Morning Market Update

Decline in Jobless Claims Boosts Stocks

Stocks are higher to start the trading day, after jobless claims fell more than expected and posted the first weekly decline in a month, and strong corporate earnings were reported in both Europe and Asia. In equity news, the bidding war for data storage company 3PAR Inc continued to make news, as Dell Inc raised its bid to $24.30 cash per share for the company, slightly higher than the $24 per share offer from Dow component Hewlett-Packard Co. Elsewhere, consumer discretionary names Guess? Inc and Rue 21 are lower despite beating Street earnings estimates, as forecasts were disappointing, and the Indian car market is targeted by both Ford Motor Co. and Toyota Motor Corp. European markets have pared early gains but are higher, Asian stocks advanced, and Treasuries are mixed.

As of 8:56 a.m. ET, the September S&P 500 Index Globex futures is 4 points above fair value, the Nasdaq 100 Index is 9 points above fair value, and the DJIA is 35 points above fair value. Crude oil is up $0.44 at $72.96 per barrel, and the Bloomberg gold spot price is lower by $1.95 at $1,238.10 per ounce.

The battle for data storage company 3PAR Inc (PAR $26) continues, as Dell Inc (DELL $12) raised its bid to $24.30 per share in cash, for a total enterprise value of $1.6 billion, slightly higher than Dow component Hewlett-Packard Co’s (HPQ $38), $24 per share offer, and Dell said that 3PAR’s Board has accepted its increased offer.

Several consumer discretionary companies reported earnings, with Guess? Inc (GES $36) reporting 2Q earnings of $0.72 per share, four cents higher than the analyst estimate, aided by a rise in North America wholesale and Asia revenue, but shares are lower after the company reaffirmed full-year financial targets, saying that economic conditions remain uncertain in many markets and consumer behavior remained cautious, although its expansion efforts in Asia and Europe were paying off. Shares of teen retailer Rue 21 (RUE $23) are lower despite reporting 2Q EPS of $0.26, one cent higher than the Street, but revenues missed expectations as the company reported record merchandise margins due to lower merchandise costs and not being overly promotional. Additionally, the company forecast 3Q EPS of $0.25-0.27, one cent less than analyst estimates, and its full-year forecast also missed expectations.

The Indian car market is in headlines after Ford Motor Co. (F $11) said it will introduce eight new vehicles in India by 2015, and export its Figo small car from India to 50 new markets, and Toyota Motor Corp (TM $69) said it would start selling its Etios hatchback in the country next year, aiming to sell 70,000 of the cars in the first year, and said it is considering selling its Lexus brand in India. The Indian consumer is a rising force in the global economy.

Jobless claims fall for first time in a month

Weekly initial jobless claims fell by 31,000 to 473,000, versus last week's figure which was upwardly revised by 4,000 to 504,000, and compared to the consensus estimate of economists surveyed by Bloomberg, which called for claims to decrease to 490,000. The four-week moving average, considered a smoother look at the trend in claims, increased by 3,250 to 486,750, while continuing claims fell by 62,000 to 4,456,000, compared to the 4,495,000 that was anticipated by economists. Treasuries reversed an early gain and are mixed.

European shares rise on bullish earnings and economic news

Stocks in Europe are higher in afternoon trading, but pared gains despite a decline in US jobless claims, after earnings reports came in better than expected, with Credit Agricole (CRARY $6), France’s largest bank by branches according to Bloomberg, reporting net income above forecasts, and L’Oreal (LRLCY $19), the world’s largest cosmetics maker, announcing a first-half profit gain of 21% and a record operating margin, aided by growth in Asia and Latin America, and recovering sales of luxury fragrances. Bullish sentiment is also gaining favor after Accor SA (ACRFY $6), Europe’s largest hotelier, announced it is targeting a full-year operating profit ahead of expectations, Air Berlin Plc said passenger trends in the first weeks of the current quarter point to improved business trends in the second half and the airline maintained its operating income guidance, while German truck maker MAN SE (MAGOY $9) said it may expand in Asia. However, shares of the world’s largest liquor maker, Diageo Plc (DEO $65) are lower after posting annual profit growth that missed analysts’ estimates on weak sales in the US and Europe.

In economic news, the leading index for the euro-zone rose 1.0% in July, after rising 0.6% in June, but the Conference Board said that despite the rise, the pace of economic activity “should ease in the short-term and pave the way for modest growth in 2011.” In separate releases, Germany’s consumer confidence rose and a measure of Italy’s consumer confidence fell. Additionally, Ireland attracted high interest in two short-term debt auctions, selling 600 million euros ($763 million) at yields that were lower than sales just prior to yesterday’s credit rating cut by Standard & Poor’s.

The UK FTSE 100 Index is up 1.0%, Germany’s DAX Index is advancing 0.7%, France’s CAC-40 Index is higher by 1.1%, and the Irish Overall Index is up 1.1%.

Asian shares attract bargain hunters, yen fall boosts Japanese stocks

Markets in Asia were higher after declines this month attracted the attention of bargain hunters and the fall in the yen boosted shares of exporters in Japan, prompting the Nikkei 225 Index to rise 0.7%. Japan’s Prime Minister Kan said that the 15-year high in the yen versus the US dollar was making the economic situation “severe,” and the Asahi newspaper said the government may ask the Bank of Japan to ease monetary policy further as part of an economic stimulus package, without saying where it got the information.

In equity news, Asahi Breweries Ltd, Japan’s second-largest beer maker said it would pay $323 million in cash for Australian soft-drink maker P&N Beverages, Woolworths Ltd (WOLWF $23), Australia’s biggest retailer, gained after saying net income for the year ending June 2011 would grow 8-11% and it would double is share buyback, and Fortescue Metals Group Ltd (FSUMY $20), Australia’s third largest producer of iron ore according to Bloomberg, reported a 14% full-year profit increase. Airlines were in focus in Asia, with discount airline Virgin Blue Holdings Ltd surged 13% after swinging to a full-year profit and agreeing to cooperate with Mid East operator Etihad Airways PJSC on flights to Europe, and Air New Zealand gained after reporting higher income results. Elsewhere in Australia, the leading index gained 0.1% in June, and the S&P/ASX 200 Index advanced 0.8%. India’s BSE Sensex 30 Index added 0.3%, with Tata Steel Ltd, the biggest state-run steelmaker, rising after a government official said steel companies may raise prices next month.

In China, the Shanghai Composite gained 0.3% and the Hong Kong Hang Seng Index fell 0.1%, after disappointing earnings results were reported from China Life (LFC $60), as premium growth slowed, as well as from wireless carrier China Unicom Ltd (CHU $13), on higher handset subsidies and marketing spending. However, Trinity Ltd, the luxury menswear unit of Li & Fung (LFUGY $5), surged nearly 10% after reporting a 161% increase in first-half profit, and coal producers advanced after Chinese Premier Wen called for accelerated consolidation of the coal industry.