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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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.92% and Sep S&Ps down -1.30 points. European stocks gained and the euro strengthened to a 1-3/4 month high on speculation stress tests on European banks will show narrower losses than estimated. European bank stocks led financial shares higher after Credit Suisse Group AG raised their recommendation for lenders to "benchmark," saying European sovereign-debt risk is overstated, the financial industry is undervalued and the European Union stress tests "may be a positive catalyst." Stocks and most commodities also received a boost after the IMF raised its estimate for global economic growth. The IMF now estimates the world economy will expand 4.6% this year; the biggest increase since 2007, from an April forecast of 4.2% after a stronger-than-expected first half. The IMF warned however, "recent turbulence in financial markets, reflecting a drop in confidence about fisca l sustainability, policy responses, and future growth prospects, has cast a cloud over the outlook." As expected, the BOE kept its benchmark interest rate unchanged at 0.50% and kept its asset purchase target unchanged at 200 billion pounds.
• The Asian markets today closed mostly higher with Japan up +2.76%, Hong Kong +0.97%, China -0.18%, Taiwan +0.99%, Australia +2.40%, Singapore +1.26%, South Korea +1.53%, India +1.03%. Japanese exporters rallied as the yen fell against the dollar and after the ICSC said that US retail sales in June grew at the fastest pace in 4 years, easing concern that growth in the world’s biggest economy is faltering. NEC Corp., Japan’s largest personal computer maker, led gains in Asian technology stocks after it jumped 2.6% when it said it aims to double its share of the world’s supercomputer market in the next 4 years. Australian job growth in Jun rose a more-than-expected 45,900, boosting stocks and the Australian dollar, and heightening odds that the RBA will have to resume raising interest rates. Australia’s jobless rate held steady in June at 5.1%, marking the first time it’s below Japan’s jobless rate since at least 1978. China’s Shanghai Stock Index closed lower, led by industrial companies and energy producers, as concern the government will step up tightening measures overshadowed rising earnings. Energy producers were undercut after the government said it would extend a resource tax to the entire nation, while industrial companies weakened after UBS AG said that China will "intensify" enforcement on land policies.

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Overnight Developments

• Global stocks are lower with the European Euro Stoxx 50 Index down -1.04% and Sep S&Ps down -1.00 point. A bigger than expected slowdown in Chinese manufacturing along with Spain’s deteriorating creditworthiness fanned concern that the global economic recovery is faltering and kept stock prices on the defensive. Weaker-than-expected demand at a Spanish auction of 3.5 billion euros ($4.3 billion) of 5-year notes heightened sovereign-debt worries, with credit-default swaps tied to Spain’s debt climbing 10 bp to 273.6. Spanish bank stocks sold-off and led European bank stocks lower and mining stocks tumbled as well after metal prices slumped. The euro gained as the ECB said it will lend 111.2 billion euros ($136.5 billion) to banks in 6-day loans to help them cope with the expiry of its 12-month loans in which banks needed to repay 442 billion euros worth of debt by today.
• The Asian markets today closed lower with Japan down -2.04%, Homg Kong closed for holiday, China -1.44%, Taiwan -1.03%, Australia -1.49%, Singapore -0.53%, South Korea -1.00%, India -1.08%. China’s Shanghai Stock Index tumbled to a 14-1/2 month low after China’s manufacturing expanded at a slower pace for a second month in June, adding to signs that its economy is moderating. The Jun China purchasing mangers’ index fell -1.8 to 52.1, a bigger drop than the -0.7 drop the market was expecting. Japan’s Nikkei 225 Stock Index fell to a 7-month low despite the Q2 Japan Tankan large manufacturers index climbing to a 2-year high. Most Asian exporters closed lower on concern European demand for their goods may wane after Moody’s Investors Service warned that it may cut Spain’s top credit rating, while concerns that a global economic slowdown is deepening sent shipping companies lower after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7% a nd extended its 24-day slump to a whopping 43%.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.64% and Sep S&Ps up +7.40 points. The dollar and Treasuries are weaker and most commodities are higher as the euro strengthened after ECB figures suggested reduced funding pressure for European banks. The ECB said it would lend banks 131.9 billion euros ($161.5 billion) for 3 months, less than some market estimates of 250 to 300 billion euros. Banks on July 1 need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB, and a main cog in its extraordinary liquidity measures designed to fight the financial crisis last year. The weaker-than-expected demand suggests that funding pressures for European banks aren’t as bad as originally feared and helped push the euro higher and send European bank stocks soaring. AstraZeneca Plc, the UK’s second-biggest drug maker, climbed 9.7% after winning a US court ruling that will help prevent the sale of generic copies of it s cholesterol medicine Crestor until 2016, while Portugal Telecom SGPS SA jumped 5.8% after Telefonica SA increased its offer for the Portuguese company’s stake in Brazil’s largest mobile-phone operator.
• The Asian markets today closed mostly lower with Japan down -1.96%, Hong Kong -0.59%, China -1.12%, Taiwan -1.27%, Australia -1.02%, Singapore +0.18%, South Korea -0.76%, India +0.95%. Most Asian stock markets declined, with Chinese stocks falling to a 14-month low, as Asian markets play catch up to yesterday’s global equity market rout that was extended by weaker-than-expected US Jun consumer confidence that’s spurring concern about a slowdown in US economic growth. Most Asian exporters closed lower on concerns demand will weaken for their goods if the US economy slows and Japan’s Nikkei 225 Stock Index tumbled to a 7-month low after Japan’s wages unexpectedly declined in May. May Japan labor cash earnings dropped -0.2% y/y when the market was expecting a +0.8% y/y increase, eroding prospects for acceleration in domestic demand and deepening concern that the global economic recovery will slow.

