Overnight Developments

• European stocks are lower with the European DJ Stoxx 50 down -0.03% and Dec S&Ps down -2.60 points. The euro retreated from a 1-week high against the dollar and Treasuries strengthened after German investor confidence tumbled. The Sep German ZEW economic sentiment survey fell for the fifth consecutive month and by a larger-than-expected -18.3 to a 19-month low of -4.3 as budget cuts across the Euro-Zone and slowing global growth clouded the outlook for Europe’s largest economy. Declines in utility stocks also pressured stock prices with E.ON sliding 3.0% after Germany’s biggest utility was downgraded to "hold" from "buy" at UniCredit SpA, which cited uncertainty on nuclear power plant extensions. Aug UK consumer prices unexpectedly rose +3.1% y/y, the same pace as July, and the sixth straight month prices have exceeded the government’s 3.0% limit as higher costs from airfare to food stoked price pressures.
• The Asian markets today closed mixed with Japan down -0.24%, Hong Kong +0.17%, China +0.09%, Taiwan +0.51%, Australia +0.25%, Singapore -0.59%, South Korea -0.15%, India +0.72%. Japanese stocks fell as the yen climbed to a fresh 15-year high against the dollar after Japanese Prime Minister Kan beat his rival Ozawa in a party vote today, reducing the likelihood the government will intervene in the foreign-exchange markets to weaken the yen. China’s yuan gained after the PBOC fixed the reference rate at 6.7378 per dollar, the highest since a peg against the dollar was scrapped in July 2005, on speculation the Chinese government will allow faster appreciation of the yuan to head off US trade sanctions. The action by the European Commission to raise its Euro-Zone GDP estimate yesterday for this year to 1.7% from 0.9% gave support to Asian equity markets on optimism that demand for Asian exports will remain strong. Asian bank stocks rallied for a second day after regulato rs agreed to give banks as long as 8 years to comply with new capital requirements and after Zhu Min, former deputy governor of the PBOC and current vice president of Bank of China Ltd. said that banks in Asia have high capital ratios and will be able to avoid the degree of fundraising needed elsewhere to meet the new international standards.

Overnight U.S. Stock News

• Dec S&Ps this morning are down -2.60 points. The stock market yesterday gapped higher and traded in positive territory the entire day and finished moderately higher (Dow +0.78%, S&P 500 +1.11%, Nasdaq Composite +1.93%). The Nasdaq rose to a 2-1/2 month high and the S&P 500 and the Dow both rallied to 1-month highs. Bullish factors included (1) carry-over support from stronger-than-expected Chinese economic data and comments from China’s Premier Wen Jiabao who said that China’s economy is in "good shape," which eases concern that the global economy will lapse back into recession, (2) a rally in bank stocks after the Basel Committee on Banking Supervision reached a compromise that doubles capital requirements for banks while giving them until 2019 to meet the buffer requirements to withstand future crisis, (3) carry-over strength from a rally in European equity markets after the European Commission raised its economic growth forecast for the Eur o-Zone this year to 1.7% instead of a previously projected 0.9%, (4) gains in raw-materials and energy producers as the slumping dollar pushed most commodities higher, with crude oil climbing to a 1-month high, (5) strength in chipmakers after research firm Gartner Inc. predicted that semiconductor equipment spending will double in 2010, (6) the smaller-than-expected US budget deficit in Aug as the economic recovery generated more tax revenue for the Treasury (-$90.5 billion versus expectations of -$100.0 billion), and (7) the prediction from CLSA Ltd. that US stock prices are "screamingly cheap" and will rally at least 30% in the next 12 months as the cheapest valuations in decades lure investors.
• Bearish factors included (1) the statement from IMF Managing Director Strauss-Kahn that the global economy may not generate much employment growth in coming years, and (2) the prediction from well-known bank analyst Richard Bove that legislators who don’t understand the banking industry and a sense of "mass hysteria" led to the passage of financial-reform law that will hurt US consumers.
• Campbell Soup (CPB) fell 2.3% in European trading after Goldman Sachs cut the stock to "sell" from "neutral" as they downgraded the packaged foods industry to "cautious" from "neutral," citing a mixed outlook for US sales, margin risks and valuations.

