Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.17% and Sep S&Ps up +0.60 of a point. The dollar and Treasuries are weaker and most commodities are higher as the markets square positions ahead of this morning’s Jun US payrolls report. The European Union’s statistics office today said that the May Euro-Zone unemployment rate remained at 10.0%, its highest level in nearly 12 years, after the April figure was revised down from a previously reported 10.1%. European automakers led stocks higher as Daimler AG rose 1.7% after it reported a 25% jump y/y in June US car sales and BMW gained 1.1% after it reported a 12% increase in June US car sales. Deutsche Boerse AG, the operator of the Frankfurt stock exchange, climbed 3% after Morgan Stanley upgraded the stock to "overweight" from "equal weight," saying that exchanges are "starting to look more attractive given lower balance sheet risks compared with banks and st rong, volatility-driven volumes." Steel makers also advanced led by a 2.3% jump in ThyssenKrupp AG after Goldman Sachs Group upgraded Germany’s largest steelmaker to "buy" from "neutral," saying "recent volatility in the equity markets has driven steel valuations to low levels."
• The Asian markets today closed mostly higher with Japan up +0.13%, Hong Kong -1.11%, China +0.32%, Taiwan +1.06%, Australia +0.03%, Singapore +0.85%, South Korea -0.75%, India -0.28%. Currencies of commodity-producing countries strengthened and mining stocks rallied after Australia reached a compromise on a new resource tax. Australian Prime Minister Gillard agreed to exempt most commodities from the tax, cut the planned tax on mining profits to 30% from 40% on coal and iron ore earnings and to raise the levy’s trigger level. Japanese exporters closed slightly higher after the yen fell back from a 7-month high against the dollar, although most shipping companies weakened after the Baltic Dry Index of shipping costs for commodities fell for a 25th consecutive session, its longest losing streak since Aug 2005. Goldman Sachs Group cut its growth forecast for China for this year to 10.1% from 11.4%, saying that government restrictions on lending and real estate will slow expansion in the world’s fastest-growing major economy.

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Overnight Developments

• Global stocks are sharply higher with the European Euro Stoxx 50 Index up +1.34% at a 1-1/4 month high and Sep S&Ps up +17.10 points at a 1-month high. The dollar index plunged to a 1-1/4 month low, Treasuries sank and commodities surged with gold jumping to an all-time high after China signaled it will relax the yuan’s fixed rate to the dollar, a sign that the global economy may strengthen. European mining stocks and basic resource producers rallied on speculation a stronger yuan will boost Chinese demand for metals and other commodities. European carmakers all gained with Daimler AG and Bayerische Motoren Werke AG both up over 3%, while Porsche SE advanced 4.1% after Commerzbank raised its recommendation on the carmaker to "hold" from "reduce." Banco Santander SA climbed nearly 2% after the Times reported that Spain’s largest bank is considering selling parts of its UK operations that may be worth as much as 25 billion pounds. BP Plc li mited gains in European stocks after it slid nearly 5% after the Sunday Times reported that the company is seeking to raise $50 billion to cover the cost of the oil spill in the Gulf of Mexico. BP may raise the first $10 billion from a bond sale this week, acquire a $20 billion loan and get the remaining $20 billion from asset sales over the next 2 years, the newspaper reported, and that BP wants to move quickly to raise cash because of concern its ratings may be downgraded, which would boost its borrowing costs.
• The Asian markets today closed higher with Japan up +2.43%, Hong Kong +3.08%, China +3.13%, Taiwan +1.90%, Australia +1.33%, Singapore +1.84%, South Korea +1.75%, India +1.74%. Asian stock markets rallied sharply on speculation that China’s relaxing of its currency peg to the dollar will bolster global economic growth. China’s currency posted its biggest gain in 20 months as the yuan surged to 6.798 per dollar after being held at about 6.83 to the dollar since mid-2008. In a statement on its website, the PBOC said the decision to increase "exchange-rate flexibility" was made after the economy improved, but did not indicate a timeframe for the change. The PBOC said it would maintain the yuan’s 0.5% daily trading band and said greater yuan flexibility would help cut the trade surplus and reduce reliance on exports as a driver of growth. In a tactical move ahead of this weekend’s Jun 26-27 G-20 summit in Toronto, China is trying to shift the focus of the G-20 meeting away from the value of its currency to items on its own agenda. Vice Foreign Minister Tiankai said that China wanted to discuss new quotas for the IMF that would boost the power of developing countries, promote the overhaul of global financial regulations, speak out against trade protectionism and pay more attention to economic development in poorer countries.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.14% and Sep S&Ps down -4.70 points. The euro weakened and the yield premium that investors demand to hold Spanish 10-year government bonds over German bunds widened to a record 219 bp, the most since the euro’s debut in 1999, after the Spanish newspaper El Economista reported that the IMF, the EU and the US Treasury are putting together a credit line of as much as 250 billion euros ($307 billion) for Spain. The EU and the Spanish government denied the report. European stocks shrugged off the Spanish report and rallied with Celesio jumping 6.1% as Europe’s largest publicly traded drug wholesaler said it’s forming a joint venture with Phoenix Group in the Netherlands to distribute pharmaceuticals. Irish Life surged 9.5% after Deutsche Bank initiated coverage of the bank with a "buy" recommendation, while automobile stocks fell and limited gains in the overall market with Daimler AG fa lling 2.4% and Michelin & Cie. dropping 1.4%.
• The Asian markets today closed higher with Japan up +1.81%, Hong Kong, China and Taiwan all closed for holiday, Australia +1.20%, Singapore +1.02%, South Korea +0.90%, India +0.29%. Asian stock markets closed higher, led by gains in technology shares, after Taiwan Semiconductor Manufacturing Co.’s projection for global demand boosted US chip sales. Raw materials and commodity producers also gained on speculation for increased demand and after the price of copper climbed to a 1-1/2 week high. Japan’s Nintendo closed 4.7% higher after the company introduced its 3DS handheld device that displays games in 3 dimensions without requiring glasses at the annual E3 game conference in Los Angeles. Nomura Holdings predicts that the "bubble" in China’s property market is going to burst very quickly, with prices set to fall as much as 20% in the next 12 to 18 months. China’s real-estate prices jumped 12.4% across 70 cities in May, adding to the 12.8% surge in April tha t was the most since the data series began in 2005. In its annual report released on its website yesterday, the China Banking Regulatory Commission warned of growing credit risks in the country’s real-estate industry and that the risks associated with home mortgages are growing and a "chain effect" may reappear in real-estate development loans.

