Overnight Developments

• European stocks are weaker with the European Stoxx down -0.81% and Sep S&Ps down -2.90 points. The dollar and Treasuries are higher on increased safe-haven demand as stocks falter. European bank stocks are leading financial shares lower after Allied Irish Banks Plc, Ireland’s second-biggest bank, dropped 8.2% after its first-half loss widened as bad debts rose. Standard Chartered Plc fell 6.3% after Royal Bank of Scotland Group Plc cut its recommendation on the bank to "hold" from "buy," citing weakness in capital-market related sales and pre-impairment profit that missed forecasts. Next Plc slid 7.4% and led retailers lower after Britain’s second-largest clothing retailer said consumer spending will be "more restrained" in the second half. Limiting losses in European stocks was the 4.0% jump in Electricite de France SA after the French government said that electricity prices would rise 3.4% starting Aug 15. Demand for dollars continues to weaken after the 3-month dollar Libor rate fell for the 16th consecutive session to a 2-3/4 month low of 0.424%.
• The Asian markets today closed mixed with Japan down -2.11%, Hong Kong +0.43%, China +0.37%, Taiwan +0.19%, Australia -0.65%, Singapore -0.43%, South Korea -0.10%, India +0.57%. Asian stocks were undercut after weaker-than-expected US economic data on home sales and factory orders renewed concerns about the strength of the global economy. Japanese exporters were pressured as the yen rose to an 8-month high against the dollar, which threatens to hurt the value of overseas sales when converted to the local currency. Canon, the world’s biggest maker of digital cameras, fell 4.3%, and Sony, which gets 22% of its sales from the US, slipped 3%. Toyota Motor dropped 1.6% and Honda Motor fell 2.2% after the companies posted declines in US auto sales last month of 3.2% and 2.0% respectively. The yield on Japanese 10-year government bonds fell below 1.00% for the first time in 7 years on speculation the strengthening yen will increase deflationary pressures.

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Overnight Developments

• European stocks are weaker with the European Stoxx down -0.81% and Sep S&Ps down -2.90 points. The dollar and Treasuries are higher on increased safe-haven demand as stocks falter. European bank stocks are leading financial shares lower after Allied Irish Banks Plc, Ireland’s second-biggest bank, dropped 8.2% after its first-half loss widened as bad debts rose. Standard Chartered Plc fell 6.3% after Royal Bank of Scotland Group Plc cut its recommendation on the bank to "hold" from "buy," citing weakness in capital-market related sales and pre-impairment profit that missed forecasts. Next Plc slid 7.4% and led retailers lower after Britain’s second-largest clothing retailer said consumer spending will be "more restrained" in the second half. Limiting losses in European stocks was the 4.0% jump in Electricite de France SA after the French government said that electricity prices would rise 3.4% starting Aug 15. Demand for dollars continues to weaken after the 3-month dollar Libor rate fell for the 16th consecutive session to a 2-3/4 month low of 0.424%.
• The Asian markets today closed mixed with Japan down -2.11%, Hong Kong +0.43%, China +0.37%, Taiwan +0.19%, Australia -0.65%, Singapore -0.43%, South Korea -0.10%, India +0.57%. Asian stocks were undercut after weaker-than-expected US economic data on home sales and factory orders renewed concerns about the strength of the global economy. Japanese exporters were pressured as the yen rose to an 8-month high against the dollar, which threatens to hurt the value of overseas sales when converted to the local currency. Canon, the world’s biggest maker of digital cameras, fell 4.3%, and Sony, which gets 22% of its sales from the US, slipped 3%. Toyota Motor dropped 1.6% and Honda Motor fell 2.2% after the companies posted declines in US auto sales last month of 3.2% and 2.0% respectively. The yield on Japanese 10-year government bonds fell below 1.00% for the first time in 7 years on speculation the strengthening yen will increase deflationary pressures.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.04% and Sep S&Ps down -3.50 points. The dollar and Treasuries are stronger and most commodities are weaker. European stocks fluctuated between slight gains and losses ahead of Q2 earnings season, which officially begins when Alcoa reports its earnings results after the close of today’s trading. European bank stocks are weak, led by a 3.2% decline in Allied Irish Banks Plc, as European finance ministers meeting in Brussels today are under pressure to disclose more about the stress tests being conducted on banks to see whether they could withstand losses if the region’s debt crisis worsens. Limiting losses is the 6.7% jump in BP Plc after the Sunday Times reported that Exxon Mobile may bid for the company along with reports that BP is selling assets in Alaska, while Volkswagen AG climbed 1.9% after the biggest foreign carmaker in China boosted sales +46% y/y in the first half of this year in the world’s largest vehicle market after introducing new models to attract customers.
• The Asian markets today closed mixed with Japan down -0.37%, Hong Kong +0.44%, China +1.10%, Taiwan -0.10%, Australia +0.31%, Singapore +0.28%, South Korea +0.63%, India +0.58%. Japanese banks closed lower and led losses in stock prices after the Democratic Part of Japan won only 44 seats in the upper house, 12 short of majority, making it unlikely Prime Minister Kan will be able to reduce the world’s largest public debt. The yen weakened to a 2-week low against the dollar after Standard & Poor’s said Kan’s defeat is "potentially negative" for Japan’s debt rating because of legislative gridlock. The yen’s weakness provided a boost to Japan’s exporters, helping to limit declines. China’s Shanghai Stock Index closed higher, led by gains in property developers, on speculation the government will relax curbs on mortgage lending amid a slowdown in property prices. China’s June property prices declined -0.1% m/m, snapping 15 straight months of increases, whi le Chinese new lending in June was 603 billion yuan ($89 billion), the least in 3 months. Morgan Stanley predicts that the Chinese government may loosen this year’s 7.5 trillion yuan new-lending quota for banks in Q4, when a slowdown in inflation will be "well established." Rounding out the bullish factors for Chinese stocks was the more-than-forecast 44% y/y increase in June China exports to $137 billion, which signals that global demand has withstood Europe’s sovereign-debt crisis so far.

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