Overnight U.S. Stock News

• Sep S&Ps this morning are trading up +7.40 points. The US stock market yesterday opened lower and continued lower throughout the day and finished with sharp losses (Dow Jones -2.65%, S&P 500 -3.10%, Nasdaq Composite -3.85%). The S&P 500 plunged to a 7-3/4 month low, the Dow Jones fell to 3-week lows while the Nasdaq slid to a 1-3/4 month low. Bearish factors included (1) carry-over weakness from a plunge in Asian and European stock markets as industrial and commodity stocks declined on concern that China’s economy is weakening after the Conference Board revised down its April gauge for the outlook of China’s economy to indicate slower growth, (2) the larger-than-expected decline in Jun US consumer confidence (-9.8 to 52.9 versus expectations of -0.8 to 62.5), (3) weakness in bank stocks led by a plunge in JPMorgan Chase after Moody’s Investors Service said JPMorgan Chase, Bank of America and Wells Fargo may lose $1.38 billion in annual revenue from the proposed cap on credit-card swipe fees being considered by Congress, and (4) concerns over the health of European banks after the 3-month Euribor rate rose to an 8-month high of 0.688%, signaling a lack of trust between lenders, along with concerns that European banks must refinance $540 billion in 1-year ECB loans into 3-month loans by July 1.
• Bullish factors included (1) the larger-than-expected increase in the Apr S&P/CaseShiller composite-20 home price index which had its biggest year-over-year gain in 3-1/2 years (+0.4% m/m and +3.8% y/y versus expectations of -0.15% m/m and +3.4% y/y), (2) comments from President Obama who said after meeting with Fed Chairman Bernanke that he and the Fed Chairman both agree that the US economy is strengthening "into recovery," and (3) the plunge in the 10-year T-note yield to a 14-month low of 2.95%.
• Citigroup (C) rose 2.1% and Bank of America (BAC) climbed 1.5% in pre-market trading on carry-over support from a rally in European bank stocks on weaker-than-expected demand for ECB funds.
• Peabody Energy (BTU) increased 1.3% in pre-market trading after Deutsche Bank AG raised its recommendation on the stock to "buy" from "hold."

