Morning Market Update

Nearly Unchanged Ahead of a Consumer Gauge

In morning trading, the equity markets are hanging around the flatline before the mid-morning release of the Conference Board’s consumer confidence report, while traders are digesting mixed sessions overseas. Asian markets moved higher, led by Japan, while upbeat UK data in being offset by uneasiness toward Irish banks and cautiousness in Greece, which has the European markets mixed in afternoon trading. Meanwhile, just before the US opening bell, the S&P/Case-Shiller Home Price Index came in with the eighth-straight monthly increase and Treasuries are lower. Equity news is light, with a Wall Street Journal report that Apple Inc. is developing a new iPhone that could end the exclusivity of the service for the device at Dow member AT&T dominating the headlines.

As of 8:50 a.m. ET, the June S&P 500 Index Globex future is 1 point above fair value, the Nasdaq 100 Index is 4 points above fair value, and the DJIA is 2 points below fair value. Crude oil is up $0.09 at $82.26 per barrel, and the Bloomberg gold spot price is down $0.83 at $1,108.90 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% to 81.22.

The Wall Street Journal is reporting that Apple Inc. (AAPL $232) is developing a new iPhone that would work on a type of wireless network called CDMA, which is used by competitors Verizon Wireless—a joint venture between Dow member Verizon Communications (VZ $30) and Vodafone (VOD $23)—as well as Sprint Nextel Corp. (S $4). The report cites people briefed by the company and suggests that this could set the stage for US phone carriers other than Dow component AT&T Inc. (T $27), which is currently the exclusive service provider of the iPhone, to sell the device as soon as this year. VZ , AAPL, and S all have not commented, but the report quotes a spokesperson for T as saying, “There has been lots of incorrect speculation on CDMA iPhones for a long time. We haven’t seen one yet and only Apple knows when that might occur.”

Home prices continue to improve, consumer confidence on deck

Just before the opening bell, the S&P/Case-Shiller Home Price Index was released showing a decline in home prices of 0.7% year-over-year (y/y) in January, inline with what had been expected. Month-over-month (m/m), home prices were 0.32% higher, the eighth-consecutive monthly increase, compared to the forecast, which called for the m/m rate to decline 0.25%. Treasuries are lower.

Later today, the economic calendar will yield the release of the Conference Board’s Consumer Confidence Index, expected to increase to 51.0 in March, from February’s 46.0. The forecasted improvement in consumer confidence may be a result of the continued string of improving economic data and optimism that the labor market may soon show signs of support for the recovery.

Europe mixed despite upbeat UK data

Stocks in Europe are mixed in afternoon action, as strength in materials shares on continued strength in metals prices and some favorable economic data are being met with uneasiness in Greece and Ireland. Today’s reports out of the UK are helping provide some reasons for optimism, with the nation’s 4Q GDP being revised higher from a 0.3% quarter-over-quarter (q/q) expansion to a 0.4% increase, compared to the forecast of economists, which expected the figure to remain at 0.3%. Meanwhile, separate reports showed UK home prices rose 0.7% m/m in March, versus the 0.2% increase that was anticipated, and the nation’s current account deficit came in much narrower than forecasted. In other economic news, German import prices rose 1% m/m in February, compared to the 0.4% increase that was expected, France’s 4Q GDP remained unrevised at a 0.6% q/q expansion as expected, and Spain’s retail sales fell more than expected y/y in February, while its consumer prices rose more than anticipated y/y in March.

However, some cautiousness toward Greece, despite yesterday’s successful debt auction and last week’s agreement by euro-zone nations to provide financial support if necessary, is limiting gains in the region. Also, financials are being bogged down by another sharp decline in shares of Allied Irish Banks (AIB $4) as it waits to hear what capital requirements the government will set for the sector in order to receive aid from its “bad bank” program. AIB has tumbled over 35% in the past two sessions. The sluggishness in financials is being partially offset by strength in shares of UBS (UBS $16) after Bloomberg reported that the company generated about $2.3 billion of revenue at its fixed income division in 1Q, after Switzerland’s largest bank rebuilt the unit following record losses, according to people familiar with the matter. UBS said the reported figure is slightly higher that its current 1Q forecast.

France’s CAC-40, Germany’s DAX, and Spain’s IBEX 35 Indexes are 0.1% in the green, while Switzerland’s Swiss Market Index is advancing 0.4%. Meanwhile, Britain’s FTSE 100 Index is flat, Ireland’s Irish Overall Index is down 0.2% and Greece’s Athex Composite is declining 1.7%.

Economic optimism supports advance in Asia

On the heels of an upbeat economic confidence report out of Europe, along with the continued upward momentum in the US, stocks in Asia moved higher. Materials issues were the best performers as the aforementioned data was met with some economic reports in the Asia/Pacific region to boost economic optimism. Japan’s Nikkei 225 Index led the way, gaining 1% to reach the highest level since October 2008, following reports that showed vehicle production in February jumped 74.9% y/y, the job-to-applicant ratio ticked slightly higher, and the nation’s jobless rate remained at 4.9%—the lowest in about a year. The reports offset a separate report that showed Japanese industrial production fell 0.9% m/m in February, compared to the decline of 0.5% that economists had forecasted. Meanwhile, South Korea’s Kospi Index rose 0.5%, aided by an economic release, which showed an index of manufacturers’ outlook rose to the highest level since 4Q 2002, per Bloomberg. Elsewhere, stocks in China moved higher, with the Shanghai Composite Index up a modest 0.2%, while Hong Kong’s Hang Seng Index rose 0.7% despite a smaller-than-expected increase in retail sales. Rounding out the day, Australia’s S&P/ASX 200 Index rose 0.4%, Taiwan’s Taiex Index gained 0.2%, while India’s BSE Sensex 30 Index fell 0.7%.

In equity news, BHP Billiton (BHP $81) finished higher after the world’s largest mining firm agreed to set quarterly pricing of iron ore contracts for Asian steel mills, allowing the company to adapt more quickly to price changes in iron ore, which have surged recently. BHP had set annual prices for the past 40 years, per Bloomberg.