Overnight Developments

• Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.41% although Sep S&Ps are slightly higher by +0.50 points. The markets are worried that the weekend G20 meeting in Toronto will expose the rift on austerity versus stimulus that currently exists within the G20 and that G20 leaders will be unable to project a unified message. European stocks are being hurt by the fact that Greek 5-year credit default swap prices today reached a new record high of 1115 bp as the market increasingly worries about a possible Greek debt default. European officials today in Brussels are discussing the details of exactly when to disclose the results of the stress tests on 25 top cross-border European banks and on whether to go further and conduct stress tests on domestic national banks to determine the exact state of the European banking system. The EU last week said it would disclose the results of the stress tests some time in July. US Congressional nego tiators working through the night approved a compromise on US financial regulation, one provision of which will require US banks to move their swaps trading desks into subsidiaries. Both the House and Senate now need to approve the deal, which they propose to have on President Obama’s desk for signature by July 4.
• A storm is gathering in the Caribbean that could turn into a tropical storm or even a hurricane by the end of this weekend or by early next week and that has a chance of moving northward towards oil rigs in the Gulf of Mexico. BP’s stock is down 7% this morning on the possibility the storm will disrupt the effort to halt and clean up the BP oil spill.
• The Asian markets today closed mostly lower on concerns about stronger Asian currencies and higher interest rates following this week’s surprise Taiwan rate hike: Japan -.92%, Hong Kong -0.21%, China -0.77%, Taiwan -1.52%, Australia -1.49%, Singapore +0.14%, South Korea -0.80%, and Bombay -0.88%.

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Overnight Developments

• Global stocks are lower with the European Euro Stoxx 50 Index down -0.67% and Sep S&Ps down 6.60 points (-0.61%). The markets remain concerned about the European economy with Greek credit default swaps today rising 27 bp to a record high of 959 bp, indicating that the markets are increasingly concerned about a Greek debt default. Meanwhile, the Greek 10-year bond spread against Germany rose by 10 bp to a 1-1/2 month high of 782 bp. Global stocks are also lower on yesterday’s news that US May new home sales plunged by 33%. On the brighter side, April Eurozone industrial orders today rose by +0.9% m/m, adding to March’s +5.1% surge and marking the third consecutive monthly increase. The report boosted hopes for a continuance in the surge in European exports tied to the recent depreciation of the euro.
• The Asian markets today closed mostly lower: Japan +0.05%, Hong Kong -0.59%, China -0.04%, Taiwan +0.10%, Australia -0.14%, Singapore -0.82%, South Korea +0.82%, and Bombay -0.14%. Taiwan’s central bank today unexpectedly raised its key policy rate to 1.375% from 1.25%, as opposed to the unanimous market consensus that the bank would leave rates unchanged. Taiwan’s Q1 GDP soared by 13.3% and the government last month hiked its 2010 GDP forecast to +6.14% from +4.72% and its 2010 inflation forecast to +1.4% from +1.27%. Adding to the news of tighter policy in Asia, South Korea’s Finance Ministry today said that South Korea will “normalize” its accommodative policies and take pre-emptive action against inflation due to stronger-than-expected economic growth. The Finance Ministry raised its forecast for South Korean 2010 GDP to +5.8% from +5.0%.

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