Morning Market Update

Early Direction is Upward as Japan Rises Following Earthquake

The US equity markets are higher in early trading following a solid advance in Japan after reports that yesterday’s magnitude 7.1 earthquake caused no major additional damage to the Northeast region of the country, which was hit by the massive earthquake and tsunami last month. Treasuries are lower amid the advance in stocks, with wholesale inventories set to be released later this morning. In equity news, Expedia Inc announced that it has received approval to split its company into two separate publicly-traded entities, while Seagate Technology Inc reinstated its dividend and issued a slightly better-than-forecasted 3Q revenue outlook. Overseas, Asia finished mostly higher, led by stocks in Japan, while European markets are gaining ground on the heels of yesterday’s bailout request by Portugal and the European Central Bank’s rate hike.

As of 8:43 a.m. ET, the June S&P 500 Index Globex future is 6 points above fair value, the Nasdaq 100 Index is 8 points above fair value, and the DJIA is 45 points above fair value. WTI crude oil is $1.23 higher at $111.53 per barrel, and the Bloomberg gold spot price is up $11.03 at $1,469.23 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.5% to 75.17.

Expedia Inc. (EXPE $22) announced that its Board of Directors has preliminarily approved a plan to separate the online travel booking company into two separate publicly traded companies. One company will be called TripAdvisor, which will include the domestic and international operations associated with the TripAdvisor Media Group. Meanwhile, the other company will remain as Expedia Inc, including the domestic and international operations of the company’s travel transaction units, such as Expedia.com, Hotels.com, and Hotwire, as well as other brands.

Seagate Technology Inc. (STX $15) announced that its Board of Directors has approved a quarterly cash dividend of $0.18 per share, with the first dividend payable on June 1, 2011 to shareholders of record as of May 2, 2011. The maker of hard disk drives and storage solutions said the dividend, which it discontinued in 2009, “reflects the strength of our balance sheet and the exceptional cash generation ability of our business.” Additionally, STX announced that it expects 3Q revenue to be approximately $2.7 billion, compared to the $2.6 billion that analysts surveyed by Reuters had expected.

Wholesale inventories to finish out the week

Treasuries are lower in morning action as there are no major US economic reports scheduled for release before the opening bell, with the yield on the two-year note up 4 bps to 0.82%, the yield on the 10-year note 5 bps higher to 3.60%, and the 30-year bond yield gaining 3 bps to 4.65%.

Shortly after the day’s trading session begins, wholesale inventories will be released, forecasted to increase 1.0% month-over-month (m/m) in February, after growing 1.1% m/m in January.

Europe higher amid strength in materials

The equity markets in Europe are nicely higher in afternoon action, with basic materials issues posting a solid advance to lead the way, aided by reports that yesterday’s earthquake that hit Japan, which caused a late-day drop in the markets across the pond, caused no major additional damage. Also, financials are gaining ground following yesterdays’ news that Portugal will seek a bailout and the European Central Bank (ECB) increased its benchmark interest rates by 25 basis points to 1.25%. The advance in the group also comes as European regulators said they will use stricter criteria when measuring the capital positions of the region’s largest banks in this year’s second round of stress tests of the sector. However, shares of TNT NV (TNTTY $26) are down sharply after the Dutch mail and logistics services company said profits at its express unit, that it intends to spin off, fell amid the negative impact on volumes of the turmoil in the Middle East and North Africa and recent floods in Australia.

In economic news, Germany’s trade surplus widened as both exports and imports grew at a level above economists’ forecasts, but the surplus was below expectations. Moreover, UK producer prices rose more than anticipated in March.

The UK FTSE 100 Index and France’s CAC-40 Index are gaining 1.0%, Germany’s DAX Index is rising 0.6%, and Portugal’s PSI 20 Index is advancing 0.6%.

Asia higher as yesterday’s earthquake in Japan inflicts minimal damage

Stocks in Asia finished higher on the heels of yesterday’s magnitude 7.1 earthquake in Japan, which did not cause major damage to the Northeast region of the nation that had been hit by March’s massive earthquake and tsunami. Japan’s Nikkei 225 Index led the advance in the region, gaining 1.9%, as shares of Tokyo Electric Power Co. (TKECY $5) rose sharply. TKECY, which is the operator of the nuclear facility that was damaged by the March quake and continues to be in critical condition, said no additional damage was done to the power plant. Meanwhile, Toyota Motor Corp. (TM $77) and Nissan Motor Co. (NSANY $17) said they will resume production at all factories in Japan from mid-to-late April, but would not operate at normal volumes for an undetermined period. TM moved nicely higher, while NSANY ticked lower. Also, shares of Fast Retailing Co. (FRCOY $14) moved solidly higher to contribute to the rise in the Japanese markets after the clothing retailer increased its full-year earnings outlook.

Elsewhere, shipbuilders showed some strength to help South Korea’s Kospi Index move 0.3% higher, while Chinese stocks finished higher, with the Hong Kong Hang Seng Index rising 0.5% and the Shanghai Composite Index gaining 0.7%. Moreover, Australia’s S&P/ASX 200 Index increased 0.7%, paced by gains in energy issues, despite the Australian government formally rejected Singapore Exchange Ltd’s (SPXCF $7) $8.8 billon takeover offer of ASX Ltd. (ASXFY $35)—the operator of Australia’s primary national stock exchange. Shares of ASXFY finished lower, but SPXCF finished with a gain. However, Taiwan’s Taiex Index inched 0.1% lower, while India’s BSE Sensex 30 Index declined 0.7%.