Morning Update

M&A Continues to Lead the Way

The equity markets are extending yesterday’s gains in morning action as another major M&A report is boosting sentiment, with CF Industries Holdings announcing a larger offer to acquire fertilizer firm Terra Industries in an attempt to thwart Norway’s Yara International’s agreement to merge with Terra. Treasuries are lower in early trading as stocks move higher and amid the absence of any major economic data today. In other equity news, Qualcomm Inc. boosted its quarterly dividend and announced a new $3 billion share buyback plan, while Staples Inc. reported 4Q earnings that missed analysts’ expectations. Overseas, Asia was mostly higher amid a rate hike from Australia and upbeat data in India, and European shares are gaining ground as Greece remains in focus.

As of 8:52 a.m. ET, the March S&P 500 Index Globex future is 6 points above fair value, the Nasdaq 100 Index is 8 points above fair value, and the DJIA is 48 points above fair value. Crude oil is up $0.69 at $79.39 per barrel, and the Bloomberg gold spot price is up $4.36 at $1,123.35 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.1% to 80.61.

Terra Industries (TRA $41) is moving higher today after CF Industries Holdings Inc. (CF $108) announced that it has offered to acquire the fertilizer firm for $37.15 per share in cash and 0.0953 of a share of CF, with a total value of about $4.7 billion. This is an upward revision to CF’s previous bid and the deal is contingent on TRA terminating its $4.1 billion merger agreement with Norway’s Yara International (YARIY $42).

Qualcomm Inc. (QCOM $36) is higher after the wireless technology firm announced that it has increased its quarterly dividend by 12%, from $0.17 per share to $0.19. Additionally, QCOM announced a new $3.0 billion stock repurchase program.

Staples Inc. (SPLS $26) reported 4Q EPS ex-items of $0.38, one penny shy of the consensus estimate of Wall Street analysts, with revenues increasing 4% year-over-year (y/y) to $6.4 billion, versus the $6.3 billion that the Street was expecting. The office supply firm issued 2010 EPS guidance that missed analysts’ estimates. Shares are lower.

Dormant US economic docket, but labor report looms

Treasuries are lower in morning action as there are no major releases on today’s economic calendar, although key employment reports are slated for the rest of the week, headlined by Friday’s nonfarm payroll report, expected to show 53,000 jobs were lost in February.

Europe led higher by financials and transportation issues as Greece remains in focus

Stocks in Europe are higher in afternoon action, led by financials on a better-than-expected report in the sector and as Greece is on the rise as it is expected to meet with the German government later this week. According to several media reports, the debt-ridden nation is anticipated to be set to unveil its plans in a meeting later this week with German officials to further combat its deficit problems and expectations have grown that the Greek nation will receive some form of eurozone aid. However, nothing has been confirmed and the reports suggest that Greece will need to prove that it has the measures in place to get its deficit under control before any aid will be granted. Greece’s Athex Composite Index is nicely higher, advancing 2.0%. Adding to some of the enthusiasm in the financial sector across the pond, Allied Irish Banks (AIB $3) is solidly higher after the company posted a full-year loss that was narrower than analysts surveyed by Bloomberg had forecasted.

Meanwhile, transportation issues are also helping the eurozone advance, with Peugeot (PEUGY $26) gaining ground after its CEO said at the Geneva auto show that the start to the year has been “better than expectations,” per Bloomberg news. Also, shares of Deutsche Lufthansa (DLAKY $15) are nicely higher to help transports issues after it announced a narrower-than-expected full-year loss.

On the economic front in the region, Switzerland’s 4Q GDP rose more than expected on a month-over-month (m/m) basis and UK PMI Construction unexpectedly declined in February. However, the headlining release was a report that showed the pace of eurozone consumer price increases slowed from 1.0% y/y in January to 0.9% in February, matching economists’ expectations.

Britain’s FTSE 100, France’s CAC-40, and Germany’s DAX Indexes all are advancing 0.9%, and Switzerland’s Swiss Market Index is up 0.5%

Most of Asia advances on Indian and Australian data, but Chinese shares slump

Stocks in Asia were mostly higher on the heels of the M&A-fueled gains in the US, with India leading the way, as its BSE Sensex 30 Index rose 2.1%, after being closed yesterday, as traders digested some favorable economic and equity data. Tata Motors (TTM $17) jumped over 12% in reaction to yesterday’s report that its February sales rose 58% y/y. Also, a report showed India’s exports rose 11.5% y/y—the third-straight monthly gain—and imports gained 35.5% y/y. Moreover, the emerging nation said yesterday that its PMI manufacturing posted the eleventh-consecutive month of expansion in February and increased the most in 1 ½ years, per Bloomberg. Australian data also came into focus in Asia, as the Reserve Bank of Australia increased its benchmark lending rate by 25 basis points to 4.00%, as expected, and a separate report showed retail sales rose more than expected on a m/m basis. Australia’s S&P/ASX 200 Index rose 0.3% in reaction to the data. Meanwhile, Japan’s Nikkei 225 Index rose 0.5%, aided by a decline in the country’s jobless rate in January, which fell from an upwardly revised 5.2% in December to 4.9%, versus the expectation that the rate would come in at 5.1%.

In other economic news in the region, South Korea’s consumer prices rose by a smaller-than-expected amount in February, and the Kospi Index finished 1.3% higher. However, stocks in China did not participate in today’s advance in the region, with Hong Kong’s Hang Seng Index declining 0.7% and the Shanghai Composite Index decreasing 0.5%, as both indexes were bogged down by profit taking. Rounding out the day, Taiwan’s Taiex Index ticked higher, gaining 0.3%.