[R]1:00PM NY, 5:00 PM Frankfurt European markets gained ground, supported by U.S. gains.[/R]

European stock markets posted solid gains to close in the positive territory, helped by strength on Wall Street. Weaker shares of the German SAP failed to hurt sentiment.

The tech sector was in focus after the software giant admitted to ‘inappropriate downloads’ in response to a lawsuit by Oracle. SAP lost 2.5%. Still in the sector, Nokia added 2.2% after its 50-50 venture with Siemens, Nokia Siemens Networks, won a $900 million contract from India's Bharti. Among tech stocks gainers, Getronics surged 19%, while Business Objects rose 2.3% after UBS upgraded the firm to buy from neutral.

In deal news, French food giant Danone rose 1.25% after it agreed to sell its biscuit business to U.S. rival Kraft Foods for 5.3 billion euros ($7.2 billion) in cash. The U.K. FTSE 100 rose 0.68% at 6,635.10, the German DAX climbed 1.16% at 8,050.64 and the French CAC-40 gained 0.71% at 6,069.84.


[R]11:30AM Market averages traded up, supported by deal news. Airlines rallied.[/R]

U.S. stock averages continued to trade higher, as a smaller-than-expected drop in factory orders and fresh merger deals generated positive sentiment. The Commerce Department reported that orders for U.S. factory goods fell 0.5% in May, compared with predictions of a decline of more than 1%.

Airline stocks posted significant strength in late morning trading, with Continental Airlines (CAL: chart), up 9.4%, leading the sector higher. Other notable gainers included brokerage, networking, and computer hardware stocks.

In late morning trading, the Dow Jones industrial average rose 45.04, or 0.33%, to 13,580.47. Among blue chips, Caterpillar (CAT: chart) dropped 3% after it was downgraded to reduce from neutral at UBS, while Merck & Co. (MRK: chart) advanced 0.8%. Dow members General Motors (GM: chart) and Ford (F: chart) declined 2.5% and 0.6%, respectively ahead of June auto sales data.

The Standard & Poor's 500 index was up 5.01, or 0.33%, at 1,524.44, and the Nasdaq composite index was up 9.47, or 0.36%, at 2,641.77. Bonds fell after the better-than-anticipated factory orders data. The yield on the benchmark 10-year Treasury note rose 5.03% from 4.99% late Monday.


[R]New factory orders dropped 0.5% in May.[/R]
Tuesday morning, the Department of Commerce released its report on new orders for manufactured goods in the month of May, showing that orders fell by much less than economists had been expecting. The report showed that new orders for manufactured goods fell 0.5 percent in May following an upwardly revised 0.5 percent increase in April. Economists had expected orders to fall 1.2 percent compared to the 0.3 percent increase originally reported for the previous month.

The relatively modest decrease in orders for manufactured goods came as a 2.4 percent drop in orders for manufactured durable goods more than offset a 1.6 percent increase in orders for manufactured non-durable goods. The Commerce Department also said that shipments of manufactured goods rose 1.0 percent in May, matching the increase that was seen in the previous month. The report also showed that inventories of manufactured goods edged up 0.3 percent in May after rising 0.4 percent in April. Inventories of manufactured goods have increased in fourteen of the last fifteen months.


[R]9:45AM Market opened higher, boosted by takeover deals.[/R]

U.S. stocks opened higher, extending recent advance on the back of more deal news before the Independence Day break. However, gains were modest as investors remained cautious ahead of data on the manufacturing and housing sectors. The latest takeover news included a $7.2 billion bid from Kraft Foods (KFT: chart) to buy Danone's biscuit and cereal unit. Kraft's shares fell 1.3%.

Automakers are in focus Tuesday, due to the release of June auto sales. Ford (F: chart) lost 3.4%, while General Motors (GM: chart) dropped 3% as another month of weak sales reports is expected. Ford also said that it is offering a premium to holders of its 5-year-old debt securities to convert them to common stock.

The Dow Jones industrial average was up 9.92 points, or 0.07%, at 13,545.35. Among blue chips, Caterpillar (CAT: chart) dropped 3% after it was downgraded to reduce from neutral at UBS, which also cut the company's price target to $70 from $78. The Standard & Poor's 500 Index was up 2.33 points, or 0.15%, at 1,521.76. The Nasdaq Composite Index was up 3.38 points, or 0.13%, at 2,635.68.


[R]9:00AM U.S. stock futures pointed higher ahead of Independence Day. Auto sales were in focus.[/R]