MarketWatch.com - Pre-Market Indications

Monday, September 13, 2010

Indications: U.S. stock futures point to Wall Street rise

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By Polya Lesova and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures pointed to an early rise Monday on signs of healthy economic growth in China and as global regulators gave banks as much as eight years to meet capital requirements.

Dow Jones Industrial Average futures were up 70 points to 10,529, and S&P 500 futures rose 8 points to 1,112.9. Nasdaq 100 futures gained 11.5 points to 1,901.25.

A burst of M&A also helped bolster sentiment.

  • Hewlett-Packard Co. /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 38.20, 0.00, 0.00%) said it would acquire security-software maker ArcSight Inc. /quotes/comstock/15*!arst/quotes/nls/arst (ARST 43.92, +8.82, +25.13%) for about $1.5 billion, on the heels of H-P's larger deal for data-storage company 3Par Inc. /quotes/comstock/13*!par/quotes/nls/par (PAR 32.91, -0.01, -0.03%) , for which it outflanked rival Dell.

  • Dollar Thrifty Automotive Group Inc. /quotes/comstock/13*!dtg/quotes/nls/dtg (DTG 50.54, +2.53, +5.27%) said it had agreed to be purchased by Hertz Global Holdings Inc. /quotes/comstock/13*!htz/quotes/nls/htz (HTZ 10.74, +0.69, +6.87%) for $1.43 billion, an offer that topped a bid from rival rental-car company Avis Budget Group Inc. /quotes/comstock/13*!car/quotes/nls/car (CAR 10.83, +0.61, +5.97%) .

  • Genzyme Corp. /quotes/comstock/15*!genz/quotes/nls/genz (GENZ 70.30, -0.50, -0.70%) announced it will sell its genetics unit to Laboratory Corp. of America Holdings /quotes/comstock/13*!lh/quotes/nls/lh (LH 74.27, -2.38, -3.11%) for $925 million in cash.

Among currencies, the U.S. dollar, the Japanese yen and government bonds all posted declines on reduced demand for safe-haven investments.

"We've had some really good news out of China, for a start," said Mike Lenhoff, chief strategist at Brewin Dolphin in London.

China's Trump shows no fear

Ren Zhiqiang, chairman of Hua Yuan Property Co. and one of China's most outspoken real estate tycoons, explains why he criticizes the Communist Party and what it takes to attract two million followers to a Chinese microblog.

"It almost looks as if the loss of recovery momentum in China is running its course. That's a very powerful boost to sentiment, and the markets are responding.

"I think also what really has helped sentiment has been Basel III and this fairly lengthy phase-in period for the capital requirements, which will not burden the banks," Lenhoff said.

Over the weekend, China reported a string of economic data, including a stronger-than-expected 13.9% increase in August industrial production. Retail sales also rose sharply, while the August inflation rate of 3.5% was in line with market expectations.

Policy makers in Beijing have taken measures in recent months to slow down what they see as an unsustainable growth pace. The latest data signaled that the Chinese economy is now growing at a more moderate but still robust pace, easing fears of a severe policy-driven downturn.

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Asian stocks ended higher overnight, and European stocks also rose in afternoon trading. The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 266.51, +1.81, +0.68%) gained 0.8%.

The blue-chip Dow index /quotes/comstock/10w!i:dji/delayed (DJIA 10,533, +69.55, +0.66%) rose 0.5% on Friday, finishing higher for a second consecutive week. The index is up 0.3% so far this year.

The U.S. economic calendar is thin Monday, with August federal budget data scheduled for release in the afternoon.

New bank rules in focus

In Basel, Switzerland, global regulators agreed Sunday on new rules to strengthen the existing capital requirements for banks.

The minimum common equity requirement will be raised from 2% to 4.5%. Banks will also be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress, bringing the total common equity requirements to 7%.

Regulators settled on a long timeline for implementing the rules, with some of the requirements becoming fully effective only in 2019.

Banking shares rose across Europe following the new rules. Germany's Commerzbank AG /quotes/comstock/11e!fcbk (DE:CBK 6.42, +0.12, +1.97%) gained 2.3%, France's BNP Paribas /quotes/comstock/24s!e:bnp (FR:BNP 55.98, +1.14, +2.08%) rose 1.7% and the U.K.'s Barclays PLC /quotes/comstock/23s!a:barc (UK:BARC 323.70, +4.60, +1.44%) advanced 1.3%.

While the new bank rules and Chinese data are the main factors boosting sentiment, "the latest round of earnings results was very, very good," Lenhoff said. "We're seeing a lot of corporate activity, a lot of mergers and acquisitions, and I think that is an expression of confidence in the global economy."

The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.2891, +0.0186, +1.4640%) , meanwhile, rallied 1.2% to $1.2826.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 81.76, -0.94, -1.13%) , which tracks the performance of the greenback against a basket of other major currencies, dropped 0.7% to 82.132.

Crude-oil futures rose 46 cents to $77.91 a barrel in electronic trading on Globex.

Polya Lesova is MarketWatch's London bureau chief. Kate Gibson is a reporter for MarketWatch, based in New York.

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