U.S. Markets open in 1 hr 33 mins

U.S. stock futures follow Europe higher

David Russell (david.russell@optionmonster.com)

Equity markets are beginning the fourth quarter on a positive note as economic news from Europe comes in better than expected.

S&P 500 futures are indicating a gain of about one-third of 1 percent. The German DAX and
French CAC-40 both climbed by about 1 percent after Eurozone manufacturing contracted less than feared in September. Stress tests of Spanish banks announced today also showed a smaller-than-expected capital deficit.

Asian markets were mixed in the overnight session after Friday's decline in U.S. markets. Chinese markets are closed for the "Golden Week" holiday.

Today's advance follows a modest pullback in the S&P 500 last week as the index attempts to consolidate at its highest levels since early 2008--undoing the technical damage of the subprime crash that year. It has remained above its 30-day moving average since early August, and today's strength appears to reflect a continuation of that trend.

This morning's gains also come against a backdrop of relative weakness in commodity markets and a lack of clear direction in foreign exchange. Oil, copper, and silver are down by more than one-third of 1 percent while agricultural foodstuffs are little-changed. Natural gas is the only major product in the green, continuing its recent strength.

It's unusual to see European stocks higher by more than 1 percent at the same time that oil is down, a divergence may indicate a growing confidence in equities as an asset class. The gains are especially noteworthy because they fly in the face of negative outlooks from major companies including FedEx and Intel before earnings season later this month.

The euro is modestly higher against the U.S. dollar, but other currencies that usually indicate risk appetite, such as the Australian and Canadian dollars, are roughly flat so far.

In company-specific news, body-armor maker Ceradyne accepted a $35-a-share takeover by industrial conglomerate 3M. That's a premium of more than 40 percent over its closing price on Friday.

Investors today will be looking forward to the purchasing managers index at 9 a.m. ET, followed one hour later by the ISM manufacturing index and construction spending. Federal Reserve Chairman Ben Bernanke is also scheduled to speak at 12:30 p.m. ET. (See related story )

More From optionMONSTER