This stock market seems to have an illness called schizophrenia. In late September, the major stock indexes declined lower, the Dow Jones Industrial Average dropped by over 1000.0 points only to recapture all of those declines in 15 trading days in the month of October. Ten percent rallies and declines are becoming normal trading ranges these days. In the past, the stock markets would rally higher or lower by ten percent in a year. These are certainly not normal times.

What causes these large wide range stock market swings? Well, there are several things that can affect markets, however, the main catalyst is currency. The major stock markets seem to be moving on the back of currency intervention, mainly the U.S. Dollar. As you all know, the U.S. Dollar is the world’s reserve currency, therefore, most every commodity must be purchased with U.S. Dollars. If you have ever traveled to Asia you may have noticed that most businesses will take the U.S. Dollar for payment before they take their own currency. This tells us that the strength of the U.S. Dollar is what is moving the stock markets around the world.

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Recently, the leading commodity stocks have bounced higher as the U.S. Dollar Index sold off. This morning, the U.S. Dollar Index is trading higher and just about every leading commodity stock is selling off today. The only commodity that is not declining lower today is WTI oil, traders must remember that oil can be affected by weather. Currently there is a hurricane that is developing in the Caribbean Sea and is expected to reach the Gulf of Mexico by the end of the week. This is certainly part of the catalyst for higher oil.

The news out of the European Union is simply one of the most bizarre scenarios that we have ever seen in our life times. Traders cannot follow all of the news that comes out of that region regarding the European bank bailout. Therefore, traders should simply watch the U.S. Dollar Index(DXY). When the DXY rallies the major stock indexes will decline and deflate lower. The opposite is true when the DXY sells off or pulls back, the major stock indexes will inflate and trade higher. Traders should continue to expect these schizophrenic markets going forward. The only beacon of light that we have as a trader to navigate us through these turbulent markets is going to be to follow the U.S. Dollar Index.

Nicholas Santiago InTheMoneyStocks.com

Schizophrenic Market Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets. Article Source

Overnight Developments

• European stocks are slightly higher with the European DJ Stoxx 50 up +0.09% and Sep S&Ps down -0.80 of a point. The dollar index is weaker and copper jumped to a 4-month high on speculation that central banks won’t allow the global economy to slide back into recession after the Bank of Japan (BOJ) expanded a bank-loan program and Fed Chairman Bernanke pledged last Friday to "do all that it can" to ensure a continuation of the economic recovery. European stocks also received a boost after Aug Euro-Zone economic confidence rose a more-than-expected +0.7 to 101.8, its highest level in 2-1/2 years, as a surge in exports help the Euro-Zone economy in Q2 to expand at its fastest pace in 4 years. An increase in M&A activity is another positive factor for stock prices today after Zodiac Aerospace jumped 13% after La Tribune reported that Safran SA is preparing another bid for Europe’s biggest maker of airplane seats, while Genzyme climbed 3.4% after Sano fi-Aventis SA offered to buy the world’s largest maker of medicines for genetic diseases for about $18.5 billion. On the negative side of M&A activity, Infineon Technologies AG, Europe’s second-largest semiconductor maker, slid 1.9% after Intel agreed to buy its wireless unit for about $1.4 billion, below the $1.9 billion Infineon was seeking.
• The Asian markets today closed higher with Japan up +1.76%, Hong Kong +0.68%, China +1.97%, Taiwan +0.24%, Australia +1.89%, Singapore +0.62%, South Korea +1.82%. India +0.19%. Japanese stocks rallied when the BOJ, at the conclusion of its emergency meeting in Tokyo, boosted its bank-loan program by 10 trillion yen ($118 billion) to 30 trillion yen as the yen’s surge to a 15-year high against the dollar threatens economic growth. The yen knee-jerked lower after the BOJ’s action, but soon strengthened on speculation the steps taken by the BOJ are insufficient to stem its strength. Even Prime Minister Kan’s announcement that the government will spend 920 billion yen ($10.8 billion) on economic stimulus and compile an extra budget if needed failed to stem the yen’s gains. Deutsche Bank AG recommends that investors sell Asian stocks before slowing earnings growth and a weakening global economy lead to further stock losses.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -0.80. The stock market last Friday rebounded from an early drop to a 1-1/2 month low and finished sharply higher and on its high (Dow +1.65%, S&P 500 +1.66%, Nasdaq Composite +1.65%). Bullish factors included (1) the smaller-than-expected downward revision to Q2 US GDP (+1.6% annualized versus expectations of +1.4% annualized) as Q2 consumption was revised upward to +2.0% from +1.6%, and (2) comments from Fed Chairman Bernanke, which led a broad-based rally in raw materials and energy producers, when he said the Fed "will do all that it can" to ensure a continuation of the economic recovery and that the "preconditions" for growth in 2011 are "in place."
• Bearish factors included (1) the unexpected decline in the Aug US University of Michigan consumer confidence (-0.7 to 68.9 versus expectations of unchanged at 69.6), and (2) data from EPFR Global that said investors withdrew a net $7.1 billion from equity funds tracked worldwide in the week to Aug 25 and put $5.2 billion into bonds amid concern the economies in Europe and the US are losing momentum.
• Genzyme (GENZ) gained 3.8% in European trading after Sanofi-Aventis offered to buy the company for $18.5 billion in cash or $69 a share, taking its bid public after Genzyme refused to negotiate.