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Overnight Developments

• European stocks are higher with the European DJ Stoxx 50 up +0.86% and Dec S&Ps are up +9.40 points, both at 1-month highs. The dollar and Treasuries are weaker while most commodities rallied with crude oil at a 1-month high as a larger-than-expected increase in Aug China industrial production lifted mining stocks and raw material producers and boosted optimism in the global recovery. The European Commission raised its economic growth forecast for the Euro-Zone this year to 1.7% instead of a previously projected 0.9%, and said the economy may slow to a more "moderate" expansion in the second half. Bank stocks and the euro currency strengthened after the Basel Committee on Banking Supervision reached a compromise that more than doubles capital requirements for the world’s banks and gives them as long as 8 years to comply with the higher capital requirements intended to prevent future crisis. Credit Agricole jumped 6.7%, Societe Generale climbed 4.6% and Commerzbank advanced 2.0%. Deutsche Postbank AG slipped 6.8% after Deutsche Bank AG said it plans to raise at least 9.8 billion euros in its biggest-ever share sale to take over Postbank and meet stricter capital rules. Deutsche Bank expects to offer between 24 euros and 25 euros a share in cash to Postbank shareholders to increase its 29.95% stake in the lender.
• The Asian markets today closed higher with Japan up +0.89%, Hong Kong +1.89%, China +1.01%, Taiwan +2.55%, Australia +1.20%, Singapore +1.47%, South Korea +1.03%, India +2.17%. Strong economic data from China lifted Asian stocks and eased concern about a slowdown in the economic recovery. China’s Aug industrial production increased 13.9% y/y, more than market expectations of 13.0% y/y and Aug China retail sales rose +18.4% y/y. The PBOC reported Aug new loans of 545.2 billion yuan ($80 billion) and a 19.2% y/y increase in M2, the broadest measure of money supply. Both numbers were stronger than expected with the increase in M2 growth the first in 9 months. Aug China consumer prices rose 3.5% y/y, their biggest increase in 22 months due to a rise in food costs.

Today’s U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) FUL-HB Fuller (BEST earnings consensus $0.45), LRN-K12 Inc. (-0.07), PCYC-Pharmacyclics (-0.07), PMFG-PMFG Inc. (0.10), MTRX-Matrix Service (0.10), VALV-Shengkai Innovations (0.16), GCOM-Globecomm Systems (0.17).

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Overnight Developments

• European stocks are slightly higher with the European DJ Stoxx 50 up +0.09% and Sep S&Ps down -0.80 of a point. The dollar index is weaker and copper jumped to a 4-month high on speculation that central banks won’t allow the global economy to slide back into recession after the Bank of Japan (BOJ) expanded a bank-loan program and Fed Chairman Bernanke pledged last Friday to "do all that it can" to ensure a continuation of the economic recovery. European stocks also received a boost after Aug Euro-Zone economic confidence rose a more-than-expected +0.7 to 101.8, its highest level in 2-1/2 years, as a surge in exports help the Euro-Zone economy in Q2 to expand at its fastest pace in 4 years. An increase in M&A activity is another positive factor for stock prices today after Zodiac Aerospace jumped 13% after La Tribune reported that Safran SA is preparing another bid for Europe’s biggest maker of airplane seats, while Genzyme climbed 3.4% after Sano fi-Aventis SA offered to buy the world’s largest maker of medicines for genetic diseases for about $18.5 billion. On the negative side of M&A activity, Infineon Technologies AG, Europe’s second-largest semiconductor maker, slid 1.9% after Intel agreed to buy its wireless unit for about $1.4 billion, below the $1.9 billion Infineon was seeking.
• The Asian markets today closed higher with Japan up +1.76%, Hong Kong +0.68%, China +1.97%, Taiwan +0.24%, Australia +1.89%, Singapore +0.62%, South Korea +1.82%. India +0.19%. Japanese stocks rallied when the BOJ, at the conclusion of its emergency meeting in Tokyo, boosted its bank-loan program by 10 trillion yen ($118 billion) to 30 trillion yen as the yen’s surge to a 15-year high against the dollar threatens economic growth. The yen knee-jerked lower after the BOJ’s action, but soon strengthened on speculation the steps taken by the BOJ are insufficient to stem its strength. Even Prime Minister Kan’s announcement that the government will spend 920 billion yen ($10.8 billion) on economic stimulus and compile an extra budget if needed failed to stem the yen’s gains. Deutsche Bank AG recommends that investors sell Asian stocks before slowing earnings growth and a weakening global economy lead to further stock losses.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -0.80. The stock market last Friday rebounded from an early drop to a 1-1/2 month low and finished sharply higher and on its high (Dow +1.65%, S&P 500 +1.66%, Nasdaq Composite +1.65%). Bullish factors included (1) the smaller-than-expected downward revision to Q2 US GDP (+1.6% annualized versus expectations of +1.4% annualized) as Q2 consumption was revised upward to +2.0% from +1.6%, and (2) comments from Fed Chairman Bernanke, which led a broad-based rally in raw materials and energy producers, when he said the Fed "will do all that it can" to ensure a continuation of the economic recovery and that the "preconditions" for growth in 2011 are "in place."
• Bearish factors included (1) the unexpected decline in the Aug US University of Michigan consumer confidence (-0.7 to 68.9 versus expectations of unchanged at 69.6), and (2) data from EPFR Global that said investors withdrew a net $7.1 billion from equity funds tracked worldwide in the week to Aug 25 and put $5.2 billion into bonds amid concern the economies in Europe and the US are losing momentum.
• Genzyme (GENZ) gained 3.8% in European trading after Sanofi-Aventis offered to buy the company for $18.5 billion in cash or $69 a share, taking its bid public after Genzyme refused to negotiate.

