Overnight Developments

• European stocks are trading mildly lower with the European Stoxx 50 down -0.28%. Sep S&Ps are down 4.80 points (-0.44%). S&Ps are on edge ahead of this morning’s Q2 GDP report (expected +2.6%). There is also some caution ahead of Sunday’s expected release of China’s purchasing managers index due to talk of a sharply weaker figure. The market consensus is for a moderate 0.7 point decline to 51.4 from 52.1 in June. The Eurozone July CPI rose to a 20-month high of +1.7% y/y from +1.4% y/y in June, which was in line with market expectations. However, the core CPI rose to only +0.9% y/y from +0.8% y/y in June. Meanwhile, the Eurozone June unmeployment rate remained at 10%, the highest level in almost 12 years. The IMF said today that US banks may need as much as $76 billion more in capital. A senior executive from Moody’s said that Spain, already on review for a possible downgrade, will probably lose its Aaa rating. Spain has already lost its triple-A ra ting from S&P and Fitch. The Moody’s executive also said that the U.S. needs a "clear plan" for tackling its deficit.
• The Asian markets today closed lower across the board: Japan -1.64%, Hong Kong -0.30%, China -0.32%, Taiwan -0.49%, Australia -0.68%, Singapore -0.33%, South Korea -0.83%, Bombay -0.69%. Asian markets were undercut by the report that Japan’s June unemployment rate rose to a 7-month high of 5.3%, which was higher than the consensus of 5.2%. In addition, Japan’s factory output fell 1.5% m/m versus the consensus for a +0.2% rise.

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Overnight Developments

• European stocks are higher with the European Stoxx 50 up 0.55% after hitting a 3-month high. Sep S&Ps are up 5.70 points (+0.52%). European stocks received support from positive earnings reports from AstraZeneca and Volkswagen and from positive confidence and employment reports. The European Commission’s business and consumer confidence index rose to a 2-1/3 year high of 101.3 from 99 in June. Meanwhile, Germany unemployment fell by 20,000 to 3.21 million, which was the lowest level in 1-1/2 years and was the 13th consecutive monthly decline. The Germany unemployment rate fell to 7.6% from 7.7%. French Finance Minister Christine Lagarde today said she expects a "serious pickup" in global growth in 2011, "if only because global trade has significantly improved." UBS upgraded European stocks to "neutral" from "underweight," cut U.S. stocks to "neutral," and cut Japanese stocks to "underweight."
• The Asian markets today closed mixed: Japan -0.59%, Hong Kong +0.01%, China +0.50%, Taiwan +0.18%, Australia -0.13%, Singapore +0.41%, South Korea -0.17%, Bombay +0.19%. Asian stocks were undercut by Wednesday’s U.S. Beige Book report, which suggested lackluster U.S. demand for Asian exports. Panasonic fell 7.7% today after news that the company would offer stock to help it purchase full control of its Sanyo Electric and Panasonic Electric Works units.

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Overnight Developments

• European stocks this morning are trading with solid gains with the European Stoxx 50 up 1.04%. Sep S&Ps are up 6.20 points (+0.56%). European stocks have been boosted by the continued decline in bank risk and a sharp 9% rally in UBS due to a favorable earnings report. The Markit iTraxx Financial Index of credit default swaps for 25 banks and insurers fell for the 6th day by 6.5 bp to hit a 3-month low of 111 bp. Deutsche Bank rallied by 3.5% after also reporting stronger than expected earnings today. The European stock markets were also encouraged by the fact that Hungary was able to sell $228 million in 3-month T-bills despite the recent financial turmoil in Hungary and the forint rallied by 0.8%. In another favorable US earnings report, Du Pont reported Q2 EPS of $1.17 that was well above the analyst consensus of 94 cents and raised its full-year 2010 EPS guidance to $2.90-$3.05 from $2.50-$2.70.
• The Asian markets today closed mixed: Japan -0.07%, Hong Kong +0.64%, China -0.55%, Taiwan -0.51%, Australia +0.25%, Singapore +0.42%, South Korea +0.03%, Bombay +0.32%. India’s central bank today raised its reverse repo rate by 50 bp to 4.50% and its repo rate by 25 bp to 5.75% in order to address inflation concerns. The central bank raised its India GDP forecast to 8.5% from 8.0% and its wholesale price inflation forecast to 6.0% from 5.5% for the year through March.

