Morning Market Update

Stocks Sink as Euro-area Debt Concerns Continue Burn

The global equity markets are under pressure as the focus continues to sit on the euro-area debt crisis and fears of contagion to other European nations are hamstringing the bulls. Treasuries are higher amid the euro-area debt uneasiness, showing little reaction to a lackluster read of US home prices and ahead of reports on consumer confidence and business activity in the Midwest. In equity news, industrial electric motor maker Baldor Electric Co agreed to be acquired by Swiss engineering firm ABB Ltd for over $4 billion, while Seagate Technology Inc terminated discussions regarding a potential going-private transaction and it authorized the repurchase of up to an additional $2 billion of its outstanding ordinary shares. Overseas, Asia was mixed with Chinese and Japanese markets lower, while European markets have given up an early advance and are lower as the debt concerns persist.

As of 8:47 a.m. ET, the December S&P 500 Index Globex future is 11 points below fair value, the Nasdaq 100 Index is 21 points below fair value, while the DJIA is 93 points below fair value. Crude oil is $0.78 lower at $84.95 per barrel, and the Bloomberg gold spot price is up $18.48 at $1,384.80 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.7% at 81.39.

In M&A news, industrial electric motor maker Baldor Electric Co. (BEZ $45) announced that it has agreed to be acquired by Swiss engineering firm ABB Ltd (ABB $20) for $63.50 per share, for a total transaction value of $4.2 billion, including the assumption of $1.1 billion in debt.

Seagate Technology Inc. (STX 14) reported that it has terminated discussions regarding a potential going-private transaction and the hard-disk drive company’s Board of Directors has authorized the repurchase of up to an additional $2 billion of its outstanding ordinary shares. The company also issued 2Q revenue guidance that matched the Street’s expectations.

Home prices soft, consumer confidence and Chicago PMI set to be released

Just before the opening bell, the S&P/Case-Shiller Home Price Index was released showing a increase in home prices of 0.59% year-over-year (y/y) in September, compared to the gain of 1.00% that economists surveyed by Bloomberg had expected. Month-over-month (m/m), home prices were 0.80% lower, compared to forecasts, which called for a decline of 0.40%. Treasuries remain higher following the home price data.

Later this morning, the economic calendar will yield the releases of the Conference Board’s Consumer Confidence Index, forecasted to improve from 50.2 in October to 53.0 in November, and the Chicago Purchasing Managers Index, expected to decline from 60.6 in October to 59.9 for November.

Europe gives up early gains as debt fears remain

Stocks in Europe are under modest pressure in afternoon action after relinquishing an early advance, with the financial sector applying the largest amount of pressure on the equity markets as concerns that the debt crisis will spread to other nations such as Portugal and Spain continue to stymie sentiment.

Meanwhile, there are some economic reports across the pond that deserve a mention, with the seventeenth straight monthly drop in German unemployment to the lowest level since December 1992, although smaller than forecasted by economists, highlighting the docket. Other reports included: an unexpected drop in UK consumer confidence, France’s producer prices rising more than expected, euro-zone consumer prices and unemployment rate both matching forecasts, while Italy’s unemployment rate rose more than anticipated.

The UK FTSE 100 Index is down 0.1%, France’s CAC-40 Index is 0.3% lower, Italy’s FTSE MIB Index is declining 0.6%, Spain’s IBEX 35 Index is decreasing 0.4%, Portugal’s PSI 20 Index is falling 0.6%, and Ireland’s Irish Overall Index is dropping 0.3%, while Germany’s DAX Index is gaining 0.2%.

Asia mixed as traders grapple with data and global concerns

The Asian equity markets finished mixed, with lingering uneasiness toward the euro-area debt situation and concerns about further actions from China to try to combat inflation pressuring stocks in China and Japan. But some favorable data aided the equity market in India and South Korean stocks rebounded from recent weakness that came amid a flare up of geopolitical concerns in the region. China’s Shanghai Composite Index fell 1.6% and Hong Kong’s Hang Seng Index declined 0.7%, while Japan’s Nikkei 225 Index dropped 1.9%. Some disappointing economic data in Japan exacerbated sentiment as construction orders and household spending both declined, housing starts fell short of economists’ expectations and the nation’s jobless rate unexpectedly rose. However, Japanese industrial production came in better than forecasted.

Meanwhile, India’s BSE Sensex 30 Index rose 0.6% as the aforementioned concerns toward Europe and China were mitigated by a report showing the country’s 3Q GDP grew by a larger amount than expected. Elsewhere, South Korea’s Kospi Index rose 0.5% despite geopolitical concerns and reports showing the nation’s Leading Index decelerated and industrial production unexpectedly fell, while Australia’s S&P/ASX 200 Index dropped 0.7% following a wider-than-expected 3Q trade deficit and despite a larger-than-expected increase in the country’s building approvals.