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Overnight Developments

• Global stocks are mostly lower with the European Euro Stoxx 50 Index down -1.14% and Sep S&Ps down -4.50 points. The dollar and Treasuries are stronger while most commodities are weaker. European stocks declined on valuation concerns as investors fear that stock prices have outpaced the prospects for company earnings and economic growth. BNP Paribas fell 3.4% and led bank stocks lower after Fitch Ratings cut the long term credit rating of France’s largest bank one step to AA-, the fourth-highest investment grade, from AA citing a "deterioration" of the company’s asset quality. Bank stocks were also pressured after comments from ECB Council member Noyer who said "some banks have started facing increasing funding problems and that the situation reflects a general state of uncertainty which, left unchecked, could have significant consequences on financial stability and the real economy, as was the case during the last part of 2008." European debt concerns also undercut stock prices after Standard & Poor’s lowered its economic growth forecast for Spain to an average of 0.7% a year through 2016 from 1.0%, saying Spanish banks face mounting credit losses and "substantial strain" on revenue generation. Limiting losses in European stocks was the unexpected increase in German business confidence after the Jun German IFO business climate rose +0.3 to a 2-year high of 101.8 as the euro’s depreciation and a global economic recovery brightened the outlook for exports.
• The Asian markets today closed mostly lower with Japan down -1.22%, Hong Kong -0.45%, China +0.11%, Taiwan -0.30%, Australia -1.18%, Singapore -0.46%, South Korea -0.54%, India -0.71%. Asian shipping companies closed lower after freight rates slumped for a 17th consecutive day and basic resource companies fell as most commodity prices declined. Japan’s fiscal strategy released today has yet to impress upon the ratings’ agencies the ability of Japan’s government to cut the country’s massive debt. Under the plan, Prime Minister Kan’s administration pledged to balance its books in 10 years, restrict bond sales and overhaul the tax system. Annual spending will be capped at 71 trillion yen ($781 billion) over the next 3 years, and the government will decide changes to the tax regime "soon." The director of sovereign ratings at Standard & Poor’s in Singapore said that while the strategy is "better than nothing," the country’s credit quality is &quo t;still eroding slowly," while the director of Fitch Ratings’ Asia-Pacific sovereign group said the plan "does not have enough details for us to reach a firm conclusion or for us to say that we have confidence that Japan has a detailed fiscal consolidation plan."

