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 mostly lower with the European Euro Stoxx 50 Index down -0.55% and June S&Ps down -7.40 points. The euro sank to a 4-year low and is undercutting European stock prices 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." The dollar and Treasuries rallied on the Hungary news, which undercut commodity prices. Limiting losses in stocks today is speculation that the US payrolls report, released later this morning, will show a fifth month of gains and add to evidence that the economy is gaining momentum. Q1 Euro-Zone GDP was revised up to +0.6% y/y from +0.5% y/y, the first annual gain since Q3 of 2008, led by a +6.0% y/y jump in exports and a +2.0% y/y increase in government spending. European technology stocks rallied, led by a 2.9% advance in S TMicroelectronics; after UBS raised its recommendation on Europe’s largest chipmaker to "neutral" from "sell," saying the chipmaker was a "strong beneficiary" from recent currency moves. Infineon Technologies AG gained 2.7% and ASML Holding NV rose 3.1% after the Dramexchange Index, which tracks prices of the most widely used computer memory chips, rose 1.2% and indicates an increase in demand.
• The Asian markets today closed mostly lower with Japan down -0.13%, Hong Kong -0.03%, China +0.30%, Taiwan -0.21%, Australia -0.82%, Singapore +0.47%, South Korea +0.21%, India +0.56%. South Korean stocks closed higher after the country’s Q1 GDP was revised up to a gain of +2.1% q/q from April’s initial estimate of +1.8% q/q, as exports surged and domestic demand strengthened. The South Korean Finance Ministry said in its monthly economic report today that the government will keep its expansionary economic-policy stance "for the time being" to support the recovery, citing risks from Europe and North Korea tensions. Japanese stocks were little changed as the Democratic Party of Japan is scheduled to vote on a new prime minister today to replace Yukio Hatoyama who resigned earlier this week. Asian mining companies closed lower and limited gains in other sectors after the CEO of Freeport-McMoRan said that China is a "risk to the world’s market place in t he near term" as it takes measures to cool its economy.

Overnight U.S. Stock News

• June S&Ps this morning are trading down -7.40 points on concern that Hungary may default on its sovereign debt. The US stock market yesterday finished with modest gains (Dow Jones +0.06%, S&P 500 +0.41%, Nasdaq Composite +0.96%). All of the stock indexes climbed to 2-week highs. Bullish factors included (1) optimism the economy is strengthening after Apr factory orders gained for the eighth consecutive month (+1.2% m/m) and the May ISM non-manufacturing index expanded for the fifth straight month (unchanged at 55.4), (2) strength in retailers after May ICSC chain store sales rose +2.6% y/y, their sixth straight monthly increase, and (3) Goldman Sachs’ hike in its May US payroll forecast to increase +600,000 from +500,000.
• Bearish factors included (1) concerns that the European debt crisis will worsen after the euro weakened on liquidity concerns as overnight deposits with the ECB rose to a record 320.4 billion euros ($394 billion), the fifth consecutive day deposits with the ECB have exceeded 300 billion euros as the sovereign debt crisis makes banks wary of lending to each other, (2) the weaker-than-expected May ADP employment change (+55,000 versus expectations of +70,000), and (3) weakness in mining companies and raw material producers after the CEO’s of Codelco and Freeport-McMoRan, the two largest copper producers, said that China’s plans to slow its economy threatens to reduce demand for metals and other commodities.
• Comtech (CMTL) gained 5.5% in pre-market trading after the provider of mobile-data communications equipment reported Q3 revenue of $216.3 million, well ahead of analysts’ estimates of $190.3 million.