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Overnight Developments

• European stocks are stronger with the European DJ Stoxx 50 up +0.37% and Sep S&Ps are up +7.00 points. The dollar index and Treasuries are weaker while most commodities are higher, even after German investor confidence dropped to a 16-month low. The Aug German ZEW economic sentiment survey fell a more-than-expected -7.2 to 14.0, its fourth straight decline and its lowest level in 16 months, which suggests a weaker growth outlook going forward. In the UK, July consumer prices rose +3.1% y/y, which is above the government’s 3.0% limit and forced BOE Governor King to write his third public letter this year to explain how he will bring prices under control. European stocks received a boost after Carlsberg, the biggest brewer in Russia, climbed 2.1% after it reported Q2 profit of 2.63 billion kroner, beating analysts’ estimates of 2.05 billion-kroner and after the company raised its full-year profit forecast due to the effect of a stronger ruble and an improvement in the Russian market. Weinerberger surged 7.2% after the world’s largest brickmaker reported Q2 net income of 20.6 million euros ($26 million), compared with a 151.5 million euro loss the year before after the company cut costs and the building material market began to recover.
• The Asian markets today closed mixed with Japan down -0.38%, Hong Kong +0.12%, China +0.69%, Taiwan -0.13%, Australia +0.87%, Singapore -0.35%, South Korea +0.64%, India -0.01%. Japanese bank stocks fell and helped to lead the overall market lower after Deutsche Bank downgraded the industry to "marketweight" from "overweight," citing "a lack of confidence that the strong Q1 performance will continue in subsequent quarters." A report from the Nikkei newspaper said that the Japanese government might extend the eco-point incentive program for purchases of energy-saving devices in an attempt to extend the economic recovery after Monday’s release of Japan Q2 GDP data showed the Japanese economy barely grew last quarter. The central banks of Australia and South Korea said the world economic outlook has become clouded, which may slow their pace of future interest rate increases. The minutes of the Aug 3 RBA policy meeting released today said th ere is "more uncertainty over the global outlook than there had been earlier in the year," while BOK Governor Kim Choong Soo said in a speech today that markets "may prove turbulent in the future."

Overnight U.S. Stock News

• Sep S&Ps this morning are up +7.00 points. The stock market yesterday erased early losses and finished the day mixed (Dow -0.01%, S&P 500 +0.01%, Nasdaq Composite +0.39%). The S&P 500, the Dow and the Nasdaq all fell to 3-week lows but recovered to finish mixed to higher. Bullish factors included (1) strength in raw materials and commodity producers after the dollar fell and boosted most commodities along Goldman Sachs’s reiteration of its "overweight" rating on commodities, and (2) the plunge in the yield on the 10-year T-note to a 17-month low of 2.57%, which should benefit consumers and businesses.
• Bearish factors included (1) carry-over weakness from a fall in Japanese and European stocks on concern the global economic recovery is faltering after Q2 Japan GDP came in weaker-than-expected (+0.4% annualized versus expectations of +2.3% annualized), (2) the weaker-than-expected Aug Empire manufacturing index (+2.0 to 7.1 versus expectations of +3.2 to 8.3), (3) a slump in homebuilders after the unexpected decline in the Aug NAHB housing market index to a 17-month low (-1 to 13 versus expectations of +1 to 15), and (4) the decline in most education stocks after data from the US Department of Education signaled that for-profit college aid may be imperiled because loan payback rates are insufficient.
• Potash Corp. of Saskatchewan (POT) surged 13% in pre-market trading after the world’s largest fertilizer producer rejected an unsolicited takeover proposal from BHP Billiton worth $130 a share in cash.

