After posting a solid advance last week, US equity markets are extending gains in early action, as Hurricane Irene came and went and appeared to cause less damage than projected, while a report showed personal spending rose more than economists anticipated. Treasuries are lower in early trading, ahead of reports on pending home sales and regional manufacturing, while Friday's US labor report looms on the horizon. Meanwhile, equity news is light, along with volume amid the aftermath of the storm and ahead of the Labor Day holiday weekend, with Dow member Pfizer Inc and Bristol-Myers Squibb Co announcing positive results from a study of their blood-thinning treatment. Overseas, Asian stocks finished mostly higher as Japan elected a new Prime Minster, while China announce further policy tightening, and European markets are nicely higher following a merger in the banking sector of Greece.
As of 8:51 a.m. ET, the September S&P 500 Index Globex future is 14 points above fair value, the Nasdaq 100 Index is 25 points above fair value, and the DJIA is 125 points above fair value. WTI crude oil is $1.79 higher at $87.16 per barrel, and the Bloomberg gold spot price is down $13.14 at $1,814.01 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.2% to 73.60.
Dow member Pfizer Inc. (PFE $18) and Bristol-Myers Squibb Co. (BMY $29) announced that a study revealed that their blood-thinning treatment, known as apixaban, "significantly reduced the risk" of stroke, major bleeding, and mortality, compared to a standard treatment. BMY said an application for the approval of the treatment, under the trade name Eliquis, will be filed with the US Food and Drug Administration this year, per the Wall Street Journal.
Personal spending rises more than expected to kick off a fully-loaded economic docket
Personal income increased 0.3% month-over-month (m/m) in July, inline with expectations of economists surveyed by Bloomberg, and June's 0.1% increase was revised to a 0.2% gain. However, personal spending advanced 0.8% m/m in July, compared to expectations of a 0.5% advance, and June's 0.2% decline was revised to a 0.1% drop. The savings rate as a percentage of disposable income fell to 5.0% in July, from an upwardly revised 5.5% in June.
Also, the PCE Price Index, which is released with the income and spending data, was up 2.8% year-over-year (y/y) in July, above expectations of a 2.7% increase, after June's 2.6% increase was unrevised. The core PCE Price Index, which excludes food and energy, was up 0.2% m/m, matching forecasts, while y/y, core prices moved 1.6% higher, versus the 1.5% gain that was expected.
Treasuries are lower in morning action following the data, with the yield on the 2-year note up 2 bps to 0.20%, the yield on the 10-year note increasing 5 bp to 2.25%, and the 30-year bond rate 6 bps higher at 3.59%.
Later this morning, the US economic calendar will yield the releases of pending home sales, projected to decline 0.9% m/m in July, while the Dallas Fed Manufacturing Index is expected to decline from -2.0 in July to -8.5 in August.
Throughout the week we will get plenty of key economic reports amid the backdrop of growing recession concerns, highlighted by tomorrow afternoon's release of the minutes from the August Federal Open Market Committee (FOMC) meeting, and Thursday's national ISM Manufacturing Index, expected to show a contraction in manufacturing activity, as the forecast of 48.5 would fall below the 50 level that separates contraction from expansion.
However, the economic focus will likely be on the job market, which is one side of the Federal Reserve's dual monetary policy mandate. The headlining employment report will come on the last trading day before the extended Labor Day holiday weekend, as Friday brings nonfarm payrolls, which are expected to grow by 75,000 jobs in August, after rising by a better-than-expected 117,000 in July, and private-sector payrolls are projected to increase 105,000, after advancing by 154,000 in July. The unemployment rate is forecasted to remain at 9.1% and average hourly earnings are anticipated to rise 0.2% m/m, after gaining 0.4% in July. Leading up to Friday's labor report, we will get the leading indicator of weekly jobless claims, which will be reported on Thursday. Other jobs readings include Wednesday's ADP Employment Change and the employment component of the ISM report.
Other reports on the US economic calendar for this week include: the S&P/CaseShiller Home Price Index, Consumer Confidence, MBA mortgage applications, the Chicago PMI, factory orders, construction spending, as well as 2Q nonfarm productivity and unit labor costs.
Greek bank merger supports stocks across the pond
The equity markets in Europe are higher in afternoon action, led by a rally in Greek banking stocks following the announcement that two of the nation's banks agreed to merge in an attempt to combat the threats of a slowing economy and the eurozone's sovereign debt crisis. Alpha Bank (ALBKY $1) announced that it will merge with EFG Eurobank Ergasias (EGFEY $2), with Alpha noting that, "This merger is a decisive step in the strengthening of the private sector economy at a crucial juncture in Greece's history," per Bloomberg. Shares surged on the announcement, as well as other banking stocks in the region. However, trading is lighter than usual, with the markets in the UK closed for a holiday.
In economic news in Europe, Germany's consumer prices fell 0.1% m/m in August, matching expectations, after rising 0.4% in July, while prices were 2.3% higher y/y, also inline with forecasts. Meanwhile, a read on consumer confidence in Italy fell more than anticipated in August.
France's CAC-40 Index is 1.8% higher, Germany's DAX Index is gaining 1.5%, and Italy's FTSE MIB Index is rising 2.0%, while Greece's Athex Composite Index is surging 16.2%.
Asia mostly higher following US rally
Stocks in Asia finished mostly higher on the heels of the strong advance in the US on Friday, which capped off a steep weekly advance, following Federal Reserve Chairman Ben Bernanke's Jackson Hole, Wyoming speech, where he held off on announcing further quantitative easing. Japan's Nikkei 225 Index increased 0.6%, overcoming early losses, amid the announcement that the nation's Finance Minister Noda was elected head of the Democratic Party, the country's ruling party, allowing him to succeed Prime Minister Kan, who announced his resignation last week. Elsewhere, South Korea's Kospi Index rose 2.8%, led by export issues, Australia's S&P/ASX 200 Index rose 1.5%, aided by strength in banks and mining stocks, while Hong Kong's Hang Seng Index advanced 1.4%, boosted by oil-related equities. However, China's Shanghai Composite Index fell 1.4% after the government announced further policy tightening measures, ordering banks to hold customer margin deposits in required reserves at the nation's central bank.
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