Morning Market Update

M&A News Helps Modest Move Higher

The US equity markets are higher in early action, as traders try to find direction in a week void of any major economic releases. Sentiment was helped by the release of the NFIB Small Business Optimism Index, which showed an increasing number of firms reporting expectations of a better economy. The only other release scheduled today is wholesale inventories, which are expected to increase 1.0% in September. The US equity front was highlighted by news that Chevron Corp will acquire Atlas Energy for $4.3 billion in cash and stock, while Priceline.com reported better-than-expected 3Q earnings. Overseas, Asia finished lower, while Europe is moving to the upside. Treasuries are also higher.

As of 8:45 a.m. ET, the December S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is 6 points above fair value, while the DJIA is 17 points above fair value. Crude oil is up $0.36 at $87.42 per barrel, and the Bloomberg gold spot price is up $6.65 at $1,416.20 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% at 76.90.

Dow member Chevron Corp. (CVX $85) reached a definitive agreement to acquire Atlas Energy Inc. (ATLS $32) for $43.34 per share, which values Atlas at $4.3 billion, including the assumption of net debt. Atlas is one of the largest independent natural gas producers in the Appalachia and Michigan Basins, and a leading developer in the Marcellus Shale in Pennsylvania. CVX commented that the acquisition will “further advance Chevron’s global shale gas positions, complementing the company’s recent entrance into shale gas opportunities in Poland, Romania and Canada.”

Priceline.com Inc. (PCLN $389) reported 3Q EPS ex-items of $5.33, compared to analysts’ estimates of $4.97, while revenue for the quarter grew 37% to $1.0 billion, also higher than the $690 million estimate. Gross bookings, which represent the value of all travel services bought online through Priceline’s websites, surged 47% to $4 billion and hotel room nights jumped 54%, although airline ticket volume fell 4.6%.

Business optimism rises, wholesale inventories on deck

The NFIB Small Business Optimism Index moved higher in October, rising from 89.0 in September to 91.7, well above the expectation of economists surveyed by Bloomberg, which called for the index to improve to 90.0. The increase came as the number of firms reporting expectations of a better economy improved, while those expecting higher sales and selling prices also moved higher. Moreover, firms planning to hire over the next three months rose four points to net 1%.

Treasuries are higher in morning trading as the only other major economic release scheduled for today is September wholesale inventories, forecast to increase 1.0% m/m following a 0.8% gain in August.

Europe seeing gains amid mostly positive UK data

Stocks in Europe are nicely higher in afternoon action, highlighted by some mostly positive economic data out of the UK and an improving outlook from Vodafone Group PLC (VOD $28), the world’s largest mobile operator by revenue. U.K manufacturing production output increased 0.1% in September, the fifth straight month of expansion, although economists were looking for an increase of 0.2%. Overall industrial production in the U.K. rose by 0.4% in September, matching the forecast of economists. Meanwhile, the U.K. trade deficit narrowed as exports increased and a measure of housing prices experienced a larger decline than expected. In other economic news in the region, Germany’s consumer price index came in inline with expectations, and France’s trade balance narrowed in September.

On the European equity front, Vodafone Group PLC raised its full-year profit outlook and said it will introduce tiered data plans in an effort to take advantage of the wireless internet explosion caused by increased sales in smartphones. In other equity news, Barclays PLC (BCS $18) reported a sharp decrease in net profit in the third quarter, as its investment banking business continued to be hurt by decreases in participation in volatile markets.

The UK FTSE 100 Index is up 0.8%, France’s CAC-40 Index is 0.8% higher, and Germany’s DAX Index is up 0.7%.

Asia lower following yesterday’s advance

The equity markets in Asia were lower, as investors booked some profits following yesterday’s solid gains. Japan’s Nikkei 225 Index fell 0.4%, while stocks in China also moved lower, with the Shanghai Composite Index falling 0.8%, while Hong Kong’s Hang Seng Index plunged 1.0%. The lone economic report in the region showed that Japan’s trade balance widened considerably in September. In equity news, Skymark Airlines announced that it would buy up to six A380 airplanes from Airbus, a subsidiary of EADS (EADSY $26), worth as much as $2.1 billion. The deal would make Skymark, Japan’s third-largest carrier, the first carrier in Japan to purchase the super jumbo jet from Airbus. Meanwhile, stocks in Australia declined, with the S&P/ASX 200 Index falling 0.8 %, while the Taiex Index increased 0.2%.