Morning Market Update

Nearly Unchanged to Begin the Week

Stocks are flat in morning trading, following personal income and spending figures that were mixed but mostly inline with expectations, and the weekend G20 meeting of world leaders, in which they pledged to cut deficits by 2013. Treasuries are modestly higher after slightly extending gains on the aforementioned personal outlays data. US equity news is light, with Apple Inc announcing favorable iPhone 4 sales, calling it the best product launch in its history, while overseas, Toyota Motor Co. issued another recall and Standard Chartered offered cautious commentary. However, traders may be treading with some caution ahead of Friday’s US labor report. In overseas action, Asia finished mixed, while Europe is higher.

As of 8:54 a.m. ET, the September S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is at fair value, and the DJIA is 8 points above fair value. Crude oil is down $0.71 at $78.15 per barrel, and the Bloomberg gold spot price is down $1.18 at $1,254.43 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.2% at 85.47.

Apple Inc. (AAPL $267) announced that the company sold over 1.7 million iPhone 4 units through June 26th, three days after its launch, and AAPL’s CEO Steve Jobs said this was the most successful product launch in the company’s history.

Shares of Toyota Motor Co. (TM $70) are under some pressure after it announced that it was recalling and temporarily halting sales of its 2010 Lexus hybrid sedan because of a potential fuel leak problem. However, the world’s largest automaker did announce that it increased global vehicle production by 28%.

Meanwhile, shares of Standard Chartered Plc. (SCBFF $26) are lower after the UK financial firm said recent market volatility has hampered sentiment and impacted its business. But the company said it posted strong first-half results supported by its Asian business. However, the company’s Finance Director said the company is comfortable with the analyst consensus for its full-year profit. Moreover, the company executive also said the company supports making stress tests results public and they are confident on what the bank will report, per Dow Jones Newswires.

Personal income and spending increase, end of week labor report coming into focus

Personal income was 0.4% higher in May, just below the Bloomberg survey of economists, which called for a 0.5% increase, while April’s 0.4% increase was revised to a 0.5% gain. Personal spending was 0.2% higher in May, compared to expectations of a 0.1% rise, and April’s flat reading was left unrevised. The savings rate increased to 4.0% in May, after an upwardly revised 3.8% reading for April.

Also, the PCE Price Index, which is released with the income and spending data, was up 1.9% y/y in May, after April’s 2.0% increase, above the consensus forecast of a 1.8% increase. The core PCE Price Index, which excludes food and energy, was 0.2% higher month-over-month (m/m), versus the 0.1% increase that economists expected. Year-over-year, core prices moved 1.3% higher, just above the consensus of economists surveyed, which called for a 1.2% gain. Treasuries are higher, extending slight gains following the income and spending data.

Also, Treasuries are modestly higher following the weekend G20 meeting that was held in Toronto, in which world leaders pledged to cut deficits by 2013, and vowed to maintain stimulus measures and take “concerted efforts” to try to ensure the continuation of the global economic recovery. Also, members endorsed a flexible timeline for implementing last year’s new bank rules the G20 members agreed to, aimed at boosting capital and increasing liquidity at financial firms.

There will be a plethora of major economic data out later this week, beginning with Tuesday’s reading of the S&P/CaseShiller Home Price Index, forecasted to decline 0.1% m/m in April, and lags last week’s sales data by a month. On Thursday, the ISM Manufacturing Index will be released, which is expected to show a decrease to 59.0 in June from 59.7 in May, with 50 being the level that separates contraction versus expansion in the economy. Despite declining, last month’s reading fell less than expected, and indicated the tenth consecutive month the manufacturing sector grew, with the overall economy gaining for the 13th consecutive month. The ISM Non-Manufacturing Index is not scheduled to be released until July 6, and is expected to increase to 55.5 from 55.4.

However, the headlining event will be nonfarm payrolls on Friday, with the Bloomberg survey of economists forecasting payrolls fell by 110,000 in June after increasing 431,000 in May, while excluding government hiring, private sector payrolls are expected to increase 113,000, after expanding by a disappointing 41,000 in May. Temporary hiring for the Census is distorting the headline number, as the government has said that Census hiring likely peaked in May. The unemployment rate is estimated to increase to 9.8% from 9.7%, as workers re-enter the workforce as job openings increase.

Other releases this week include the Conference Board’s measure of consumer confidence, MBA Mortgage Applications, the ADP Employment Change Report, the Chicago Purchasing Manufacturing Index, initial jobless claims, construction spending, pending home sales, and factory orders.

Europe advancing to begin the week

Stocks in Europe are higher in afternoon action with basic materials and industrials leading the way on the heels of the weekend G20 meeting of world leaders, and their collective pledge to combat budget deficits while being mindful of the global economic recovery. Financials are also higher to help the advance across the pond, buoyed by the G20 meeting, in which no new immediate rules for the industry were crafted, helping soothe some concerns about a potentially crippling crackdown on the industry. However, gains in the group are being limited by the aforementioned comments from UK financial firm Standard Chartered Plc.

The economic front is relatively light in the Europe, as euro-zone money supply unexpectedly fell in May, a UK housing survey increased in June, Spain’s mortgages rose in April, and Sweden’s trade surplus unexpectedly narrowed in May. Germany will report its national Consumer Price Index (CPI) later today.

The UK FTSE 100 Index is 0.1% higher, France’s CAC-40 Index is gaining 0.8%, Germany’s DAX Index is advancing 0.9%, and Spain’s IBEX 35 Index is up 1.1%, while Sweden’s OMX Stockholm 30 Index is 0.3% in the red.

Asia mixed in lackluster session

Stocks in Asia were mixed in a lackluster session, with traders digesting a few economic reports and showing little reaction to the weekend G20 meeting of world leaders. Japan’s Nikkei 225 Index was 0.5% lower, following a report that showed the nation’s retail sales fell 2.0% month-over month (m/m) in May, versus the expectation of economists, which called for sales to decline 0.1%, and on a y/y basis, sales rose 2.8%, compared to the 4.8% increase that was anticipated. Also, Japanese stocks were pressured by a decline in shares of Toyota Motor Co. on the recall announcement.

In other economic news in the region, China’s Leading Index dipped slightly from 104.15 in April to 103.44 for May and stocks finished mixed, with the Shanghai Composite Index falling 0.7%, while Hong Kong’s Hang Seng Index increased 0.2%. Meanwhile, Taiwan’s Leading Index increased by 0.3% m/m in May, and the Taiex Index rose 0.4%, while New Zealand’s NZX 50 Index fell 0.9% following reports that showed the country’s business confidence and activity outlook both declined. Stocks in Australia finished lower, as the S&P/ASX 200 Index declined 0.7%, as mining firms gave up early gains and traded below the flatline amid continued uncertainty about how the new prime minister will handle the looming hefty 40% mining industry tax. Rounding out the day, South Korea’s Kospi Index increased 0.1%, and India’s BSE Sensex 30 Index was one of the area’s best performers, gaining 1.1%.