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Overnight Developments

• European stocks are higher with the European DJ Stoxx 50 up +0.45% and Sep S&Ps up +1.00 point. Better-than-expected earnings results are leading European stocks higher as Credit Agricole, France’s largest bank by branches, jumped 3.8% after it reported Q2 net income of 279 million euros, beating analysts’ estimates of 318 million euros, while L’Oreal, the world’s biggest cosmetics maker, surged 6.6% after it reported first-half net income increased 21% from last year to 1.32 billion euros. Also boosting European stocks was the +0.1 point increase in the Sep German GfK consumer confidence survey to an 11-month high of 4.1 as stronger economic growth and declining unemployment in Germany boosted income expectations. Loan growth grew in Europe in July as the economic recovery gathered steam after the ECB reported a +0.9% y/y increase in loans to Euro-Zone households and companies in July, the fastest pace in 13 months, which suggests the economy may not lose as much momentum as some economists forecast.
• The Asian markets today closed mixed with Japan up +0.69%, Hong Kong -0.11%, China +0.25%, Taiwan -0.61%, Australia +0.83%, Singapore -0.02%, South Korea -0.27%, India +0.26%. Japanese exporters rallied and led Japanese stocks higher as the yen weakened against the dollar. The Asahi newspaper reported today that the Japanese government may ask the BOJ to ease monetary policy further as part of an economic stimulus package, while the Nikkei English news reported that Japanese Prime Minister Kan told business leaders he is in contact with the Finance Ministry and the central bank on the possibility of currency intervention. The yen has risen 15% this year and Suzuki Motor Corp. Chairman Suzuki said the strengthening currency poses an “extremely grave” situation and will have a “very big impact” on profit.

Overnight U.S. Stock News

• Sep S&Ps this morning are up +1.00 point. The stock market yesterday sold off early but recovered its losses the rest of the session and finished higher (Dow +0.20%, S&P 500 +0.33%, Nasdaq Composite +0.84%). The S&P 500, Dow and Nasdaq all fell to 1-1/2 month lows but erased their losses and finished higher. Bullish factors included (1) speculation that the recent plunge in equity prices overshot the potential damage from a slowdown in the economy, (2) strength in homebuilders, despite the plunge in Jul new home sales to a record low, after Toll Brothers rallied when it unexpectedly reported its first quarterly profit since 2007 as writedowns declined, and (3) a supportive interest rate picture that keeps stock valuations low and benefits consumers and businesses after the yield on the 10-year T-note fell to a 1-1/2 year low of 2.42%.
• Bearish factors included (1) carry-over weakness from a fall in European stocks after S&P cut Ireland’s long-term sovereign credit rating one step to AA-, its lowest since 1995, and raised its estimate for recapitalizing the Irish banking system to as much as 50 billion euros ($63 billion) from a previous estimate of 35 billion euros, which renews concern over the European sovereign-debt crisis, (2) the weaker-than-expected Jul durable goods orders (+0.3% versus expectations of +3.0%), and the unexpected decline in Jul durable goods orders ex transportation which had its biggest drop in 1-1/2 years (-3.8% versus expectations of +0.5%), (3) the unexpected plunge in Jul new home sales which fell to their lowest level since records began in 1963 (-12.4% to 276,000 versus expectations of unchanged at 330,000), and (4) the unexpected decline in the Jun FHFA house price index (-0.3% m/m versus expectations of +0.1% m/m).
• Schlumberger (SLB), the world’s biggest oilfied-services contractor, rose 1% in European trading after crude oil prices gained.