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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +1.78% and June S&Ps up +3.80 points. The dollar is little changed, Treasuries are weaker and most commodities are higher on increased economic optimism. European stocks received a boost after the May Euro-Zone PMI composite was unexpectedly revised up to 56.4 from the originally reported 56.2. Automakers gained, led by a 5.5% jump in Peugeot, after Deutsche Bank AG raised its recommendation on Europe’s second-largest carmaker to "buy" from "hold," and Daimler AG rose 2.5% after its Mercedes Benz division reported a 23% gain in US sales in May. Air France-KLM Group jumped 4.8% after Europe’s biggest airline said passenger traffic rose 4.3% in May. Limiting stock gains was the unexpected decline in Apr Euro-Zone retail sales which fell -1.2% m/m, the biggest drop in 1-1/2 years and weaker than market expectations for a +0.1% m/m increase. European banks are parking c ash with the ECB amid concern that a 750 billion-euro European rescue package may not be enough to stop the crisis from spreading and spilling into the banking industry. Overnight deposits with the ECB rose to a record 320.4 billion euros ($394 billion) and deposits have exceeded 300 billion euros for the past five days as the sovereign debt crisis makes banks wary of lending to each other.
• The Asian markets today closed mostly higher with Japan up +3.24%, Hong Kong +1.62%, China -0.78%, Taiwan +2.29%, Australia +2.40%, Singapore +2.42%, South Korea +2.14%,India +1.68%. Japanese businesses cut spending for the 12th consecutive quarter after Q1 capital spending excluding software fell -12.9% y/y. The much larger than expected decrease in capital spending will lead the government to downgrade Japan’s Q1 GDP figures later this month. Japanese exporters closed higher as the yen slumped to a 2-week low against the dollar and Asian carmakers gained on increased US sales. Nissan Motor closed 4.8% higher after reporting a +24% y/y increase in US car sales in May, Toyota rose 3.6% after posting a 5.7% sales gain and Kia Motors advanced 3.2% after its US sales rose 21% last month. The South Korean won rose sharply after JPMorgan Chase raised the nation’s equities to "overweight" and said the won is one of the "most undervalued" emerging-marke t currencies.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +3.80 points. The US stock market yesterday opened higher and maintained a positive tone throughout the day as it trended higher into the close and finished on its high (Dow Jones +2.25%, S&P 500 +2.58%, Nasdaq Composite +2.64%). Bullish factors included (1) a rally in homebuilders after the stronger-than-expected Apr US pending home sales (+6.0% m/m and +24,6% y/y versus expectations of +5.0% m/m and +21.0% y/y), (2) a rally in energy producers and oil service providers after crude oil rose, (3) strength in airline stocks after Continental airlines beat monthly estimates for monthly unit revenue, which signals a stronger return of business travelers who pay higher fares, and (4) the prediction from MFS Investment Management that "the US is in the middle of a V-shaped economic recovery and that the European bank crisis does not have the scale and scope of Lehman and AIG and it doesn’t have the ingredients to bring down the banking system."
• Bearish factors included (1) the slump in the MBA’s home purchase index to its lowest level since Apr 1997, which indicates future US housing sales may be weak as the expiration of government tax incentives to purchase homes by the end of April has led to a reduction in home sales since then, and (2) carry-over weakness from a slump in European stocks on concern the region’s sovereign debt contagion is spreading after the yield premium between Spanish 10-year government bonds and 10-year German bunds widened to a 13-year high of 177 bp.
• Alcoa (AA) rose 1.6% in European trading after the company was upgraded to "outperform" from "neutral" at Macquarie Group Ltd.
• Las Vegas Sands (LVS) climbed 2.6% in pre-market trading after Morgan Stanley raised its recommendation on the casino company to "overweight" from equal weight."

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.89% and June S&Ps up +6.40 points. European stocks retreated and were led lower by losses in energy producers and oil service companies as the US opens up criminal and civil investigations into BP Plc’s Gulf of Mexico oil spill. Prudential Plc, the UK’s biggest insurer, fell nearly 3% after its $35.5 billion takeover attempt of American International Group’s Asian unit collapsed, while Aegis Group Plc slipped 3.1% after the world’s largest independent buyer of advertising space was downgraded to “sell” from “hold” at Deutsche Bank AG. Also undercutting European stock prices was the larger-than-expected +0.9% m/m increase in April Euro-Zone PPI, the biggest monthly gain in 1-3/4 years, as a weaker euro made imports more expensive and energy costs rose.
• The Asian markets today closed mostly lower with Japan down -1.12%, Hong Kong -0.13%, China +0.49%, Taiwan -1.28%, Australia -0.73%, Singapore +0.45%, India +1.02%. Most Asian stock markets fell and the yen droppped to a 2-week low against the dollar after Japanese Prime Minister Hatoyama said he will resign, less than 2 months before elections, which raises uncertainty after the future direction of the Japanese economy. The next prime minister will inherit an economy that’s dependent on exports and remains within the throes of deflation that the BOJ has failed to stop. With consumer spending slowing in Q1, the reliance on trade leaves Japan vulnerable to any slump in overseas demand stemming from Europe’s debt crisis. Australia’s Q1 GDP rose +0.5% q/q, its fifth straight quarterly increase, as government stimulus spending helped counter consumer demand that weakened. Policy makers expect Australia’s economic growth to almost double in he next 2 years, as China’s de mand for resources spurs a mining investment boom.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +6.40 points. The US stock market yesterday shook off early weakness and rallied into early afternoon, but then plummeted into the close and finished on its low (Dow Jones -1.11%, S&P 500 -1.72%, Nasdaq Composite -1.54%). Bearish factors included (1) concerns that the global economy may begin to slow after China’s May purchasing managers index slowed more than forecast (-1.8 to 53.9 versus expectations of -1.2 to 54.5) (2) weakness in bank stocks after the ECB said in its bi-annual Financial Stability Report 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, (3) the plunge in the euro to a 4-year low against the dollar after the April Euro-Zone unemployment rate unexpectedly rose +0.1 to a 12-year high of 10.1%, and (4) geopolitical concerns after AFP reported that Lebanon fired on Isr aeli warplanes that were flying over its airspace.
• Bullish factors included (1) optimism the US economy may be able to overcome the negative effects of the European debt crisis after the May ISM manufacturing index fell less than expected (-0.7 to 59.7 versus expectations of -1.0 to 59.4), (2) the unexpected increase in April construction spending which had its largest monthly increase since June 1998 (+2.7% m/m versus expectations of unchanged), and (3) the prediction from the chief equity strategist at JPMorgan Chase who said that the 5-week decline in the S&P 500 Stock Index is consistent with a temporary pullback within a bull market.
• JPMorgan Chase (JPM) climbed 1.6% in pre-market trading after UBS upgraded the stock to “buy” from “neutral.”
• Joy Global (JOYG) rose 2.7% in pre-market trading after Goldman Sachs raised its recommendation on the stock to “buy” from “neutral.”

