Overnight Developments

• European stocks are higher with the European DJ Stoxx 50 up +0.59% and Sep S&Ps up +0.10 of a point, both at 2-week highs. The dollar is weaker while Treasuries and most commodities are little changed as the markets anxiously await the monthly US payrolls report. Speaking to reporters in Seoul today, ECB Council member Draghi said that while the economic recovery remains "fragile," it is becoming more broad-based. Draghi, who is also the governor of Italy’s central bank, said the ECB’s monetary stance would remain "accommodative." The euro strengthened after ECB Council member Wellink told Market News International that the yen’s appreciation against the euro is helping some Euro-Zone exporters. Yell Group Plc rose 6.2% as the publisher of the UK’s yellow pages directories rallied for a third straight day on takeover speculation, while Theolia SA plunged 9.4% after the French wind-power company reported a first-half net loss of 24.2 milli on euros, larger than the 14.1 million-euro loss a year earlier.
• The Asian markets today closed mostly higher with Japan up +0.57%, Hong Kong +0.49%, China -0.04%, Taiwan +1.42%, Australia +0.19%, Singapore +0.53%, South Korea +0.16%, India -0.09%. Asian stocks rose after US reports showed an unexpected increase in pending home sales and improved retail sales that eased concerns of an economic slowdown. Sony, the electronics maker that gets 22% of sales from the US, rose 2.4% and James Hardie Industries SE, the biggest seller of home siding in the US, climbed 2.1%. Technology stocks also advanced with Wintek Corp., a component maker for Apple’s iPads, surging 7% after saying its Aug revenue rose 17% m/m, while Chimei Innolux, Taiwan’s largest maker of liquid-crystal displays, closed 6.9% higher amid speculation that Q4 demand for consumer electronics will improves from the previous 3 months. Japan’s economy probably grew more than three times the government’s initial estimate of +0.4% annualized in Q2 after a Finance Ministry repo rt today showed Japan Q2 capital investment excluding software fell -1.5% y/y, its smallest decrease since 2007 as a result of strong overseas demand. Japan will release its revised Q2 GDP growth estimate on Sep 10.

Overnight U.S. Stock News

• Sep S&Ps this morning are up +0.10 of a point. The stock market yesterday finished on its high with modest gains (Dow +0.49%, S&P 500 +0.91%, Nasdaq Composite +1.06%). The S&P 500 and the Dow climbed to 2-week highs and the Nasdaq posted a 1-1/2 week high. Bullish factors included (1) carry-over strength from a boost to European equity markets after the ECB raised its 2010 GDP estimate for the Euro-Zone to between 1.4% and 1.8%, up from a previous forecast of between 0.7% and 1.3%, (2) comments from ECB President Trichet who said a double-dip recession in the Euro-Zone is "not in the cards," which boosts confidence in the global economic recovery, (3) the unexpected decrease in weekly US initial unemployment claims (-6,000 to 472,000 versus expectations of +2,000 to 475,000), (4) strength in homebuilders after the unexpected increase in Jul pending US home sales (+5.2% m/m versus expectations of -1.0% m/m), and (5) a rally in retailers after Aug ICSC chain store sales rose +3.2% y/y, their ninth straight monthly increase.
• Bearish factors included (1) the weaker-than-expected Jul factory orders (+0.1% versus expectations of +0.2%), (2) the prediction from the chief economist at FTN Financial who said that with "the rate of layoffs still uncomfortably high, there’s no reason to expect an acceleration in US consumer spending," and (3) the prediction from Edward Prescott, senior adviser to the Minneapolis Fed, that the US economy is likely to experience a period of stagnation until the country reduces its debt.
• Take-Two Interactive (TTWO) surged 13% in European trading after the video game publisher reported an unexpected Q3 profit of 28 cents a share and boosted its earnings outlook on sales of the newest release "Red Dead Redemption."
• H&R Block (HRB) climbed 3.8% in pre-market trading after it reported a fiscal Q1 loss of 36 cents a share, beating analysts’ estimates for a loss of 40 cents.

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