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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +1.55% and Sep S&Ps up +12.80 points. The dollar and Treasuries are weaker and copper rose to a 1-3/4 month high as growth unexpectedly accelerated in the European manufacturing and service industries in July. The July Euro-Zone PMI composite rose +0.7 to 56.7 when the market was expecting a decline to 55.5. Also boosting European stocks was the stronger than expected UK retail sales for Jun, the unexpected increase in the July French business indicator which rose +2 points to a 2-year high of 98 and the unexpected increase in May Euro-Zone industrial new orders that climbed +3.8% m/m. Limiting gains in European stocks was the 2.7% drop in Credit Suisse AG after Switzerland’s second-largest bank reported a drop in profit at its investment banking unit in Q2 as trading revenue slumped amid Europe’s sovereign debt crisis, while SSAB Svenskt Staal AB, the largest supplier of high-tensile steel, slid 6.9% after it reported Q2 income of 369 million kroner ($49.9 million), below analysts’ estimates of 482 million kroner.
• The Asian markets today closed mixed with Japan down -0.62%, Hong Kong +0.50%, China +1.24%, Taiwan -0.45%, Australia -0.86%, Singapore +1.01%, South Korea -0.72%, India +0.76%. Japanese stocks closed lower for the fifth straight day as the Nikkei 225 Stock Index fell to a 2-week low after Fed Chairman Bernanke said the US economic outlook remains "unusually uncertain." Most Japanese exporters declined as the yen approached a 7-month high against the dollar, while Nintendo, the world’s biggest portable video-game maker that gets 80% of its revenue overseas, slipped 1.3% after Citigroup cut its rating on the stock to "hold" from "buy." Citigroup also cut its outlook for China’s 2010 economic expansion to 9.5% from 10.5% after China’s economy showed signs of slowing at the end of Q2. Citigroup also cut its 2011 growth estimate for China to 8.8%, lower than last month’s forecast of 9.3%.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.45% and Sep S&Ps down -7.30 points. US Stock futures retreated and led European shares lower after IBM and Texas Instruments reported revenue that missed analysts’ estimates. Treasuries and the dollar are higher as the drop in stocks prompts an increase in safe-haven demand. Spain sold 6 billion euros ($7.8 billion) of Treasury bills, the maximum target for the auction, which pushed down the borrowing costs due to the increase in demand. Spain, which has to repay 24.7 billion euros of debt this month, has the third-largest deficit in the Euro-Zone and many of its banks are dependent on the ECB for funds. Greece sold 1.95 billion euros ($2.53 billion) of 13-week Treasury bills with a bid-to-cover ratio of 3.85, higher than last week’s 3.64, which shows strong demand and indicates an increase in investor confidence towards Greek government debt. Hungary, however, raised less than planned in a debt sale for a fourth time since June, which sent its borrowing costs soaring to a 19-week high and reignited concern about the ability to tame its budget deficit as the economy slows.
• The Asian markets today closed mixed with Japan down -1.15%, Hong Kong +0.86%, China +2.20%, Taiwan +0.81%, Australia +1.04%, Singapore +0.11%, South Korea +0.23%, India -0.28%. China’s Shanghai Stock Index closed higher after the International Strategy & Investment Group said China would relax polices that were aimed at curbing its housing industry as the economy faces a bigger risk from a slowdown than inflation. At a briefing in Beijing, China’s Commerce Ministry said that China’s domestic consumption will become the most important element of the nation’s economic growth in the future and that domestic consumption in the second half of this year will continue to grow at a relatively fast pace. Japanese stocks fell, led by declines in semiconductor-related stocks, after Texas Instruments reported disappointing profit and sales, while automakers and electronics companies also closed lower fell on concern demand from the US may falter after US home-builder confide nce sank to a 16-month low.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +5.70 points. The euro and Treasuries are little changed despite the action by Moody’s Investors Service to downgrade Ireland’s credit rating one notch to Aa2 from Aa1, citing the government’s "gradual but significant loss of financial strength." European stocks and the euro also saw little reaction after the cost to insure debt payments from Hungary surged and the forint tumbled 2.6% against the euro when deficit-reduction talks with the IMF broke down. Credit-default swaps on Hungarian government debt jumped 45.5 bp to a 5-week high of 362 bp after the IMF and European Union declined to endorse Prime Minister Orban’s plans to control the budget deficit as part of a 20 billion-euro ($25.8 billion) emergency bailout because "a range of issues remain open." The EU said that Hungary’s government must make "tough decisions, notably on spending," to comply with deficit requirements. M&A activity boosted European stock prices after International power and GDF Suez climbed after GDF Suez, operator of Europe’s largest natural-gas network, said it’s in preliminary talks to combine some of its assets with International Power, creating an enlarged company majority-owned by GDF. Tomkins rallied 34% after Onex Corp., Canada’s biggest publicly traded buyout firm, and the Canada Pension Plan Investment Board signaled they might bid 2.9 billion pounds ($4.4 billion) for Tomkins.
• The Asian markets today closed mostly lower with Japan closed for holiday, Hong Kong down -0.79%, China +2.54%, Taiwan -0.19%, Australia -1.46%, Singapore -0.42%, South Korea -0.45%, India -0.15%. Asian stocks were undercut as concern deepened that the global economic recovery is faltering which may hurt exports and curb demand for Asian goods after US July University of Michigan consumer confidence tumbled to an 11-month low. The China Securities Journal said a report from the State Information Center said that China’s export growth might slow over the rest of the year to less than half the pace of the first six months. The report states that China’s exports between July-through-December may rise only +16.3% from a year earlier, slowing from the +35% y/y increase in the first half as the removal of tax rebates, weaker demand because of Europe’s debt crisis, and comparisons with higher base levels leads to smaller increases. Still, the report predicts that China’s ex ports for the full year of 2010 will climb 24.5% compared with a -16% decline in 2009.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.48% and Sep S&Ps up +1.80 points. US stock futures rose to a 2-week high after Intel, the world’s biggest chipmaker, reported better-than-expected earnings late yesterday and boosted its profit forecast for the year to a record. Intel’s rally led a surge in global technology stocks with STMicroelectronics NV and Infineon Technologies AG, Europe’s biggest chipmakers, climbing more than 2% and ASML Holding NV, Europe’s largest manufacturer of chip technology, advancing 5.6%. European stocks failed to hold their gains however after ICAP, the biggest broker of transactions between banks, dropped 5.3% after saying, "volumes slowed significantly in June as our customers’ and end investors’ risk appetites reduced." Also undercutting European stocks and the euro was the smaller than expected +0.9% m/m increase in May Euro-Zone industrial production which was forecast to increase +1.2% m/m along with a report from the Bank of Spain that showed Spanish lenders borrowed a record 126.3 billion euros ($161 billion) from the ECB in June as investors shunned the nation’s banks.
• The Asian markets today closed mostly higher with Japan up +2.71%, Hong Kong +0.64%, China +0.72%, Taiwan +1.54%, Australia +1.87%, Singapore +0.82%, South Korea +1.38%, India -0.27%. Intel’s earnings report boosted Asian technology stocks with Samsung Electronics, Asia’s biggest semiconductor maker, advancing 2.6% and Advantest, the world’s largest maker of chip-testing equipment, gaining 5.9%. Japanese stocks also received a boost after Komatsu Ltd., the world’s second-largest maker of construction equipment, gained 5.5% after raising its first-half net income forecast by 41% to 52 billion yen on rising demand from Asia and Latin America. Singapore raised its 2010 economic growth forecast saying its economy will grow between 13% and 15% this year after it reported that growth in the first half of this year accelerated to a record 18.1% pace as casinos spurred tourism. Fitch Ratings claims that Chinese bank lending in the first half was 28% higher than official numb ers suggest as more loans were repackaged into investment products, "distorting" credit data. Fitch said after adjusting for "informal securitization," new loans stood at about 5.9 trillion yuan ($871 billion) in the first six months, more than the PBOC’s data that show new loans of 4.6 trillion yuan.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +1.47% and Sep S&Ps up +5.80 points. Better than expected earnings from Alcoa boosted US and European stocks to 2-week highs despite weakness in the euro after the action by Moody’s Investors Service to cut Portugal’s credit rating two notches to A1 because of a growing debt burden and "weak" economic growth prospects. The euro remained under pressure after the July German ZEW economic sentiment fell a more than expected -7.5 to a 15-month low of 21.2 as Europe’s debt crisis threatens to cripple economic growth and banks undergo stress tests to prove their durability. Helping to keep European stocks in positive territory was the action by Greece to sell 1.625 billion euros ($2.1 billion) of 26-week T-bills at 4.65%, below the 5.00% rate charged by the European Union for its bailout package, easing concern about its budget deficit and reviving confidence in the Greek government’s austeri ty measures. BMW jumped 6.6% and led automakers higher after it forecast 2010 sales volume will rise by about 10% to more than 1,4 million units, with a full-year profit margin of more than 5% expected for the automobilies segment.
• The Asian markets today closed mostly lower with Japan down -0.11%, Hong Kong -0.18%, China -1.56%, Taiwan -0.55%, Australia -0.67%, Singapore +0.12%, South Korea +0.12%, India +0.27%. Chinese stocks fell and led other Asian stock markets lower after the government quashed speculation that it will ease real estate curbs that drove property prices lower for the first time in 16 months. Chinese banks and property developers led declines after the government said it will "strictly" enforce housing policies to prevent speculative real estate investment. Also pressuring Asian stocks was the 3.6% fall in Infosys after India’s second-largest software services provider reported Q2 net income of 14.9 billion rupees ($318.5 million), below analysts’ estimates of 15.6 billion rupees.

