Morning Market Update

Shortened Week Begins With Global Equity Wins

US equity markets are nicely higher in morning action as traders get back to their desks following a long holiday weekend, greeted by solid gains in Asia and Europe to help support the early advance. However, Treasuries are gaining modest ground in early trading despite the global advance in the equity markets, as traders are awaiting the morning release of the ISM Non-Manufacturing Index, which will likely be the biggest piece of data released this week on the US economic calendar. Meanwhile, US equity news is light, with Par Pharmaceuticals Companies announcing the FDA has approved a treatment for nausea in patients receiving chemotherapy and radiotherapy. In global equity news, BP Plc is advancing after an analyst upgrade and comments from a Libyan oil industry executive that BP’s shares are a bargain, and UK builder Balfour Beatty Plc offered upbeat guidance on its orders. Elsewhere, overseas, China shares led the advance in Asia, along with stocks in Australia after the nation’s central bank kept its benchmark interest rate unchanged.

As of 8:45 a.m. ET, the September S&P 500 Index Globex future is 9 points above fair value, the Nasdaq 100 Index is 22 points above fair value, while the DJIA is 78 points above fair value. Crude oil is up $0.99 at $73.13 per barrel, and the Bloomberg gold spot price is down $5.95 at $1,203.33 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 84.26.

Generic drug maker Par Pharmaceuticals Companies (PRX $26) announced that the US Food and Drug Administration (FDA) approved Zuplenz, a treatment developed by PRX subsidiary Strativa Pharmaceuticals, for nausea in patients receiving chemotherapy and radiotherapy. Strativa said the FDA approval of the treatment marks an important milestone for the company.

The week’s headlining economic report due out after the opening bell

Treasuries are higher in morning action as traders come back from the holiday weekend, awaiting this morning’s release of the ISM Non-Manufacturing Index, which will likely be the pinnacle for this week’s relatively light economic calendar. The gauge of service sector activity is forecasted to decline to 55.0 in June from 55.4 in May, which would mark the eighth month in the past ten months above the 50.0 level that separates expansion from contraction, but would be the first decrease after the index was flat for three straight months. The report is the companion to the ISM Manufacturing Index, which posted a worse-than-expected decline to 56.2 in June from 59.7 in May, driven by a sharp drop in the prices paid component, which fell from 77.5 in May to 57.0 in June, along with reductions in the rate of growth for new orders, export orders and production.

Companies are still struggling to find pricing power, particularly those levered to the US consumer, while deep cyclicals, such as industrials, have fared better due to growth in emerging markets. The Fed has the dual objective of maximum employment and stable prices and remains on hold as

Other releases on this week’s US economic calendar include MBA Mortgage Applications, initial jobless claims, wholesale inventories and consumer credit.

Europe advancing as materials find support

Stocks in Europe are solidly higher in afternoon trading, led by steep gains in materials and financial issues as traders are seeking shares of sectors that have been pressures the most amid the recently resurfaced pessimism toward that global recovery courtesy of disappointing US data, euro-area debt uneasiness, and concerns about a slowdown in China. Shares of BP Plc (BP $29) are solidly higher for a second-straight session, following an analyst upgrade of the energy firm that has tumbled as the costs of the Gulf of Mexico oil leak have surged. BP is also getting some support from the announcement that it will not issue new equity to raise capital to cover the costs, and from yesterday’s comments from a Libyan oil industry executive that BP’s shares are a bargain and he would recommend the nation’s sovereign wealth fund invest in the oil company. In other equity news across the pond, UK builder Balfour Beatty Plc. (BAFBF $4) is higher after it offered upbeat guidance on its orders.

Economic news is light in Europe, with the lone major report being a larger-than-expected drop in Switzerland’s Consumer Price Index, which fell 0.4% month-over-month (m/m) in June, compared to the 0.1% decline that was expected by economists.

The UK FTSE 100 Index is 2.4% higher, France’s CAC-40 Index is up 3.2%, Germany’s DAX Index is gaining 2.5%, and Switzerland’s Swiss Market Index is advancing 2.0%.

Asia moves higher as Chinese shares led the way

Stocks in Asia were broadly higher, as Chinese shares paced the advance with the Shanghai Composite Index gaining 1.9% and Hong Kong’s Hang Seng Index increasing 1.2%. Gains in the region came amid some bargain hunting among traders of issues that have come under pressure recently amid recently resurfaced global recovery continuation concerns. Australian stocks also contributed to the advance in Asia, with the S&P/ASX 200 Index rising 1.3%, after the Reserve Bank of Australia kept its benchmark interest rate unchanged at 4.5%, which was expected, and saying that the global economy continued to expand over recent months and growth in Asia and Latin America, to date, is “very strong.” The RBA added that it views its current policy as appropriate and the current setting of monetary policy is resulting in interest rates to borrowers around their average levels of the past decade. Moreover, Australia reported that its trade surplus increased to level that far exceeded economists’ forecasts.

Meanwhile, Japan’s Nikkei 225 Index rose 0.8%, even after the nation’s Leading Index deteriorated to 98.7 in May, from 101.7 in April, compared to the 98.9 reading that economists were anticipating. Elsewhere, South Korea’s Kospi Index increased 0.6%, Taiwan’s Taiex Index rose 1.5%, and India’s BSE Sensex 30 Index gained 1.0%.