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Overnight Developments

• European stocks are slightly higher with the European Stoxx up +0.45% although Sep S&Ps are down -1.30 points after sliding to a 3-week low in overnight electronic trade when Cisco Systems, the largest maker of networking equipment, forecast sales that missed analysts’ estimates. The dollar index strengthened to a 2-1/2 week high, while Treasuries and most commodities weakened with copper falling to a 2-week low and crude oil sinking to a 1-1/2 week low. European stocks fluctuated between slight losses and gains as equities try to regain their footing following Wednesday’s deep slide. AB InBev gained 3.7% after the world’s largest brewer reported Q2 net income rose to $1.15 billion, beating analysts’ estimates of $1.08 billion, and Vestas Wind Systems A/S, the world’s largest maker of wind turbines, rose 3.8% after winning an order for turbines in what will be Australia’s biggest wind-energy project. Undercutting European stock prices was the unexpected -0.1% m/m drop in Jun Euro-Zone industrial production, which was dragged lower by a decline in durable consumer goods such as furniture and home appliances. In its monthly bulletin for Aug released today, the ECB said that Q3 growth in the Euro-Zone is likely "better than expected," echoing ECB President Trichet’s comments last week, while the central bank cut its forecast for 2011 GDP growth in the Euro-Zone to 1.4% versus a previous projection of 1.5%.
• The Asian markets today closed mostly lower with Japan down -0.86%, Hong Lomg -0.89%, China -1.19%, Taiwan -0.83%, Australia -1.23%, Singapore -0.75%, South Korea -2.19%, India +0.02%. The yen fell back slightly from a 15-year high against the dollar after Japanese Vice Finance Minister Tamaki met with BOJ members to discuss the financial markets. Nintendo and Sony, which get more than 70% of their sales abroad, slumped at least 3% on concern the yen’s appreciation will hurt the value of Japanese exports, while concerns that the global economic recovery is unraveling sent Japan’s Nikkei 225 Stock Index tumbling to a 13-month low. Australian stocks closed lower after the country’s jobless rate in July rose to 5.3% from 5.1% in June. India’s industrial production rose 7.1% y/y in June, the slowest pace in 13 months, which adds to evidence that Asian economies are weakening.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -1.30 points. The stock market yesterday sold-off steadily the entire day and finished sharply lower (Dow -2.49%, S&P 500 -2.82%, Nasdaq Composite -3.01%). All of the indexes sank to 1-1/2 week lows. Bearish factors included (1) carry-over weakness from Tuesday on speculation that the decision by the Fed to purchase long-term Treasuries indicates the economic recovery is in jeopardy, (2) concerns that the global economy is slowing after China’s July industrial output rose the least in 11 months and the BOE cut its economic growth estimate for England to a 3.0% annual pace instead of the 3.6% rate forecast in May, (3) the unexpected widening of the US Jun trade balance to -$49.9 billion, its highest level in 20 months which indicates that trade subtracted more from Q2 GDP than previously estimated, and (4) weakness in materials and energy producers after metals and crude prices sank on demand concerns.
• Bullish factors included (1) the smaller-than-expected budget deficit in the July US monthly budget statement (-$165.0 billion versus expectations of -$169.0 billion), and (2) the plunge in the yield on the 10-year T-note to a 1-1/3 year low of 2.680%.
• Cisco Systems (CSCO) sank 7.3% in European trading after the company late yesterday forecast revenue for the current quarter of between $10.64 billion and $10.83 billion, below analysts’ estimates of $10.95 billion. Cisco was then downgraded to "perform" from "outperform" at Oppenheimer after the results.
• EBay (EBAY) gained 1.1% in pre-market trading after Citigroup upgraded the company to "buy" from "hold," saying that losses in 2010 and an appealing valuation set up a good "entry point" for investors.