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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +1.20 points. The dollar index is little changed, Treasuries are weaker and most commodities are higher. Rio Tinto rose 3.5% and led mining companies higher as copper rallied after LME copper inventories declined to a 7-1/4 month low. Antofagasta gained 3.4% after Citigroup raised its recommendation for the copper producer to "buy" from "hold." Also helping European stocks was the larger-than-expected +1.7% m/m increase in May French industrial production which was boosted by improving global trade and a pickup in output at car plants, while ECB President Trichet said that while the fiscal crisis isn’t over, the economic signs are "encouraging."
• The Asian markets today closed higher with Japan up +0.52%, Hong Kong +1.64%, China +2.76%, Taiwan +0.50%, Australia +0.91%, Singapore +0.69%, South Korea +1.66%, India +1.03%. Asian stocks were helped higher by Citigroup’s prediction that emerging-market stocks will rally as much as 25% by the end of the year as the global economy avoids a "double dip" recession and attractive valuations lure investors. The South Korean won strengthened over 1% against the dollar after the Bank of Korea unexpectedly raised its 7-day repurchase rate to 2.25% from a record low 2.00%, citing a pre-emptive strike against inflation. South Korea joins India, Malaysia and Taiwan in lifting interest rates in recent weeks, signaling that Asia’s expansion will remain resilient to Europe’s debt crisis.

