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.

Day Trader: Click here to read the complete Morning Call:

Overnight Developments

• Global stocks are higher with the European Euro Stoxx 50 Index up +2.34% and Sep S&Ps up +11.00 points. Speculation that stock valuations have become attractive is boosting global stocks today after the recent decline in equity prices may have overrun the outlook for company earnings. Analysts are projecting profit for S&P 500 companies will climb 34% in 2010 compared with a 27% projected gain on March 29. The revision, the most during any quarter in at least 6 years, comes as stocks posted their biggest losses in 16 months. Basis resource stocks are leading the rally today in European stocks as rising commodities boosts share prices. BHP Billiton, the world’s biggest mining company, gained 4% and Rio Tinto rose 4.8%. BP rallied 3.7% after RBS upgraded the company to "buy" from "hold," saying the "pessimistic view on the probable costs of Macondo oil spill is currently discounted" in the share price.
• The Asian markets today closed higher with Japan up +0.77%, Hong Kong +1.22%, China +2.00%, Taiwan +!.46%, Australia +1.28%, Singapore +0.84%, South Korea +0.76%, India +0.99%. The Australian dollar and financial stocks rallied today after Australia’s central bank paused in raising borrowing costs for a second month. RBA Governor Stevens kept the overnight cash rate at 4.5% and said "caution in financial markets has been evident in the past couple of months, driven principally by concerns about European sovereigns and banks but also by some uncertainty about the pace of future global growth." China’s Shanghai Stock Index rallied off of a 15-month low to close higher and provided support for gains in other Asian stock markets. Technology shares gained after Taiwan Semiconductor Manufacturing, the world’s largest contract manufacturer of chips, increased 2.6% after JPMorgan Chase maintained its "overweight" rating on the company, while Elpida Memory advanced 4.5% after the world’s third-biggest maker of computer-memory chips said it plans to cut debt and "seek opportunities including acquisitions" as a recovery in computer sales boosts profits.

Day Trader: Click here to read the complete Morning Call

Overnight Developments

• Global stocks are weaker with the European Euro Stoxx 50 Index down -1.87% and Sep S&Ps down -12.40 points. Commodities sank and the dollar and Treasuries gained on concern that growth in China, the main engine of the world’s economic recovery, is slowing. The Conference Board’s Apr leading economic index for China was revised down to show a 0.3% gain, far less than the 1.7% increase reported Jun 15. Mining companies took a hit on demand concerns with Rio Tinto down 4.7% and BHP Billiton losing 3.1%. A 2% drop in Vodaphone added to the negative price action in European stocks after Credit Suisse cut its recommendation on the world’s largest mobile-phone company to "neutral" from "outperform." On the positive side, the Jun Euro-Zone economic confidence unexpectedly rose +0.3 to 98.7 as the drop in the euro bolstered the prospects for exports and optimism in Europe’s recovery. Three people familiar with the results said that Deutsche Bank AG, Commerzbank AG and Bayerische Landesbank passed a stress test that evaluated how about 25 European lenders would handle an economic downturn. The results are based on data from April that were passed on to the Committee of European Banking Supervisors. The European Union pledged on Jun 17 to disclose the results of the tests by the end of July.
• The Asian markets today closed lower with Japan down -1.27%, Hong Kong -2.31%, China -4.59%, Taiwan -1.03%, Australia -0.88%, Singapore -1.38%, South Korea -1.33%, India -1.35%. China’s Shanghai Stock Index plunged to a 14-month low after the Conference Board revised down its April gauge for China’s economic outlook to its smallest gain in 5 months, signaling a weaker expansion. Citigroup said in a report that China’s exports face "strong headwinds" in the second half of the year from policy tightening measures and the European debt crisis, reducing prospects of a rebound in the stock market. Concerns over the prospect for growth sent commodities tumbling which undercut most Asian commodity producers, while Chinese banks fell after Moody’s Investors Service said that China’s banks will face a rise in bad loans caused by the real estate industry and local-government financing vehicles. Stocks in Japan also closed lower on concern that its economic recovery i s stalling. The May Japan jobless rate unexpectedly rose +0.1 to 5.2% for its third straight monthly increase while the job-to-applicant ratio for May rose to 0.50, its highest level in more than a year, meaning there are 50 positions for every 100 candidates. May Japan household spending unexpectedly declined -0.7% y/y and May Japan industrial production also unexpectedly fell -0.1% m/m for its first decline since Feb. Japanese exporters were also undercut after the yen climbed to a 1-1/2 month high against the dollar.

