Morning Market Update

Gains Extend After Slightly Better-Than-Expected Jobs Data    

The US equity markets added to early gains following the release of the March US nonfarm payroll report, which showed headline and private-sector payrolls grew by more jobs than forecasted, with both posting gains of over 200,000, while the unemployment rate ticked lower again. Treasuries are lower after extending losses on the employment report, while a read on national manufacturing activity will be released after the opening bell. M&A news is also helping sentiment, as NASDAQ OMX Group Inc and IntercontinentalExchange announced that they have made a joint proposal to acquire NYSE Euronext for about $11.3 billion, a premium compared to the previous offer from Deutsche Boerse. In other equity news, General Motors announced that it sold its stake in Delphi Automotive, netting a gain of $1.6 billion, but Logitech International lowered its full-year outlook on weakness in Europe, Middle East and Africa. Overseas, Asia was mixed, with China posting accelerated manufacturing activity, while European markets are higher led by financials following yesterday’s stress test results out of Ireland. 

As of 8:49 a.m. ET, the June S&P 500 Index Globex future is 7points above fair value, the Nasdaq 100 Index is 14 points above fair value, and the DJIA is 65 points above fair value. WTI crude oil is $0.67 higher at $107.39 per barrel, and the Bloomberg gold spot price is down $9.13 at $1,423.18 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.5% at 76.38.

In M&A news, NASDAQ OMX Group Inc. (NDAQ $26) and IntercontinentalExchange (ICE $124) announced that they have made a joint proposal to acquire NYSE Euronext (NYX $35) for $42.50 per share in cash and stock, or about $11.3 billion. The global securities exchanges said, based on yesterday’s closing prices, the proposal represents a 19% premium over the price proposed by Deutsche Boerse (DBOEY $8) to acquire NYX. Under the terms of the deal, NYX shareholders would receive $14.24 per share in cash, plus 0.4069 shares of NDAQ common stock and 0.1436 shares of ICE.

Elsewhere, General Motors Co. (GM $31) announced that it sold its remaining stake in Delphi Automotive, a parts supplier it spun off in 1999, for $3.8 billion, including fees, netting a gain of about $1.6 billion. GM had acquired the stake in 2009, when Delphi exited bankruptcy. GM and the rest of the auto industry will remain in focus throughout the day as March US auto sales reports will pour in.

Logitech International (LOGI $18) is down sharply after the digital device maker lowered its full-year outlook due to weakness in its Europe, Middle East and Africa (EMEA) retail sales region, in which it has experienced “lower than expected demand” from both distribution partners and consumers. LOGI expects sales in the range of $2.35-2.37 billion, down from the previous range of $2.4-2.42 billion, and its operating income outlook for the year was also lowered by $30 million. Analysts surveyed by Reuters had expected the company to post full-year revenues of $2.39 billion.

March labor report reveals job growth of over 200k, national manufacturing read to follow

Nonfarm payrolls rose by 216,000 jobs in March, compared to the consensus estimate of economists surveyed by Bloomberg, which forecasted a 190,000 increase, and the initial 192,000 gain seen in February was revised to a growth of 194,000 jobs. Additionally, excluding government hiring and firing, private sector payrolls increased by 230,000 in March, versus the forecast of a gain of 206,000, after expanding by an upwardly revised 240,000—from an initially reported 222,000 gain—in February. The unemployment rate ticked lower again, declining from 8.9% to 8.8%, compared to expectations for the rate to remain unchanged. However, average hourly earnings were flat month-over-month (m/m), versus the Street's forecast of a 0.2% increase, along with average weekly hours which remained at an upwardly revised 34.3—from an initial report of 34.2—matching expectations.

Treasuries extended losses following the employment data, with the yield on the two-year note up 7 bps to 0.89%, the yield on the 10-year note 4 bps higher to 3.51%, and the 30-year bond yield gaining 3 bps to 4.54%.

Later this morning, the economic calendar will yield the releases of the ISM Manufacturing Index, forecasted to show a slight decline from 61.4 in February to 61.0 in March, as well as construction spending, expected to decline 0.2% m/m in February.

Financials lead solid advance in Europe

The equity markets in Europe are nicely higher in afternoon action, with financials rebounding in the wake of yesterday’s late-day release of the results from Ireland’s stress test of its banking sector. The report revealed that an additional 24 billion euros ($34 billion) in capital needed by the nation’s largest banks to provide for future loan losses. But the results were relatively better than forecasted, as economists surveyed by Bloomberg had expected that 27.5 billion euros would be needed, and Ireland had set aside 35 billion euros ahead of the release. Moreover, sentiment regarding the troubled Irish financial sector was boosted after Ireland ruled out forcing senior bondholders to shoulder some of the costs of restructuring its banking sector, per Bloomberg. Financials in Ireland are surging, led by a 40% jump in shares of Bank of Ireland (IRE $2) after it said it plans to cover its 5.2 billion euro ($7.3 billion) shortfall that was revealed in the stress test in the open markets and support from existing shareholders.

The economic front across the pond is being overshadowed by the slightly better-than-forecasted US labor report, the focus on the financial crisis, and reports of accelerating manufacturing activity in China, which are all boosting sentiment. However, a plethora of manufacturing reports were released and were mostly below economists expectations, headlined by reports out of Italy, France, and the UK, which led to the composite euro-zone manufacturing report also falling short of forecasts, while activity in Germany—Europe’s largest economy—was unchanged. Elsewhere, the euro-zone unemployment rate was inline with expectations, ticking lower from an upwardly revised 10.0% to 9.9%.

The UK FTSE 100 Index is 1.1% higher, France’s CAC-40 Index is up 0.9%, Germany’s DAX Index is gaining 1.4%, and Italy’s FTSE MIB Index is increasing 0.3%, while Ireland’s Irish Overall Index is advancing 1.8%.

Asia mixed as data comes into focus

Stocks in Asia finished mixed amid some cautious trading ahead of Friday’s US labor report, and as traders digested some manufacturing data out of China and India, while getting a look at manufacturing sentiment in Japan before the massive earthquake and tsunami hit the nation. Japan’s Nikkei 225 Index declined 0.5% even as the yen continued to weaken. Meanwhile, the Bank of Japan (BoJ) released its 1Q Tankan Survey of Large Manufacturers, which rose from 5 in 4Q to 6, but it was noted that 72% of the responses to the survey were received by March 11, the day of the natural disaster that hit the nation. The BoJ will release a breakdown of pre-disaster and post-disaster responses on April 4, per Bloomberg. In equity news, shares of Tokyo Electric Power Co. (TKECY $6) found further pressure as the government announced that it is considering supporting the operator of the nuclear facility that was damaged by the natural disaster and is on the verge of a meltdown. Shares have fallen by nearly 80% since the tragedy in Japan, per Bloomberg.

Elsewhere, there were some other key reads on manufacturing activity in the region, with two separate reports showing activity in China accelerated for the first time since November, but were slightly below economists’ expectations. Stocks in China moved higher, with the Shanghai Composite Index rising 1.3% and the Hong Kong Hang Seng Index gaining 1.2%. Meanwhile, India’s manufacturing report showed activity was unchanged but remained at a level depicting expansion, and BSE Sensex 30 Index declined 0.1%. Rounding out the day, Australia’s S&P/ASX 200 Index rose 0.5% and South Korea’s Kospi Index increased 0.7%.