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Overnight Developments

• Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.70% and Sep S&Ps down -2.80 points. The dollar and Treasuries are stronger and most commodities are weaker as stocks give back some of Tuesday’s gains. The 10-year Spanish bond yield rose 6 bp after the Bank of Spain said the cost of recapitalizing and reorganizing savings banks would represent 1.5% of the economy. The yield premium investors demand to hold Spanish 10-year bonds instead of benchmark German debt widened 8 bp to 216 bp. Also adding to downside pressure in European stocks was the unexpected -0.5% m/m decline in May German factory orders, their first drop in the last 5 months, as demand for German goods weakened. CRH sank 10% and led construction and building companies lower after the world’s second-largest maker and distributor of building materials said first-half earnings before interest, taxes, depreciation and amortization probably fell about 20%, with sales slidin g 10%. Marks & Spencer slipped 3.8% even after the UK’s largest clothing retailer reported Q1 sales growth of 3.6%, beating analysts’ estimates, after it said a proposed increase in the UK value-added tax and other measures to curb the country’s deficit are likely to dampen consumer confidence.
• The Asian markets today closed mostly lower with Japan down -0.63%, Hong Kong -1.13%, China +0.69%, Taiwan -0.19%, Australia -0.50%, Singapore -0.24%, South Korea -0.76%, India -0.81%. Most Asian stocks retreated after yesterday’s weaker-than-expected Jun ISM non-manufacturing index increased concern that the global recovery will weaken. Japan’s Nikkei 225 Stock Index declined, led by losses in Honda Motor and Sony, while Hong Kong’s Hang Seng Index retreated after the head of the National Bureau of Statistics said in the bureau’s newspaper today that China’s economy faces increasing uncertainties and the economic situation is becoming more complex. The manager of China’s foreign exchange reserves said the US bond market is important and changes in holdings of Treausuries "shouldn’t be politicized." The State Administration of Foreign Exchange (SAFE) also said on its website that concern China might consider using the "nuclear" option of dumping i ts Treasury holdings is "completely unnecessary." Australia’s Jun building industry index fell -6.8 points to 46.4, its first contraction in 10 months, and a sign that interest rate increases by the RBA are eroding demand for new dwellings.

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