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Overnight Developments

• European stocks are weaker with the European DJ Stoxx 50 down -1.27% and Sep S&Ps down -7.40 points, both at their lowest levels in a month. This prompted a flight-to-safety into German bunds and Treasuries with the yield on the 10-year bund falling to a record low 2.232%. Risk aversion also prompted a surge in the yen to a 15-year high against the dollar, while most commodities slumped with crude oil at a 1-1/2 month low. European stocks retreated, led by weakness in construction and basic-resource companies, on concern that economic growth is slowing. CRH Plc, the world’s second-largest maker and distributor of building materials, tumbled 14% after the company forecast that earnings will fall 10% this year due to a slowdown in the US. HeidelbergCement AG, the world’s largest maker of aggregates used to produce concrete and asphalt, dropped 4.8% and Wolseley Plc, the world’s largest supplier of heating and plumbing products, tumbled 5.2%. EU Commissioner f or economic and monetary affairs, Olli Rehn, said that a slowdown in the US recovery and turmoil in the sovereign debt markets could cause concern in Europe, where growth is likely to decelerate in he second half. On the bright side, Jun Euro-Zone industrial new orders climbed a larger-than-expected +2.5% m/m as stronger global growth helped fuel Q2 Euro-Zone GDP to its fastest rate expansion in 4 years.
• The Asian markets today closed mostly lower with Japan down -1.33%, Hong Kong -1.10%, China +0.54%, Taiwan -0.44%, Australia -1.08%, Singapore -0.11%, South Korea -0.34%, India -0.53%. Japan’s Nikkei 224 Stock Index plunged to a 15-month low on concern the global recovery is faltering. The yen rose to an 8-year high against the euro and a 15-year high against the dollar, which undercut exporters as the strengthening yen threatens to erode Japan’s export earnings. Japan’s Prime Minister Naoto Kan tried to slow the yen’s advance when he said "steep currency moves are undesirable" as Japanese policymakers and government leaders are under pressure to protect Japan’s fragile economic recovery as the yen’s surge threatens to undermine export earnings and deepen deflation. According to the Sankei newspaper, Prime Minister Kan will meet today with business leaders to discuss the yen’s strength and its impact on the economy. Asian mining-companies and raw materials and energy producers closed lower on demand concerns as commodity prices declined, while Foster’s Group Ltd., Australia’s biggest beer and wine maker, slumped 4.3% after posting a second-half loss.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -7.40 points. The stock market yesterday traded higher early but moved lower in the early afternoon and finished with modest losses (Dow -0.38%, S&P 500 -0.40%, Nasdaq Composite -0.92%). Bearish factors included (1) speculation that the US economic data to be released this week will point to a slowing economy, which questions the sustainability of the economic recovery and raises concern about the possibility of a double-dip recession, (2) the prediction from Moody’s Investors Service that European governments’ budget cuts in the aftermath of the debt crisis will weigh on economic growth and increase the risk of countries having their credit rating cut, (3) the larger-than-expected decline in the Aug Euro-Zone PMI composite index (-0.6 to 56.1 versus expectations of -0.4 to 56.3), which signals the pace of the recovery in Europe might have peaked, and (4) weak retail demand for stocks after the ICI reported that bond funds in the US attracted more money than equity funds in 30 straight months through June, the longest such stretch in 23 years.
• Bullish factors included (1) continued strong M&A activity as global takeovers announced so far this year have totaled $1.29 trillion, up +23% from the same time last year, (2) the unexpected increase in the Aug Euro-Zone consumer confidence index, which climbed to a 2-1/2 year high (+2 to -12 versus expectations of unchanged at -14), and (3) strength in utilities after Credit Suisse Group AG said the stocks are already discounting a potential future dividend-tax rate increase "in the low 30% range," which should limit sustained risk of lost value and leaves upside if Congress avoids the full planned increase.
• Pfizer (PFE) slid 1.3% in European trading after iys cancer treatment Sutent failed in a large-scale study to improve overall survival in patients with a form of lung cancer.

