiller Home Price Index showed a decline in home prices of 3.96% y/y in April, compared to the 3.95% drop that economists surveyed by Bloomberg had expected. Month-over-month (m/m), home prices were 0.1% lower, compared to forecasts, which called for a decline of 0.20%. However, on a non-seasonally adjusted basis, home prices rose slightly m/m.

Treasuries are mixed following the home price data and gains in the equity markets, with the yields on the 2-year note and the 10-year note advancing 2 bps to 0.44% and 2.95%, respectively, while the 30-year bond rate is1 bp lower at 4.29%.

Later this morning, the economic calendar will yield the release of the Consumer Confidence Index, forecasted to increase slightly from 60.8 in May to 61.0 in June, as well as a regional manufacturing report, with the Richmond Fed Manufacturing Index expected to improve from -6 in May to -3 for June, with a reading below zero denoting contraction.

Financials leading Europe higher as Greece vote looms

The equity markets in Europe are trading in the green in afternoon action, with financials providing some support on cautious optimism Greece will approve a key austerity plan tomorrow that will result in further financial aid for the debt-laden nation to fulfill its near-term funding needs. Greek equities are moving nicely higher ahead of the vote and despite public austerity protests in the streets of the troubled nation. Financials are also gaining ground with the help of a solid advance in shares of the UK’s Standard Chartered Plc. (SCBFF $25) after the bank offered an upbeat profit outlook. However, telecommunications issues are weighing on the markets, with shares of Cable & Wireless Worldwide Plc. (CBWWF $1) falling sharply after offering a profit warning due to a decline in orders. Stocks across the pond are moving higher despite comments from European Central Bank (ECB) President Jean-Claude Trichet implying that a rate hike is likely on the way when the central bank conducts in policy meeting next week. Trichet said the ECB is in “strong vigilance mode,” per Bloomberg, in its efforts to control inflation.

In economic news in the region, the German GfK Consumer Confidence Survey posted an unexpected improvement for July, import prices in Germany fell more than expected, and Italy’s business confidence declined more than anticipated. Elsewhere, UK 1Q GDP was left unrevised at a 0.5% rate of expansion quarter-over-quarter (q/q), while its y/y pace of growth was unexpectedly revised lower, to a 1.6% gain, from a previous report of a 1.8% expansion.

The UK FTSE 100 Index is 0.9% higher, France’s CAC-40 Index is gaining 1.2%, Germany’s DAX Index is increasing 0.3%, and Greece’s Athex Composite Index is advancing 2.9%.

Asia mostly higher following a solid advance in the US 

Stocks in Asia finished mostly higher on the heels of the respectable gains in the US, amid relative optimism that tomorrow’s austerity vote in Greece will pass, helping the debt-troubled nation solve its short-term funding needs. Japan’s Nikkei 225 Index increased 0.7% to lead the way, aided by a better-than-expected report on the nation’s retail trade in May and an improvement in small business confidence for June. In equity news, Moody’s Investors Service downgraded the credit ratings of Toyota Motor Corp. (TM $80) and its affiliates by one notch and kept the automaker on review for possible further downgrade. The credit rating agency cited the yen’s recent strength and higher raw materials costs. Meanwhile, financial issues helped Australian stocks eke out a gain, with the S&P/ASX 200 Index rising 0.3%, while stocks in China finished nearly unchanged, with the Hong Kong Hang Seng Index increasing 0.1% and the Shanghai Composite Index closing flat. After the close in Hong Kong, the government reported that the nation’s trade deficit narrowed more than expected, as exports jumped 10.1%. However, South Korean stocks moved to the downside, as the Kospi Index declined 0.4%, despite a report that showed the country’s current account surplus widened in May.