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Overnight Developments

• Global stocks are higher with the European Euro Stoxx 50 Index up +1.01% and Sep S&Ps up +1.30 points. The dollar is little changed, Treasuries are stronger and commodities are mixed. European bank stocks gained, led by a 8% surge in Banco Santander SA, after Spain’s biggest lender said its outlook is “brilliant” and that is can benefit from rivals’ “weakness” in mature markets. Novartis gained 3.4% after winning a US regulatory advisory panel’s backing to introduce the first pill to treat multiple sclerosis with its drug Gilenia. Continental AG rose 3.8% after Europe’s second-biggest tire maker was raised to “buy” from “hold” at Deutsche Bank AG, while BP gained 8.7% as it snapped 4 days of declines that saw its stock tumble to a 13 year low, after the WSJ reported the company is considering cutting or deferring its Q2 dividend payment. Also boosting European stocks today was the action by the Bundesbank to raise its g rowth forecasts for Germany, as it now predicts GDP growth of 1.9% this year and 1.4% in 2011, higher than a Dec prediction of 1.6% growth in 2010 and 1.2% for 2011 as the economy profits from a pick-up in global demand. 
• The Asian markets today closed higher with Japan up +1.70%, Hong Kong +1.22%, China +0.32%, Taiwan +1.64%, Australia +1.58%, Singapore +0.60%, South Korea +1.62%, India +0.84%. Asian stock markets rallied after several economic reports from China showed its economy continues to strengthen. May China retail sales surged +18.7% y/y and May industrial production climbed 16.5% y/y as the Chinese economy proves resilient so far to the European debt crisis. Computer-related companies closed higher after Acer, the world’s largest vendor of laptop computers, rallied over 3% higher when it reported a 45% jump in May sales and Taiwan Semiconductor Manufacturing, the biggest maker of custom chips, said that it’s optimistic about the chip industry and the global economy for the second half of 2010. This adds to bullishness in the technology sector after the Semiconductor Industry Association said that global sales of microchips will rise 28% to $290.5 billion this year, boosted by demand in China and India, compared with a Nov forecast of 10% growth.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.02% and June S&Ps up +2.20 points. The dollar index rallied to a 14-3/4 month high and copper slid to an 8-month low after the weekend meeting of the Group of 20 finance chiefs failed to agree on steps to ensure the economic recovery will strengthen. The G-20 post meeting statement said the global economic rebound faces "significant challenges," while US Treasury Secretary Geithner warned that the world cannot count on the US consumer to drive growth and urged other nations to stimulate their own demand. The euro fell to a fresh 4-year low against the dollar but erased its losses after German factory orders unexpectedly gained for a second month on April as the weaker euro boosted export demand and companies increased investment. April German factory orders rose +2.8% m/m, when the market was expecting a -0.4% m/m decline, and gained +29.6% y/y, the biggest year-over-year increase s ince data began in 1992. Greece’s benchmark stock index, the ASE index, tumbled to a 12-year low, and was led lower by weakness in bank stocks, while European telecommunication stocks fell after Hellenic Telecommunications Organization SA plunged 6.6% when it announced that it will pay a lower dividend than planned. Also giving European stocks a lift was the unexpected increase in the June Euro-Zone Sentix investor confidence, which climbed +2.3 points to -4.1 when the market was expecting a -0.6 point decline to -7.0.
• The Asian markets today closed lower with Japan down -3.84%, Hong Kong -2.03%, China -1.77%, Taiwan -2.54%, Australia -2.78%, Singapore -1.95%, South Korea -1.67%, India -1.97%. Asian stock markets closed lower as they played catch up with last Friday’s losses in European and US markets. Asian mining companies and raw materials producers weakened on concerns a slowing global economy may undercut demand for commodities, while Japanese exporters slid after the yen strengthened. KB Financial Group fell 5.3% and led Asian financial companies lower on concern the European sovereign debt crisis is spreading, while China’s Hon Hai Precision Industry, the world’s largest contract electronics manufacturer, declined 5.6% after the company announced the base wage for workers at a China factory will double following recent employee suicides at its plant.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +2.20 points. The US stock market last Friday traded lower the entire day and finished with sharp losses (Dow Jones -3.15%, S&P 500 -3.44%, Nasdaq Composite -3.64%). The Dow Jones, S&P 500 and the Nasdaq all dropped to 1-week lows. Bearish factors included (1) carry-over weakness from a slump in European equity markets on concern that the European sovereign debt crisis is spreading after Hungarian Prime Minster Orban said Hungary’s economy is in a "very grave situation" because the previous government manipulated figures and lied about the state of the economy and that talk of a default is "not an exaggeration," (2) concerns that the US economic recovery may not be robust after the weaker-than-expected May nonfarm payrolls (+431,000 versus expectations of +520,000) with private payrolls up +41,000 (versus expectations of +178,000), (3) weakness in energy and raw material producers after the doll ar surged to a 14-3/4 month high and prompted a sell off in most commodities, and (4) comments from Atlanta Fed President Lockhart who said that falling commercial property prices pose a growing challenge to the banks in the Southeastern US where more failures are likely to occur.
• Bullish factors included (1) the larger-than-expected drop in the May US unemployment rate (-0.2 to 9.7% versus expectations of -0.1 to 9.8%), (2) the +31,000 increase in temporary workers in May, the eighth straight monthly increase, which may be a harbinger of future payroll gains as employment at temporary-help agencies often picks up before companies take on permanent staff, and (3) the drop in the yield on the 10-year T-note to a 1-week low of 3.20% which cuts the cost of capital for consumers and businesses.
• Talecris Biotherapeutics (TLCR) soared 38% in pre-market trading after Grifols, Europe’s largest maker of blood-plasma products, agreed to buy Talecris for about $3.4 billion in cash and stock.