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Overnight Developments

• European stocks are weaker with the European Stoxx down -1.15% and Sep S&Ps down -15.10 points. The drop in US stocks that began after the FOMC meeting yesterday afternoon accelerated in overnight trade with Sep S&Ps falling to a 1-week low as the Fed signaled the recovery is decelerating. Treasuries around the globe gained, with the US 2-year T-note yield dropping to a record low of 0.4892%, while the yield on the 10-year German bund slipped to a record low of 2.458%. The dollar index rose to a 1-1/2 week high and commodities slumped with copper declining to a 1-week low. Adding to pressure on European stocks was the Bank of England’s quarterly inflation report in which the BOE cut its economic growth estimate for England to a 3.0% annual pace instead of the 3.6% rate forecast in May and said that inflation will be at about 1.5% in 2012, lower than its 2.0% goal, which signals the economy may need more emergency stimulus. July UK nationwide consumer con fidence tumbled a more-than-expected 7 points to a 15-month low of 56, which aided a drop in the British pound to a 1-1/2 week low against the dollar.
• The Asian markets today closed mostly lower with Japan down -2.70%, Hong Kong -0.83%, China +0.62%, Taiwan -1.02%, Australia -1.88%, Singapore -1.17%, South Korea -1.32%, India -0.82%. Japan’s Nikkei 225 Stock Index fell to a 2-1/2 week low on economic growth concerns after Jun Japan machine orders, an indicator of business investment in 3 to 6 months, rose +1.6% m/m, far less than the expected +5.4% m/m increase. Japan’s exporters also closed lower after the yen surged to a 15-year high against the dollar as a stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Chinese bank stocks weakened after China’s banking regulator ordered banks to transfer off-balance-sheet loans onto their books and make provisions for those that may default. Adding to evidence that China’s economy is cooling, China’s July industrial output rose +13.4% y/y, the least in 11 months, while new loans in July were 532.8 billion yuan, be low expectations of 600 billion yuan. China’s July inflation quickened to 3.3% y/y, the fastest pace in 21 months, boosted by a low year-earlier base for comparison and rising food costs.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -15.10 points. The stock market yesterday traded in negative territory throughout the day, although a late-day rally helped it to close well above its worst levels (Dow -0.51%, S&P 500 -0.60%, Nasdaq Composite -1.24%). Bearish factors included (1) carry-over weakness from a fall in Chinese stocks on evidence that China’s economic growth is slowing after July China imports rose at their slowest pace of growth in 9 months, while July property prices in 70 major Chinese cities posted their smallest increase in 6 months, (2) the unexpected decline in Q2 nonfarm productivity which fell for the first time in over 2 years (-0.9% versus expectations of +0.2%), (3) weakness in materials and energy producers after the dollar index rallied to a 1-week high and the prices of most commodities tumbled, and (4) the fall in technology stocks led by a slump in semiconductor shares after Barclays Plc and R.W. Baird & Co. reduced their rating s on Intel, the world’s largest semiconductor manufacturer, because of weakening orders for personal computer components.
• Bullish factors included (1) strength in US phone companies after Wells Fargo upgraded the sector to “marketweight” from “underweight,” saying that US telephone stocks are increasingly appealing as a haven from slowing growth in the economy and because the industry pays out historically high dividends relative to the S&P 500 Index and that the industry “appears to be on the verge of a turnaround,” and (2) the post FOMC statement in which the Fed said they will reinvest principal payments on mortgage holdings into long-term Treasury securities as they expand their quantitative easing in an attempt to bolster economic growth and keep the US economy from lapsing back into recession.
• Cree (CRE) slumped 9.8% in European trading after the company forecast Q1 sales of $280 million at most, below analysts’ estimates of $284.3 million.

A123 Systems (AONE) dropped 4.6% in European trading after the company reported a Q2 loss of 33 cents a share, wider than the 27-cent loss estimated by analysts.

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Overnight U.S. Stock News

• Sep S&Ps this morning are down -15.10 points. The stock market yesterday traded in negative territory throughout the day, although a late-day rally helped it to close well above its worst levels (Dow -0.51%, S&P 500 -0.60%, Nasdaq Composite -1.24%). Bearish factors included (1) carry-over weakness from a fall in Chinese stocks on evidence that China’s economic growth is slowing after July China imports rose at their slowest pace of growth in 9 months, while July property prices in 70 major Chinese cities posted their smallest increase in 6 months, (2) the unexpected decline in Q2 nonfarm productivity which fell for the first time in over 2 years (-0.9% versus expectations of +0.2%), (3) weakness in materials and energy producers after the dollar index rallied to a 1-week high and the prices of most commodities tumbled, and (4) the fall in technology stocks led by a slump in semiconductor shares after Barclays Plc and R.W. Baird & Co. reduced their rating s on Intel, the world’s largest semiconductor manufacturer, because of weakening orders for personal computer components.
• Bullish factors included (1) strength in US phone companies after Wells Fargo upgraded the sector to “marketweight” from “underweight,” saying that US telephone stocks are increasingly appealing as a haven from slowing growth in the economy and because the industry pays out historically high dividends relative to the S&P 500 Index and that the industry “appears to be on the verge of a turnaround,” and (2) the post FOMC statement in which the Fed said they will reinvest principal payments on mortgage holdings into long-term Treasury securities as they expand their quantitative easing in an attempt to bolster economic growth and keep the US economy from lapsing back into recession.
• Cree (CRE) slumped 9.8% in European trading after the company forecast Q1 sales of $280 million at most, below analysts’ estimates of $284.3 million.

A123 Systems (AONE) dropped 4.6% in European trading after the company reported a Q2 loss of 33 cents a share, wider than the 27-cent loss estimated by analysts.