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Overnight Developments

• European stocks are higher with the European DJ Stoxx 50 up +0.90% and Sep S&Ps up +5.50 points. An increase in M&A activity is boosting European and US stocks today with Old Mutual Plc up over 4% after it said it might sell 70% of its Nedbank Group Ltd. banking unit to HSBC Holdings. Metals producers are higher as well with gains of 2% for Rio Tinto Group and BHP Billiton Ltd. amid speculation that a proposed mining tax in Australia might be scrapped or diluted after Australia’s general election failed to deliver a majority government for the first time in 70 years. A negative factor for European stock prices is the larger-than-expected -0.6 point decline in the Aug Euro-Zone PMI composite to 56.1, which signals the pace of the recovery might have peaked.
• The Asian markets today closed mostly lower with Japan down -0.68%, Hong Kong -0.44%, China -0.07%, Taiwan +0.61%, Australia -0.04%, Singapore -0.36%, South Korea -0.42%, India +0.04%. The yen climbed to near a 1-3/4 month high against the euro and pressured Japanese stocks along with last Friday’s comments from ECB Council member Weber who said that the ECB should continue with its emergency funding measures until at least year-end, which fueled speculation about the sustainability of Europe’s economic recovery and its demand for Asian exports. Japanese Prime Minister Kan and BOJ Governor Shirakawa spoke today about the economy and the strength of the yen and the yen rallied after Chief Cabinet Secretary Dengoku said that there was "absolutely no" discussion of intervention in the currency markets to slow the yen’s rise against the dollar. On the positive side, Japan’s 3 major shipping companies closed higher after the Nikkei English news reported that the companies are considering increasing their earnings outlook for 2010 as they were able to increase shipping rates on some routes.

Overnight U.S. Stock News

• Sep S&Ps this morning are up +5.50 points. The stock market last Friday traded in negative territory into early afternoon but then recovered into the close to finish mixed (Dow -0.56%, S&P 500 -0.37%, Nasdaq Composite +0.04%). The S&P 500 and the Dow posted 1-month lows. Bearish factors included (1) carry-over weakness from the slide in European stocks after the French government cut its GDP estimate for next year to 2.0% from 2.5% along with comments from ECB Council member Weber who said the ECB should keep its emergency funding measures in place through year-end along, which fueled speculation the global recovery may be faltering, (2) JPMorgan Chase’s cut in its US Q4 GDP forecast to 2.0% from 3.0%, (3) JPMorgan Chase’s cut in its GDP for China to +9.8% from 10% for 2010 and to 8.6% from 8.8% for 2011, citing a near-term "loss of momentum" in the US and global recoveries, and (4) the prediction from Strategic Research Partners that current combined profit estimates for 2011 S&P 500 companies’ of $96 a share is too optimistic and that profits will be only $87 a share as revenue growth trails forecasts in a slow recovery.
• Bullish factors included (1) comments from ECB Council member Honohan who said he sees a "stronger tone" to the European economy, which may help sustain the global economic recovery, (2) the prediction from HSBC Global Asset Management that global stocks stand a "decent chance" of a rally in Q4 as investors are "overly pessimistic" about the outlook for economic growth, and (3) the drop in the 10-year T-note yield to a 1-1/3 year low of 2.53%.
• Newmont Mining (NEM) rose 1% in European trading on speculation that BHP Billiton’s hostile takeover offer for Potash of Saskatchewan will increase other companies’ takeover attempts in the basic-resources industry.
• Cumberland Pharmaceuticals (CPIX) fell 2.4% in pre-marlet trading after the drugmaker said the FDA extended its review of its application for the use of the drug Acetadote in patients with acute liver failure.

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Overnight Developments

• European stocks are stronger with the European DJ Stoxx 50 up +0.37% and Sep S&Ps are up +7.00 points. The dollar index and Treasuries are weaker while most commodities are higher, even after German investor confidence dropped to a 16-month low. The Aug German ZEW economic sentiment survey fell a more-than-expected -7.2 to 14.0, its fourth straight decline and its lowest level in 16 months, which suggests a weaker growth outlook going forward. In the UK, July consumer prices rose +3.1% y/y, which is above the government’s 3.0% limit and forced BOE Governor King to write his third public letter this year to explain how he will bring prices under control. European stocks received a boost after Carlsberg, the biggest brewer in Russia, climbed 2.1% after it reported Q2 profit of 2.63 billion kroner, beating analysts’ estimates of 2.05 billion-kroner and after the company raised its full-year profit forecast due to the effect of a stronger ruble and an improvement in the Russian market. Weinerberger surged 7.2% after the world’s largest brickmaker reported Q2 net income of 20.6 million euros ($26 million), compared with a 151.5 million euro loss the year before after the company cut costs and the building material market began to recover.
• The Asian markets today closed mixed with Japan down -0.38%, Hong Kong +0.12%, China +0.69%, Taiwan -0.13%, Australia +0.87%, Singapore -0.35%, South Korea +0.64%, India -0.01%. Japanese bank stocks fell and helped to lead the overall market lower after Deutsche Bank downgraded the industry to "marketweight" from "overweight," citing "a lack of confidence that the strong Q1 performance will continue in subsequent quarters." A report from the Nikkei newspaper said that the Japanese government might extend the eco-point incentive program for purchases of energy-saving devices in an attempt to extend the economic recovery after Monday’s release of Japan Q2 GDP data showed the Japanese economy barely grew last quarter. The central banks of Australia and South Korea said the world economic outlook has become clouded, which may slow their pace of future interest rate increases. The minutes of the Aug 3 RBA policy meeting released today said th ere is "more uncertainty over the global outlook than there had been earlier in the year," while BOK Governor Kim Choong Soo said in a speech today that markets "may prove turbulent in the future."

