Morning Market Update

Stocks Remain Higher Despite Data as Eurozone Concerns Ease

The US equity markets are higher in early action, despite a softer-than-expected read on August retail sales, as eurozone debt concerns are relatively subdued amid talks between key eurozone nations on the situation in Greece. Treasuries remain mostly lower despite the US data, which also included cooler-than-anticipated producer prices and a rise in mortgage applications. Meanwhile, a read on business inventories is due out later this morning. In equity news, The US Justice Department is seeking information from eBay Inc regarding whether employees allegedly obtained information improperly from Craigslist to develop a competing service, while Dow member General Electric Co announced that it will buyback $3.3 billion in preferred shares that were held by Berkshire Hathaway Inc. Overseas, Asian stocks finished mixed, while European equities are nicely higher as some commentary from China and the European Union regarding the debt crisis is helping sentiment.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 7 points above fair value, the Nasdaq 100 Index is 15 points above fair value, and the DJIA is 63 points above fair value. WTI crude oil is $0.70 lower at $89.51 per barrel, and the Bloomberg gold spot price is down $3.85 at $1,829.82 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% to 76.93.

The US Justice Department is seeking information from eBay Inc. (EBAY $29) regarding whether the online auction site’s employees allegedly obtained information improperly from Craigslist to develop a competing service. An eBay spokesperson said, “We will cooperate in any inquiry related to the disputes between eBay and Craigslist,” and the company believes the allegations are “without merit.”

Meanwhile, Dow member General Electric Co. (GE $15) announced that it will buyback $3.3 billion in preferred shares that were held by Berkshire Hathaway Inc. (BRK/B $69). The shares were acquired by BRK/B in 2008 in order to help GE’s financial segment boost capital during the financial crisis.

Retail sales and producer prices come up short and mortgage apps rose

Advance retail sales for August came in unchanged month-over-month (m/m), compared to the 0.2% growth that was forecasted by economists surveyed by Bloomberg, and July’s 0.5% gain was revised to a rise of 0.3%. August sales ex-autos were higher by 0.1% m/m, below the 0.2% increase that was anticipated, and July’s 0.5% gain was revised to a 0.3% rise. Sales ex-autos and gas increased 0.1% m/m in August, versus the 0.3% growth that was anticipated, and its July figure was revised from a 0.3% increase to a rise of 0.2%.

Meanwhile, the Producer Price Index showed prices at the wholesale level were flat m/m in August, after rising by an unrevised 0.2% in July, matching economists’ forecasts. Also, the core rate, which excludes food and energy, rose 0.1% m/m, below forecasts of a 0.2% gain, after rising an unadjusted 0.4% in July. On a year-over-year basis, headline producer prices were 6.5% higher, inline with projections, and the core rate was up 2.5%, compared to expectations of a 2.6% rise. July’s y/y figures were 7.2% and 2.5% higher on the headline and core levels, respectively.

In other economic news, the MBA Mortgage Application Index rose 6.3% last week, after the index that can be quite volatile on a week-to-week basis, fell by 4.9% in the previous week. The advance came as a 6.0% gain in the Refinance Index was accompanied by a 7.0% increase in the Purchase Index. The increase in the index came amid a 6 basis point (bp) drop in the average 30-year mortgage rate to a new record low of 4.17%.

Treasuries are mostly lower in morning action, with the yield on the 2-year note unchanged at 0.20%, while the yield on the 10-year note is 3 bps higher at 2.02%, and the 30-year bond rate is advancing 4 bps to 3.37%.

Later this morning, the US economic calendar will yield the release of business inventories, expected to rise 0.5% m/m in July, after increasing 0.3% in June.

Europe higher as key Greek discussion is set to begin

The European equity markets are broadly higher in afternoon action, as Germany, France, and Greece are expected to hold a conference call today amid the increasing uneasiness surrounding a potential default by Greece on its debt obligations. Also, sentiment is getting a boost from some comments of support from China and as European Commission President Jose Barroso said, “The Commission will soon present options for the introduction of euro bonds,” fostering some optimism of possible coordination in eurozone, which will likely help the region combat the festering debt contagion crisis. The upbeat sentiment across the pond is overshadowing credit rating downgrades by Moody’s Investors Service of two key French banks, Credit Agricole (CRARY $4) and Societe Generale (SCGLY $5), due to their exposure to Greek debt.

Meanwhile in other equity news, shares of BP Plc. (BP $36) is nicely higher after the Wall Street Journal reported that US regulators will say some the energy company’s partners will share the blame for the Gulf of Mexico oil spill last year. Also, Swedbank (SWDBY $12) is under solid pressure after the Swedish lender halted its share repurchases, due to the “intensified financial anxiety in Europe.”

On the European economic front, UK jobless claims rose by a smaller amount than economists forecasted in August, while eurozone industrial production reaccelerated m/m in July, but came in below expectations.

The UK FTSE 100 Index is gaining 1.4%, France’s CAC-40 Index is advancing 1.5%, Germany’s DAX Index is rising 2.4%, and Greece’s Athex Composite Index is increasing 1.9%.

Asia mixed as focus remains on European debt crisis

Stocks in Asia finished mixed on continued uneasiness regarding the eurozone debt crisis and ahead of the talks between Germany, France, and Greece amid the growing uncertainty regarding a possible Greek debt default. Japan’s Nikkei 225 Index fell 1.1% amid the skittish sentiment toward Europe and following a downward revision to Japan’s July read on industrial production, while South Korea’s Kospi Index dropped 3.5% after returning from a holiday, trading for the first session since Friday. Elsewhere, Australia’s S&P/ASX 200 Index dropped by 1.6% as the eurozone uneasiness was exacerbated by the credit rating downgrades of two French banks, offsetting a rebound in Australian consumer confidence for September.

Meanwhile, stocks in China moved higher, with the Hong Kong Hang Seng Index overcoming early losses to finish 0.1% higher as the European markets opened to the upside, while the Shanghai Composite Index advanced 0.6% following some comments from China’s Premier Wen. The leader of China noted that developed nations “must take responsible fiscal and monetary policies,” and what is most important is to prevent the spread of the European sovereign debt crisis, per Bloomberg. However, the Chinese Premier noted that the country remains ready to help Europe through its current debt crisis, but he urged Europe to recognize China as a full market economy before the World Trade Organization (WTO) does so in 2016, according to CNBC. The comments come amid reports that China had held talks regarding a possible purchase of Italian bonds. Wen added that China can best contribute to the global economic recovery by ensuring steady growth at home, maintaining that the nation “will keep overall price levels basically stable and prevent big swings in economic growth.” Finally, India’s BSE Sensex 30 Index rose 1.5%, despite a report that showed the nation’s wholesale prices came in hotter than expected, suggesting India’s government will continue to tighten monetary policy to try to combat inflation.