What’s the Story

The FTSE All-World equity index is up 0.2 per cent as the FTSE Eurofirst 300 turns an early loss into a 0.8 per cent gain and Wall Street’s S&P 500 futures point to a 0.3 per cent pop for New York later in the day.

Away from equities the mood is more circumspect, however, but still generally, if mildly, “risk on”. The dollar index is down 0.1 per cent, though gold is off $3 to $1,768 an ounce. Highly-rated fixed income is mixed, with 10-year Treasury yields down 2 basis points to 1.61 per cent, though the broadly more optimistic tone sees Bund yields gain 4 basis points to 1.46 per cent.

Commodities are struggling to join in the bullish move, with copper shedding 0.4 per cent to $3.75 a pound and Brent crude losing 77 cents to $111.62 a barrel. This leaves commodity-sensitive currencies under pressure, forcing the Australian dollar down 0.1 per cent to $1.0362.

CNBC

Data on Monday showed factory activity in China remained in contractionary territory for a second consecutive month in September, while manufacturing activity in regional peers, including export-focused Taiwan, and Indonesia pointed to a slowdown.

The HSBC Taiwan purchasing managers index (PMI) fell to its lowest level in ten months in September at 45.6, while Indonesia’s PMI weakened to 50.5 last month from 51.6 in August. A PMI reading above 50 indicates expansion, while a number below 50 implies a contraction.

Separately, exports out of Indonesia fell by a higher-than-expected 24.3 percent in August from a year earlier – reflecting weakening demand out of mainland China and the West.

Marketwatch

The final reading of the purchasing-managers’ index, or PMI, for the euro-zone manufacturing sector edged higher in September but still signaled a 14th consecutive month of shrinking activity, data compiler Markit reported Monday. The index rose to 46.1 from 45.1 in August and was revised up from a preliminary estimate of 46.0, but remained below the 50 level, indicating a drop in overall activity from the previous month. “Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September. Output, order books and exports all continued to fall at steep rates …, causing firms to cut their staffing levels once again,” said Chris Williamson, chief economist at Markit.

Marketwatch

That brings investors to the U.S. ISM index, which is set for release at 10 a.m. Eastern time. Economists surveyed by MarketWatch expect the index to finish at 49.7 in September, little changed from 49.6 in August.

As with the PMI readings, a figure of less than 50 would indicate contraction, but analysts said a reading near its current level would be unlikely to unsettle markets.

The release of September nonfarm payrolls and other labor market figures on Friday promises to be the main event for financial markets. Economists expect the data to show a net increase of 130,000 jobs in September, up from 96,000 in August.

Later, Bernanke is scheduled to deliver a speech on monetary policy.

CNBC

Ceradyne [CRDN 24.43 ] – 3M [MMM 92.42 ]is buying the industrial component maker for $35 a share, a 43 percent premium over Friday’s closing price. The deal is valued at $670 million when debt and other items are factored out.

Oracle [ORCL 31.46 ] – The company is holding its OracleWorld customer conference in San Francisco. Among the announcements: enhancement of Oracle’s Public Cloud Service, which takes direct aim at Amazon.com [AMZN 254.32 ] and Google [GOOG 754.50 ]. Oracle also struck a deal with Nokia [NOK 2.575 ] to give Oracle customers access to Nokia’s map data and location services.

DreamWorks Animation [DWA 19.23 ] – Janney Montgomery Scott has upgraded the movie studio’s shares to “buy” from “neutral,” citing benefits from a broader film slate, better international performance, and a number of other factors.

Microsoft [MSFT 29.76 ] – RBC Capital Markets has downgraded Microsoft to “sector perform” from “outperform,” largely on a valuation basis. RBC said the stock’s 15 percent year-to-date gain already reflects some of the potential gains from the Windows 8 product cycle.

Wendy’s [WEN 4.525 — UNCH ] – Janney downgraded the restaurant operator’s stock to “neutral” from “buy.” The move is based on channel checks, which indicate potentially flat same-store sales.

AutoZone [AZO 369.67 — UNCH ] – The company has authorized the repurchase of an additional $750 million in shares, adding to the auto parts retailer’s existing share repurchase program.

Airline Stocks – Airline stocks could be in play today as industry group IATA raises its airline profit forecast for 2012 and says it sees improvement in 2013. That could help shares of stocks like United Continental, Delta Air Lines, Southwest Airlines, and U.S. Airways.

Goldman Sachs [GS 113.68 ] – Barron’s said the investment bank’s shares could rise 25 percent or more next year as capital markets improve.

General Motors [GM 22.75 ] – The automaker is recalling nearly 41,000 vehicles because of a problem that could cause a fuel leak. The vehicles affected were all sold in warm-weather states, including Arizona, California, Florida, Nevada, and Texas.

Legg Mason [LM 24.68 ] – Investor Nelson Peltz’s Trian Fund Management has cut its holdings in the investment firm, according to a regulatory filing. In cutting its stake to 9.5 percent from 10.5 percent, Trian is no longer the biggest shareholder in Legg Mason — that distinction now belongs to T. Rowe Price Group [TROW 63.30 ].

Sprint Nextel [S 5.52 ] – Raymond James has downgraded the stock to “market perform” from “outperform.”

Molson Coors [TAP 45.05 — UNCH ] – Morgan Stanley has cut its rating on the beer maker’s stock to “underweight” from “equalweight.”

Callaway Golf [ELY 6.14 — UNCH ] – Raymond James has upgraded the golf equipment maker’s shares to “strong buy” from “market perform.”