Overnight U.S. Stock News

• Sep S&Ps this morning are up +7.00 points. The stock market yesterday erased early losses and finished the day mixed (Dow -0.01%, S&P 500 +0.01%, Nasdaq Composite +0.39%). The S&P 500, the Dow and the Nasdaq all fell to 3-week lows but recovered to finish mixed to higher. Bullish factors included (1) strength in raw materials and commodity producers after the dollar fell and boosted most commodities along Goldman Sachs’s reiteration of its "overweight" rating on commodities, and (2) the plunge in the yield on the 10-year T-note to a 17-month low of 2.57%, which should benefit consumers and businesses.
• Bearish factors included (1) carry-over weakness from a fall in Japanese and European stocks on concern the global economic recovery is faltering after Q2 Japan GDP came in weaker-than-expected (+0.4% annualized versus expectations of +2.3% annualized), (2) the weaker-than-expected Aug Empire manufacturing index (+2.0 to 7.1 versus expectations of +3.2 to 8.3), (3) a slump in homebuilders after the unexpected decline in the Aug NAHB housing market index to a 17-month low (-1 to 13 versus expectations of +1 to 15), and (4) the decline in most education stocks after data from the US Department of Education signaled that for-profit college aid may be imperiled because loan payback rates are insufficient.
• Potash Corp. of Saskatchewan (POT) surged 13% in pre-market trading after the world’s largest fertilizer producer rejected an unsolicited takeover proposal from BHP Billiton worth $130 a share in cash.

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Overnight Developments

• European stocks are slightly higher with the European Stoxx up +0.45% although Sep S&Ps are down -1.30 points after sliding to a 3-week low in overnight electronic trade when Cisco Systems, the largest maker of networking equipment, forecast sales that missed analysts’ estimates. The dollar index strengthened to a 2-1/2 week high, while Treasuries and most commodities weakened with copper falling to a 2-week low and crude oil sinking to a 1-1/2 week low. European stocks fluctuated between slight losses and gains as equities try to regain their footing following Wednesday’s deep slide. AB InBev gained 3.7% after the world’s largest brewer reported Q2 net income rose to $1.15 billion, beating analysts’ estimates of $1.08 billion, and Vestas Wind Systems A/S, the world’s largest maker of wind turbines, rose 3.8% after winning an order for turbines in what will be Australia’s biggest wind-energy project. Undercutting European stock prices was the unexpected -0.1% m/m drop in Jun Euro-Zone industrial production, which was dragged lower by a decline in durable consumer goods such as furniture and home appliances. In its monthly bulletin for Aug released today, the ECB said that Q3 growth in the Euro-Zone is likely "better than expected," echoing ECB President Trichet’s comments last week, while the central bank cut its forecast for 2011 GDP growth in the Euro-Zone to 1.4% versus a previous projection of 1.5%.
• The Asian markets today closed mostly lower with Japan down -0.86%, Hong Lomg -0.89%, China -1.19%, Taiwan -0.83%, Australia -1.23%, Singapore -0.75%, South Korea -2.19%, India +0.02%. The yen fell back slightly from a 15-year high against the dollar after Japanese Vice Finance Minister Tamaki met with BOJ members to discuss the financial markets. Nintendo and Sony, which get more than 70% of their sales abroad, slumped at least 3% on concern the yen’s appreciation will hurt the value of Japanese exports, while concerns that the global economic recovery is unraveling sent Japan’s Nikkei 225 Stock Index tumbling to a 13-month low. Australian stocks closed lower after the country’s jobless rate in July rose to 5.3% from 5.1% in June. India’s industrial production rose 7.1% y/y in June, the slowest pace in 13 months, which adds to evidence that Asian economies are weakening.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -1.30 points. The stock market yesterday sold-off steadily the entire day and finished sharply lower (Dow -2.49%, S&P 500 -2.82%, Nasdaq Composite -3.01%). All of the indexes sank to 1-1/2 week lows. Bearish factors included (1) carry-over weakness from Tuesday on speculation that the decision by the Fed to purchase long-term Treasuries indicates the economic recovery is in jeopardy, (2) concerns that the global economy is slowing after China’s July industrial output rose the least in 11 months and the BOE cut its economic growth estimate for England to a 3.0% annual pace instead of the 3.6% rate forecast in May, (3) the unexpected widening of the US Jun trade balance to -$49.9 billion, its highest level in 20 months which indicates that trade subtracted more from Q2 GDP than previously estimated, and (4) weakness in materials and energy producers after metals and crude prices sank on demand concerns.
• Bullish factors included (1) the smaller-than-expected budget deficit in the July US monthly budget statement (-$165.0 billion versus expectations of -$169.0 billion), and (2) the plunge in the yield on the 10-year T-note to a 1-1/3 year low of 2.680%.
• Cisco Systems (CSCO) sank 7.3% in European trading after the company late yesterday forecast revenue for the current quarter of between $10.64 billion and $10.83 billion, below analysts’ estimates of $10.95 billion. Cisco was then downgraded to "perform" from "outperform" at Oppenheimer after the results.
• EBay (EBAY) gained 1.1% in pre-market trading after Citigroup upgraded the company to "buy" from "hold," saying that losses in 2010 and an appealing valuation set up a good "entry point" for investors.

