Morning Market Update

Markets on Track to Make it Four in a Row

Early gains over optimism following the Greek Parliament’s approval of its austerity plan yesterday are being fueled by an unexpected acceleration in a regional manufacturing report, as stocks are trading at their highs in late-morning action. As well, the Greek Parliament also followed through by approving the implementation of the package, which was expected. Treasuries are lower following the manufacturing report and after initial jobless claims showed a slight decline. Meanwhile, on the equity front, news is light as Samsung Electronics Co filed another patent infringement lawsuit against Apple, while the collapse of London Stock Exchange Group Plc’s bid to merge with TMX Group fostered speculation that the UK exchange may again be in the sights of Nasdaq OMX Group. Overseas, the Greek austerity vote optimism carried over to Asian markets, while European markets remain modestly higher despite some disappointing economic data in the region.

At 10:51 a.m. ET, the Dow Jones Industrial Average is gaining 1.1%, the S&P 500 Index is 0.8% higher, and the Nasdaq Composite is up 0.9%. WTI crude oil is up $0.41 at $95.18 per barrel, wholesale gasoline is $0.01 higher at $2.94 per gallon, while the Bloomberg gold spot price is down $4.83 at $1,507.50 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% to 74.43.

Samsung Electronics Co. (SSNLF $800) filed a lawsuit against Apple Inc. (AAPL $334) alleging that the company infringed on patents surrounding technology used in its popular iPhone and iPad devices, seeking to block the import of items that contain the technology cited in the complaint. The suit is yet another in the battle between the two companies over patent rights, with AAPL having its own complaints filed against the South Korean chipmaker over “blatantly” copying its technology and designs. Shares of AAPL are higher.

London Stock Exchange Group Plc’s (LDNXF $16) bid for its Canadian counterpart owned by TMX Group Inc. (TMXGF $46) fell apart after proxy votes already cast ahead of today’s shareholder vote indicated that the required two-third threshold would likely not be achieved. The collapse of the deal led to speculation that Nasdaq OMX Group Inc. (NDAQ $25) may renew its bid for LDNXF that it started in 2006. LDNXF and NDAQ are higher, while TMXGF is modestly lower.

Chicago manufacturing shows improvement, initial claims tick slightly lower

The Chicago Purchasing Managers Index unexpectedly rose, increasing from 56.6 in May to 61.1 in June, led by accelerations in production and new orders. A reading above 50 depicts expansion. However, inventories moved lower and prices paid declined, and the employment component decreased from 60.8 in May to 58.7 in June. 

Weekly initial jobless claims fell by 1,000 to 428,000, versus last week's figure which was unrevised at 429,000, and compared to the 421,000 level that economists surveyed by Bloomberg had expected. Also, the four-week moving average, considered a smoother look at the trend in claims, rose by 500 to 426,750, while continuing claims dropped by 12,000 to 3,702,000, above the forecast of economists, which called for continuing claims to come in at 3,690,000.

The Federal Reserve’s asset purchase program, which consists of $600 billion of longer-term Treasuries, ends today. However, as indicated in its last monetary policy statement, in order to promote a stronger pace of recovery and help ensure inflation over time is consistent with its mandate, it will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee also said it will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. In his post-statement news conference on June 22, Fed Chair Bernanke said there has been no talk of an additional round of quantitative easing, pointing out that the recent asset purchase program succeeded in mitigating the risk of deflation that existed last year, leaving the Fed closer to meeting its dual mandate position.

Greek votes overshadowing lackluster economic news

Equity markets across the pond are posting modest gains in late-afternoon action following yesterday’s parliamentary approval of Greek Prime Minister Papandreou’s austerity plan and after the government body also followed through by passing a bill for implementation of the package, which was widely expected.. Also aiding sentiment is an announcement from German Finance Minister Wolfgang Schauble that Germany’s largest banks have agreed to rollover 2 billion euros ($2.9 billion) of Greek debt holdings that mature through 2014, giving the troubled peripheral eurozone nation more cushion in paying its debts. The remaining conditions of the European Union’s (EU) plan to help the peripheral eurozone nation hold off a sovereign default is an agreement by private investors to shoulder some of the burden, and Schauble is seeking an agreement with the country’s banks before a meeting of euro-area finance ministers in Brussels scheduled for July 3.

In equity news in the region, shares of Lloyd’s Banking Group Plc (LYG $3) are higher after it announced that it will slash 15,000 jobs and reduce costs as it withdraws from overseas units in order to better focus on its UK business, while the London Stock Exchange is also higher after its bid to acquire the Toronto Stock Exchange owned by TMX Group Inc. folded, possibly opening the door for Nasdaq OMX Group Inc. to renew its interest for the firm.

Optimism over the Greek vote is being tempered by some negative economic news in the region, after France reported an unexpected decline in consumer spending, and retail sales in Germany fell sharply on a month-over-month basis, but showed a gain year-over-year. Also, consumer prices in Italy eked out a slight gain that was inline with economists’ forecasts, while housing prices in the UK were stable and housing permits in Spain declined further from the month prior, but slightly less than expectations.

The UK FTSE 100 Index is up 1.3%, France’s CAC-40 Index is gaining 1.2%, Germany’s DAX is 0.9% higher, Italy’s FTSE MIB Index is moving 1.2% to the upside, and Greece’s Athex Composite Index is adding 1.1%.

Asia gains as Greek concerns ease

Stocks in Asia finished higher following the gains seen in the US yesterday and after the Greek Parliament narrowly approved Prime Minister Papandreou’s austerity plan. Financials and exporters led the way on increased confidence the debt-laden nation will be able to get its financial house in order, sending the Hong Kong Hang Seng Index up 1.5% and to its highest level in two weeks, and the Shanghai Composite Index 1.2% higher. However, mixed economic data in Japan tempered enthusiasm in the eastern nation after a slightly better-than-expected read on housing starts and a narrower decline in vehicle sales was offset by a deceleration in construction orders, as the Nikkei 225 Index posted a modest 0.6% gain. Japanese vehicle sales declined 30.9% year-over-year (y/y) during May, reflecting the continued effects of the devastating earthquake and tsunami in March, but when compared to the 60.1% y/y drop seen in April, the data indicates the eastern nation may be slowly pulling itself out of the aftermath of the tragedy. Meanwhile, Taiwan’s central bank upped its benchmark interest rate by 12.5 bps to 1.875%, as expected, in its efforts to cool housing prices, and the nation’s Taiex Index rose 0.9%. Elsewhere, basic materials and industrials led the S&P/ASX 200 Index 1.7% higher, while the BSE Sensex 30 Index gained 0.8%.