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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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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.26% and June S&Ps up +0.30 of a point. The euro strengthened for a second day and most commodities rallied, as crude oil and copper climbed to 1-1/2 week highs. Daimler AG rose 2% and is leading automakers higher after the world’s second-largest luxury carmaker raised its profit forecast for its Mercedes-Benz division for the second time in 6 weeks as the global recovery spurs demand. Daimler now expects full-year earnings for its Mercedes-Benz unit to be at the “upper end” of the carmaker’s target of 2.5 billion euros ($3.1 billion) to 3 billion euro range, and its Q2 Ebit will exceed the Q1 total of 806 million euros. Daimler’s CEO said deliveries of Mercedes-Benz vehicles to China more than doubled in Q1 and China has now become Mercedes-Benz cars’ third-largest sales market. Travis Perkins jumped 8.1% after it made a 553 million-pound ($806 million) takeover offer for B SS Group in an attempt to create the UK’s largest plumbing and heating materials chain, and Opap SA rose 3.7% after Europe’s largest publicly traded gambling company reported Q1 net income of 192.2 million euros, beating analysts’ estimates of 182 million euros. Liquidity concerns eased slightly after the 3-month dollar Libor rate dropped to 0.536% from 0.538% and the dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, narrowed to 30.4 bp from 30.8 bp.
• The Asian markets today closed mostly higher with Japan up +1.28%, Hong Kong +1.73%, China -0.34%, Taiwan +0.72%, Australia +1.79%, South Korea +1.08%, India +1.18%. Asian stocks received a boost after St. Louis Fed President Bullard said the debt crisis is likely to be contained in Europe as US and Asian growth protects them from contagion. Japanese exports gained as the yen weakened to a 1-week low against the dollar with Nintendo ending 2.8% higher and Sony closing with a 1.8% gain. The April Japan jobless rate unexpectedly rose +0.1 to 5.1%, April Japan overall household spending unexpectedly fell -0.7% y/y, and deflation deepened with the April Japan national CPI ex fresh food falling a more than expected -1.5% y/y, signaling domestic demand is restraining the nation’s recovery. In another sign of economic uncertainty, the April Japan job-to-applicant ratio unexpectedly fell -0.01 to 0.48, meaning there are 48 jobs for every 100 candidates, its first deteriorati on in 8 months.

Overnight U.S. Stock News

• June S&Ps this morning are trading little changed, up +0.30 of a point. The US stock market yesterday trended higher the entire session and finished sharply higher (Dow Jones +2.85%, S&P 500 +3.29%, Nasdaq Composite +3.73%). Bullish factors included (1) carry-over support from a sharp rally in European bourses after China affirmed its commitment to investing in Europe, which was a boost of confidence for the euro, (2) comments from St. Louis Fed President Bullard who said that Europe’s sovereign debt crisis is likely to be contained within the Euro-Zone as the recovery trajectory in the US and Asia protects them from contagion, (3) strength in energy and raw-materials producers after the weaker dollar prompted a rally in most commodities, and (4) a rally in technology stocks led by gains in Microsoft after the company was upgraded to “outperform” from “market perform” at FBR Capital Markets.
• Bearish factors included (1) the unexpected downward revision to US Q1 GDP to 3.0% from 3.2% (versus expectations of an increase to 3.4%), and (2) the slightly smaller-than-expected drop in weekly initial unemployment claims (-14,000 to 460,000 versus expectations of -16,000 to 455,000).
• Apple (AAPL) climbed 1.5% in European trading as its iPad tablet computer went on sale outside of the US.

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