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Overnight Developments

• European stocks are weaker with the European Stoxx down -1.15% and Sep S&Ps down -15.10 points. The drop in US stocks that began after the FOMC meeting yesterday afternoon accelerated in overnight trade with Sep S&Ps falling to a 1-week low as the Fed signaled the recovery is decelerating. Treasuries around the globe gained, with the US 2-year T-note yield dropping to a record low of 0.4892%, while the yield on the 10-year German bund slipped to a record low of 2.458%. The dollar index rose to a 1-1/2 week high and commodities slumped with copper declining to a 1-week low. Adding to pressure on European stocks was the Bank of England’s quarterly inflation report in which the BOE cut its economic growth estimate for England to a 3.0% annual pace instead of the 3.6% rate forecast in May and said that inflation will be at about 1.5% in 2012, lower than its 2.0% goal, which signals the economy may need more emergency stimulus. July UK nationwide consumer con fidence tumbled a more-than-expected 7 points to a 15-month low of 56, which aided a drop in the British pound to a 1-1/2 week low against the dollar.
• The Asian markets today closed mostly lower with Japan down -2.70%, Hong Kong -0.83%, China +0.62%, Taiwan -1.02%, Australia -1.88%, Singapore -1.17%, South Korea -1.32%, India -0.82%. Japan’s Nikkei 225 Stock Index fell to a 2-1/2 week low on economic growth concerns after Jun Japan machine orders, an indicator of business investment in 3 to 6 months, rose +1.6% m/m, far less than the expected +5.4% m/m increase. Japan’s exporters also closed lower after the yen surged to a 15-year high against the dollar as a stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Chinese bank stocks weakened after China’s banking regulator ordered banks to transfer off-balance-sheet loans onto their books and make provisions for those that may default. Adding to evidence that China’s economy is cooling, China’s July industrial output rose +13.4% y/y, the least in 11 months, while new loans in July were 532.8 billion yuan, be low expectations of 600 billion yuan. China’s July inflation quickened to 3.3% y/y, the fastest pace in 21 months, boosted by a low year-earlier base for comparison and rising food costs.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -15.10 points. The stock market yesterday traded in negative territory throughout the day, although a late-day rally helped it to close well above its worst levels (Dow -0.51%, S&P 500 -0.60%, Nasdaq Composite -1.24%). Bearish factors included (1) carry-over weakness from a fall in Chinese stocks on evidence that China’s economic growth is slowing after July China imports rose at their slowest pace of growth in 9 months, while July property prices in 70 major Chinese cities posted their smallest increase in 6 months, (2) the unexpected decline in Q2 nonfarm productivity which fell for the first time in over 2 years (-0.9% versus expectations of +0.2%), (3) weakness in materials and energy producers after the dollar index rallied to a 1-week high and the prices of most commodities tumbled, and (4) the fall in technology stocks led by a slump in semiconductor shares after Barclays Plc and R.W. Baird & Co. reduced their rating s on Intel, the world’s largest semiconductor manufacturer, because of weakening orders for personal computer components.
• Bullish factors included (1) strength in US phone companies after Wells Fargo upgraded the sector to “marketweight” from “underweight,” saying that US telephone stocks are increasingly appealing as a haven from slowing growth in the economy and because the industry pays out historically high dividends relative to the S&P 500 Index and that the industry “appears to be on the verge of a turnaround,” and (2) the post FOMC statement in which the Fed said they will reinvest principal payments on mortgage holdings into long-term Treasury securities as they expand their quantitative easing in an attempt to bolster economic growth and keep the US economy from lapsing back into recession.
• Cree (CRE) slumped 9.8% in European trading after the company forecast Q1 sales of $280 million at most, below analysts’ estimates of $284.3 million.