Overnight U.S. Stock News

• Sep S&Ps this morning are trading down -12.40 points. The US stock market yesterday lacked direction the entire day and finished a volatile session slightly lower (Dow Jones -0.05%, S&P 500 -0.20%, Nasdaq Composite -0.13%). Bearish factors included (1) weakness in energy producers after crude oil tumbled, (2) the warning from the Bank for International Settlements (BIS) that European banks may struggle to refinance their debt if investor sentiment remains negative, which could start another banking crisis, and (3) the prediction from Columbia University finance professor Calomiris that the recently passed US financial services overhaul legislation will result in a "hidden tax" to consumers as banks levy an estimated $19 billion in additional fees to pay for the cost of the overhaul.
• Bullish factors included (1) comments from G-20 leaders after this past weekend’s summit in Toronto that they will focus on spurring economic growth and reducing deficits, (2) optimism that the US recovery is strengthening after the slightly larger-than-expected increase in May personal spending (+0.2% versus expectations of +0.1%), (3) the rally in phone service and wireless infrastructure companies after President Obama proposed doubling the airwaves available for smartphones, laptop connections to the Internet and new wireless devices, (4) the recommendation by Nomura Securities to buy stocks because equities "will be supported by valuations, monetary policy and earnings upgrades," and (5) the drop in the yield on the 10-year T-note to a 14-month low of 3.03%.
• Alcoa (AA) fell 1.7% in European trading on concern that metals demand from China may weaken.

Click here to read the complete Morning Call.

Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.31% and Sep S&Ps up +5.50 points. Signs that that the economic recovery may falter are undercutting European stock prices on concern that slower growth will hurt the outlook for earnings. The Jun Euro-Zone PMI composite, a gauge of growth in European manufacturing and service industries, fell to 56.0 from 56.4 in May, close to market expectations. The spread between the yield on Greek government bonds over comparable German bunds widened to 751 bp, a 1-1/2 month high, while a draft document from the European Commission proposes that European governments will consider imposing a charge on bond sales by countries that violate debt rules. Basic resource and mining companies fell on demand concerns with BHP Billiton down 1.4%, Rio Tinto falling 1.5% and Xstrata Plc retreating 1.8%. Holcim dropped 1.3% after Morgan Stanley downgraded the second-largest cement maker to "underweight" fr om "equal weight." According to the chief investment officer at Citigroup’s Private Bank, global equities are set to fall as the withdrawal of stimulus measures around the world causes a slowdown in earnings growth, while UBS AG and Goldman Sachs Group strategists predict the euro’s 14% slide against the dollar will boost earnings at European companies at least 25% this year and they recommend buying European stocks because the global economic rebound will overcome concerns that governments will default in Europe.
• The Asian markets today closed mostly lower with Japan down -1.87%, Hong Kong +0.18%, China -0.91%, Taiwan -0.40%, Australia -1.58%, Singapore -0.04%, South Korea -0.38%, India +0.04%. Asian stocks declined after the unexpected drop in May US existing home sales raised concern about the sustainability of the US economic recovery and demand for Asian goods. Asian commodity producers and exporters closed lower while Chinese property developers slumped after Shanghai housing sales in the first 5 months of this year fell -32.5% y/y, which indicates government measures to cool the real estate market are working. Toyota fell 1.7% and Honda lost 1.5% after both companies halted production at factories in southern China after two suppliers’ plants were closed by strikes, extending disputes to at least eight in the past month. Strikes have spread since Honda agreed last month to raise wages at a parts supplier by 24% to end a work stoppage as unrest at foreign-owned factories in China reflects a shrinking supply of low-cost labor in the nation.

Click here to read the complete Morning Call.