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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.57% and June S&Ps up +12.20 points. The dollar and Treasuries are weaker and commodity prices rose after economic reports from Asia show accelerating growth. China’s exports in May jumped by the most in 6 years, while Q1 Japan GDP was unexpectedly revised higher. Daimler AG climbed 4% after forecasting Mercedes-Benz sales will advance at twice the rate of the overall market on demand from China, while Lafarge SA, the world’s biggest cement maker, gained 4.3% after Citigroup recommended buying the shares. Overnight deposits at the ECB rose to a record 369 billion euros ($444 billion) today, the most since the start of the euro currency in 1999, as an increase in counterparty risks prompts European banks to deposit their excess funds with the ECB’s overnight deposit facility rather than lend. As expected, the Bank of England maintained its benchmark interest rate at 0.50% and held its asset purchase target at 200 billion pounds.
• The Asian markets today closed mostly higher with Japan up +1.10%, Hong Kong +0.06%, China -1.15%, Taiwan +1.56%, Australia +1.14%, Singapore +1.23%, South Korea +0.22%, India +1.59%. Japanese stocks closed higher after Japan’s Q1 GDP was unexpectedly revised up to a 5.0% annualized rate from 4.9%, driven by exports and an upward revision to consumer spending (+0.4% q/q from the previously reported +0.3% q/q). In a separate report, May Japan CGPI rose +0.4% y/y, the first increase in producer prices in 17 months, which may ease deflation concerns as an increase in raw-material costs fueled price gains. Aussie stocks closed higher after Australia’s jobless rate declined -0.2 to a 16-month low of 5.2% in May when employers added 26,900 to payrolls, more than market expectations of 20,000. China’s May exports rose +48.5% y/y, the biggest gain in more than six years, which indicates the European debt crisis has yet to slow the world’s fastest-growing major economy. Desp ite the strong export figure, China’s Shanghai Stock Index closed lower after China’s property prices jumped +12.4% y/y in May, the second-fastest pace on record, which raises concern the government will step up tightening measures to cool the property market.

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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 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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