A123 Systems (AONE) dropped 4.6% in European trading after the company reported a Q2 loss of 33 cents a share, wider than the 27-cent loss estimated by analysts.

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Overnight U.S. Stock News

• Sep S&Ps this morning are down -15.10 points. The stock market yesterday traded in negative territory throughout the day, although a late-day rally helped it to close well above its worst levels (Dow -0.51%, S&P 500 -0.60%, Nasdaq Composite -1.24%). Bearish factors included (1) carry-over weakness from a fall in Chinese stocks on evidence that China’s economic growth is slowing after July China imports rose at their slowest pace of growth in 9 months, while July property prices in 70 major Chinese cities posted their smallest increase in 6 months, (2) the unexpected decline in Q2 nonfarm productivity which fell for the first time in over 2 years (-0.9% versus expectations of +0.2%), (3) weakness in materials and energy producers after the dollar index rallied to a 1-week high and the prices of most commodities tumbled, and (4) the fall in technology stocks led by a slump in semiconductor shares after Barclays Plc and R.W. Baird & Co. reduced their rating s on Intel, the world’s largest semiconductor manufacturer, because of weakening orders for personal computer components.
• Bullish factors included (1) strength in US phone companies after Wells Fargo upgraded the sector to “marketweight” from “underweight,” saying that US telephone stocks are increasingly appealing as a haven from slowing growth in the economy and because the industry pays out historically high dividends relative to the S&P 500 Index and that the industry “appears to be on the verge of a turnaround,” and (2) the post FOMC statement in which the Fed said they will reinvest principal payments on mortgage holdings into long-term Treasury securities as they expand their quantitative easing in an attempt to bolster economic growth and keep the US economy from lapsing back into recession.
• Cree (CRE) slumped 9.8% in European trading after the company forecast Q1 sales of $280 million at most, below analysts’ estimates of $284.3 million.

A123 Systems (AONE) dropped 4.6% in European trading after the company reported a Q2 loss of 33 cents a share, wider than the 27-cent loss estimated by analysts.

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Overnight Developments

• European stocks are higher with the European Stoxx up +0.41% and Sep S&Ps up +1.60 points. The BOE as expected left its benchmark interest rate unchanged at 0.5% and kept its asset purchase plan unchanged at 200 billion pounds. The markets will now await the outcome of the ECB’s policy meeting later this morning and comments from ECB President Trichet. The euro is stronger and near a 3-month high after comments from the IMF that Greece has shown “great progress” in implementing austerity measures and should qualify for the next installment of emergency loans in a 110 billion-euro rescue package. European stocks also received a boost after June German factory orders climbed a more-than-expected +3.2% m/m as the global recovery strengthened and spurred demand for German goods. Aviva Plc soared 6.7% and led insurance companies higher after the UK’s second-biggest insurer reported first-half profit of 1.27 billion pounds ($2 billion), beating analysts’ estimate of 1.17 billion pounds. Aviva also increased its dividend as it raised its half-year payout to 9.5 pence a share from 9 pence a year earlier. Undercutting European stock gains was the 3.6% drop in Unilever after the world’s second-largest maker of consumer goods said Q2 sales rose 3.6% from a year earlier, below analysts’ estimates of 4.0%.
• The Asian markets today closed mixed with Japan up +1.73%, Hong Kong +0.01%, China -0.89%, Taiwan -0.45%, Australia +0.54%, Singapore +0.16%, South Korea -0.32%, India -0.24%. Toyota closed nearly 2% higher and led a rally in Japanese automakers after it raised its full-year profit forecast to 340 billion yen ($3.94 billion) for the year ending in March, compared with an earlier estimate of 310 billion yen, as sales in Asia grow and demand in the US recovers following Toyota’s recall of 8 million vehicles. Japanese exporters also gained after the yen weakened against the dollar, which boosts the value of repatriated overseas revenue. Property stocks and bank shares led declines in Chinese stocks today on concern that China’s proposed new stress tests of its banks signals the government may be growing more concerned about the health of the real estate market.

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