Morning Market Update

China Tightening Worries Pressure Global Markets

US equities are under some pressure in early action, as traders continue to digest the hotter-than-expected inflation data in China, which is fostering worries that it could lead to further tightening in the economy that has led the global recovery. Meanwhile, an earnings miss by Dow member Walt Disney Co is adding pressure to blue chips, while graphics chip maker Nvidia beat the Street’s estimates, but revenues continued to fall on weak demand. Treasuries are mixed with weakness at the long-end of the curve, as traders await the November preliminary reading of the University of Michigan Consumer Sentiment Index which comes after the opening bell. Overseas, Asia suffered heavy losses amid the aforementioned concerns on China, while European markets are under modest pressure as concerns over the sovereign debt situation in Europe have eased a bit following a statement from European leaders at the G-20 summit.

As of 8:42 a.m. ET, the December S&P 500 Index Globex future is 7 points below fair value, the Nasdaq 100 Index is 11 points below fair value, while the DJIA is 49 points below fair value. Crude oil is $1.59 lower at $86.22 per barrel, and the Bloomberg gold spot price is down $19.83 at $1,388.83 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.4% at 77.84.

Dow component Walt Disney Co. (DIS $36) reported 4Q EPS ex-items of $0.45, which fell short of analysts’ estimates of $0.46, on a 1.3% decline in revenues to $9.74 billion, also below estimates for $9.95 billion. The company’s largest unit, which includes its television stations ESPN and ABC Family, saw a 6.6% decline in revenues during the quarter, while its parks and resorts division suffered an 8.1% fall on higher costs, as well as lower attendance and hotel occupancy. Despite the results, Disney CEO Robert Iger said, “our brand and franchise portfolio is stronger than ever and we’re confident our global growth strategy positions the company well to thrive in the coming years.”

Nvidia Corp. (NVDA $13) reported fiscal 3Q earnings of $0.15 per share, a penny higher than the Street’s forecast, but 21% lower than the same period a year ago. The graphic video chip maker said revenues fell 6.6% to $843.9 million, as demand for its products continued to wane. However, the company’s CEO said, “We have turned the corner. We have restored our speed of execution and are regaining share in desktops.”

G-20 delays imbalance decision, consumer sentiment on tap

Talks among G-20 leaders concluded, however, by the close of the discussions, any deal to address economic imbalances was shelved, because there is disagreement among the participants as to what is driving the imbalances globally and what role other variables, like currencies, play in such gaps. The issue has dominated the summit, as members are hoping to prevent what has been christened a “currency war” leading up to the meeting, and to build upon the agreement to not pursue competitive currency devaluations that came following the group’s October gathering. The US has pushed for the Chinese currency, the yuan, also known as the renminbi, to appreciate more, however China has been able to gain support in its stance that the U.S. isn't living up to its responsibility as an issuer of a global reserve currency and obligation to stabilize capital markets by pursuing more quantitative easing.

The only item on today’s US economic calendar is the November preliminary reading of the University of Michigan Consumer Sentiment Index, where economists are forecasting the index to rise to 69.0 from 67.7 in October.

Debt anxieties ease a tad, worries switch to China

Stocks in Europe are modestly lower in afternoon action as concerns over further tightening in China re-surfaced following reports that showed prices at the consumer and producer level came in higher than anticipated. As well, a plethora of 3Q GDP data from across the pond is also dampening sentiment, as France, Italy and the euro-zone all reported revisions that were below economists’ expectations, while Germany—Europe’s largest economy—showed a slight uptick in its report. Basic material stocks are providing some of the pressure, led by shares of BHP Billiton Plc (BHP $90), the world’s largest mining company per Bloomberg, and Rio Tinto Plc (RIO $43), on a drop in copper prices. In other economic news in the region, consumer confidence in the UK ticked slightly lower.

Euro-area debt concerns were addressed at the G-20 summit of world leaders, in an effort to soothe investors’ nerves over Ireland’s situation, amid speculation that the European Union (EU) will need to step in to bailout the nation. In a combined statement issued by France, Germany, Italy, Spain and the UK, officials said that any mechanism to resolve the crisis that would force bondholders to share in the cost would not apply to outstanding debt and would only come into effect after 2013. German Chancellor Angela Merkel reiterated that the EU financial aid package put into effect in May was “in place” if needed.

The FTSE 100 Index is down 0.3%, France’s CAC-40 Index is 1.0% lower, Germany’s DAX Index is declining 0.1%, Spain’s IBEX 35 Index is down 0.4%, Italy’s FTSE MIB index is 0.1% lower, but Ireland’s Irish Overall Index is up 0.4%.

Asia falls hard

Stocks across Asia fell markedly on fears that China will need to tighten monetary policy after a slew of data yesterday showed that growth and prices in the Asian nation continue to move at a heated clip. The Shanghai Composite Index fell 5.2%, the most in 14 months, with commodity, airline and automotive shares being the hardest hit, while the Hong Kong Hang Seng Index shed nearly 2.0%. South Korea’s Kospi index declined only 0.1%, as technology and financial shares offered some support following losses yesterday due to the expiration of options. A larger-than-than expected drop in India’s industrial production pressured the BSE Sensex 30 Index, which dropped 2.1%, while Japan’s Nikkei 225 Index saw a 1.4% decline.