Morning Market Update

Stocks Glide as Euro-area Debt Fears Subside

The global equity markets are in rebound mode following the recent string of losses as expectations that Ireland will receive financial support from Europe’s bailout package are helping stocks find support. Meanwhile, gains are being maintained even as US weekly initial jobless claims rose, as economists had expected a larger gain in unemployment claims. Treasuries are lower amid the improved global sentiment and ahead of reports on manufacturing activity in Philadelphia and the US Index of Leading Economic Indicators. In equity news, Limited Brands Inc and Applied Materials both topped the Street’s profit projections, while the IPO of General Motors will commence today. Overseas, Asia markets were broadly higher, led by Japan, while European markets are gaining solid ground as the eased debt concerns are being complimented by upbeat economic and equity news across the pond.

As of 8:48 a.m. ET, the December S&P 500 Index Globex future is 14 points above fair value, the Nasdaq 100 Index is 26 points above fair value, while the DJIA is 106 points above fair value. Crude oil is $1.50 higher at $82.54 per barrel, and the Bloomberg gold spot price is up $19.50 at $1,355.50 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.7% at 78.50.

Limited Brands Inc. (LTD $32) reported 3Q EPS of $0.18, one penny above the consensus estimate of analysts surveyed by Reuters, with revenues increasing 11.5% year-over-year (y/y) to $2.0 billion, roughly inline with the Street’s forecasts. The retailer also increased its full-year EPS outlook, announced a $3 per share special dividend, and said it will repurchase $200 million of its shares.

Applied Materials Inc. (AMAT $12) announced fiscal 4Q earnings ex-items of $0.36 per share, above the $0.31 expectation of analysts, as revenues grew 89% y/y to $2.9 billion, topping the $2.6 billion that the Street forecasted. The semiconductor equipment maker issued 1Q guidance that was inline with expectations.

General Motors Co. (GM $33) is a company in focus today as the US automaker is set to conduct its initial public offering, at a price of $33 per share. The Wall Street Journal reported that the company will raise about $20.1 billion and the US Treasury’s stake in the automaker could be reduced to as low as 33%, from 66%.

Jobless claims tick higher, Philly Fed and Leading Indicators after the opening bell

Weekly initial jobless claims increased by 2,000 to 439,000, versus last week's figure which was upwardly revised by 2,000 to 437,000, and versus the consensus estimate of economists surveyed by Bloomberg, which called for claims to increase to 441,000. The four-week moving average, considered a smoother look at the trend in claims, declined by 4,000 to 443,000, and continuing claims fell by 48,000 to 4,295,000, matching the forecast of economists. Treasuries are lower, modestly extending losses following the employment data.

Later this morning, the economic calendar will yield the releases of the Philly Fed Manufacturing Index, forecasted to improve from 1.0 in October to 5.0 November, where zero is the separation point between expansion and contraction, and the Index of Leading Economic Indicators, expected to increase 0.5% for October, after rising 0.3% in September.

Europe enjoying broad-based gains as debt fears wane

The equity markets in Europe are nicely higher across the board, with materials and financials helping the lead the way, as exacerbated concerns regarding the sovereign debt health of the euro-zone were eased by growing expectations that Ireland will receive some support for its troubled banking sector. Ireland, which has been at the heart of the recent flare up in euro-area debt fears, soothed sentiment after its central bank Governor Patrick Honohan said the nation may ask for “tens of billions” of euros to support its banking sector as the nation continues to meet with a team of European officials comprised of members from the European Central Bank (ECB), European Union (EU), and International Monetary Fund (IMF). Also, successful debt auctions of ten and thirty year maturities in Spain, another euro-zone peripheral nation that is strapped with high debt, are helping boost optimism across the pond.

Meanwhile, there are some positive equity stories that are helping support stocks in Europe. Shares of Air France-KLM (AFLYY $18) are solidly higher after Europe’s largest airline posted better-than-forecasted 1Q profits and increased its full-year earnings outlook, while SABMiller Plc. (SBMRY $33) is gaining sizeable ground after the brewer posted a solid increase in first half profits.

Also, the economic calendar is contributing to the advance, with a report showing UK retail sales grew more than economists’ forecasted month-over-month (m/m) in October, which offset a separate report showing UK government borrowing increased more than anticipated.

The UK FTSE 100 Index and Germany’s DAX Index are 1.4% higher, France’s CAC-40 Index is gaining 1.6%, Spain’s IBEX 35 Index is advancing 1.5%, and Ireland’s Irish Overall Index is rising 2.1%.

Asia rebounds as global concerns ease

Stocks in Asia were broadly higher as concerns of the increased likelihood of policy tightening in China subsided somewhat and sentiment toward the euro-area debt crisis was soothed by the willingness of Ireland to work with European officials to try to tackle the problems facing its banking sector. Stocks in China pared some of their recent steep declines, with the Shanghai Composite Index rising 0.9% and the Hong Kong Hang Seng Index gaining 1.8%. Meanwhile, Japanese equity markets led the way, with the Nikkei 225 Index increasing 2.1%, as the aforementioned eased concerns were complimented by the continued decline in the Japanese yen versus the US dollar, which came close to a seven-week low and boosted the outlook for export activity in the nation. Moreover, South Korea’s Kospi Index posted a solid 1.6% advance, aided by a report that showed department store sales jumped over 13% y/y in October. However, the advance in the resource-reliant country of Australia was limited by the recent slide in crude oil prices and a report that showed the nation’s average weekly wages grew by a smaller amount than anticipated in August. The S&P/ASX 200 Index rose 0.3%. Finally, Taiwan’s Taiex Index increased 0.3% after a report showed the nation’s 3Q GDP expanded by a larger-than-forecasted amount.