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Overnight Developments

• Global stocks are weaker with the European Euro Stoxx 50 Index down -1.99% and June S&Ps down -14.50 points. The dollar index rose to a 14-month high and most commodities sank on concern that global economic growth is starting to slow. The euro sank to a 4-year low and bank stocks tumbled after the ECB said in its bi-annual Financial Stability Report yesterday that Euro-Zone banks may see another 90 billion euros in net writedowns this year on loans and securities and will need to make provisions for losses of about 105 billion euros next year, which may be even bigger amid "heightened sovereign risks and possible second-round effects of the fiscal consolidation." European stocks weakened further after the April Euro-Zone unemployment rate unexpectedly rose +0.1 to a 12-year high of 10.1% as the region’s sovereign debt crisis undermined the outlook for the economy. ECB Vice President Papademos, speaking on the final day of his term as Vice President , said that Europe’s economy may struggle to gather strength after contagion from Greece’s fiscal crisis eroded confidence in consumers and companies last month and forced governments to deepen spending cuts to reduce budget deficits and that "the consolidation measures can be expected to have some short-term negative impact on growth and employment."
• The Asian markets today closed lower with Japan down -0.58%, Hong Kong -1.36%, China -1.05%, Taiwan -1.15%, Australia -0.37%, Singapore -1.35%, South Korea -0.62%, India -2.20%. Chinese stocks declined and helped to send global stock markets lower after manufacturing in China slowed more than expected. China’s Federation of Logistics and Purchasing reported that the April China Purchasing Managers’ Index fell -1.8 to 53.9, lower than estimates for a decline to 54.5, which raises concern that China’s economy, the engine of global growth, is slowing. China’s real estate market may also be weakening after the Shanghai Securities reported that real estate closings in Beijing, Shanghai and Shenzhen in May plunged as contract numbers dropped by as much as -70% m/m from April. Japanese stocks closed lower on concern the nation’s political instability may slow the economic recovery after Prime Minister Hatoyama said he will consider his political future and do "what’s b est for the people of Japan" after polls showed 80% of Japanese voters want him to step down 6 weeks before mid-term elections.

Overnight U.S. Stock News

• June S&Ps this morning are trading down -14.50 points on global economic growth concerns. The US stock market weakened last Friday and finished with moderate losses (Dow Jones -1.19%, S&P 500 -1.24%, Nasdaq Composite -0.91%). Bearish factors included (1) the action by Fitch Ratings to cut Spain’s credit rating to AA+ from AAA, spurring concern the European debt crisis will worsen, (2) concerns that the US economic recovery will slow after April personal spending unexpected failed to increase for the first time in the last 7 months (unchanged versus expectations of +0.3%), (3) the weaker-than-expected May Chicago purchasing managers index (-4.1 to 59.7 versus expectations of -2.8 to 61.0), (4) an escalation of tensions in Korea after a North Korean general warned of "all out war" if any accidental clashes with South Korea break out, and (5) weakness in oil-services companies and energy producers after President Obama extended a moratorium on deep-w ater offshore drilling permits, suspended exploration in two areas off of Alaska, cancelled pending lease sales in the Gulf of Mexico and proposed sales off Virginia’s coast, and suspended operations at 33 deep-water wells being drilled in the Gulf of Mexico.
• Bullish factors included (1) an easing of liquidity concerns after the 3-month dollar Libor rate fell for the first time in the last 14 sessions, (2) the unexpected increase in the May US University of Michigan consumer confidence (+0.3 to 73.6 versus expectations of unchanged at 73.3), and (3) the action by Goldman Sachs to raise their operating earnings per share estimates for S&P 500 companies to $78 for 2010 and $93 for 2011, up from $76 and $90 respectively, citing stellar Q1 results and better net margins than they had expected.
• British Petroleum Plc (BP) plunged nearly 17% in European trading after it abandoned an attempt to plug the leaking well in he Gulf of Mexico.
• Alcoa (AA) fell nearly 2% and Freeport-McMoRan (FCX) dropped 2.4% in pre-market trading after industrial metals prices slumped.

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