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This morning the second quarter Gross Domestic Product(GDP) results were released by the Commerce Department. The second quarter Gross Domestic Product reported was 2.4%. This is sharply lower from the revised first quarter number of 3.7%. Economists had expected the second quarter number to be 2.5%. Therefore, today’s number was not a big surprise. What does this all mean for the market?

Well, today the market is starting out under pressure with the SPDR S&P 500 ETF (NYSE:SPY) trading lower by 1.06 to $109.20. Most commodity stocks are under pressure this morning and this is a sign of deflation. Leading commodity stocks such as Cliffs Natural Resources Inc (NYSE:CLF), and Southern Copper Corp (NYSE:SCCO) are trading lower and remain under pressure. Remember when the U.S. Dollar Index is trading higher on the trading session this will often push the commodity stocks lower. Therefore, always keep a dollar chart open as most professional traders will key off this chart. Remember when the dollar is higher the stock market indexes will deflate. Should the dollar decline or sell off the market will inflate higher.

Since the July lows the markets have surged higher climbing about 10.0 percent from that level. However, since July 16th, the major indexes have been very choppy and volatile. This type of volatile action could be expected going forward. Please remember to keep an eye on the U.S. Dollar Index as that chart will generally give traders a good indication of where the stock indexes are trading. This morning the U.S. Dollar Index is trading higher by 0.15 cents to $81.79 and the market is obviously trading lower.

- About the Author: Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets. Article Source

By all accounts the month of July has been very positive for the major stock market indexes. The SPDR Dow Jones Industrial Average (NYSE:DIA) is now higher by more than 7.0 percent from the early July low pivot. This is a sharp advance higher in less than a thirty day period for the markets. The big question that most traders and investors are now asking is, how much upside is left in the tank?

July is an earnings reporting period for most companies; thus far the results have been mixed. In the beginning of the month the street reacted poorly to most earnings releases despite the numbers or guidance reported. Alcoa (NYSE:AA), and Intel Corp (NASDAQ:INTC) both sold off after reporting better than expected earnings. Recently the street has been reacting better to earnings and economic news. Even companies such as International Business Machines (NYSE:IBM) has bounced back after initially getting pummeled after reporting earnings. You can almost feel the mood of the market changing its mind on a daily basis. It is important to note that the Dow Jones Industrial Average has staged four major reversal days since July 16th. This is a very rare event and shows the amount of uncertainty that is still in the marketplace.

The driving force in this market is not earnings or the economic news. Nor is it the Federal Reserve Bank talking of the next remedy they have in the medicine chest. It will not be the European bank’s stress tests; it will not be any of these so called major events. It will be and has been one thing since 2008; it is the movement and action in the U.S. Dollar. When the dollar declines the markets inflate. When the dollar rallies the stocks markets around the world deflate. Personally, I believe it is that simple. Sometimes the stock markets will trade inverse to the dollar on a tick for tick basis. Other times the market will react inversely to the dollar on a daily basis. The end result is that the U.S. Dollar Index has dropped around 7.0 percent since the June high. It is rather ironic that the stock market is higher by 7.0 percent since the early July lows. It is all about the U.S. Dollar Index. The bottom line is when the dollar falls the stock market inflates.

Nicholas SantiagoChief Market Strategistwww.InTheMoneyStocks.com

- About the Author: Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets. Article Source

Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +1.20 points. The dollar index is little changed, Treasuries are weaker and most commodities are higher. Rio Tinto rose 3.5% and led mining companies higher as copper rallied after LME copper inventories declined to a 7-1/4 month low. Antofagasta gained 3.4% after Citigroup raised its recommendation for the copper producer to "buy" from "hold." Also helping European stocks was the larger-than-expected +1.7% m/m increase in May French industrial production which was boosted by improving global trade and a pickup in output at car plants, while ECB President Trichet said that while the fiscal crisis isn’t over, the economic signs are "encouraging."
• The Asian markets today closed higher with Japan up +0.52%, Hong Kong +1.64%, China +2.76%, Taiwan +0.50%, Australia +0.91%, Singapore +0.69%, South Korea +1.66%, India +1.03%. Asian stocks were helped higher by Citigroup’s prediction that emerging-market stocks will rally as much as 25% by the end of the year as the global economy avoids a "double dip" recession and attractive valuations lure investors. The South Korean won strengthened over 1% against the dollar after the Bank of Korea unexpectedly raised its 7-day repurchase rate to 2.25% from a record low 2.00%, citing a pre-emptive strike against inflation. South Korea joins India, Malaysia and Taiwan in lifting interest rates in recent weeks, signaling that Asia’s expansion will remain resilient to Europe’s debt crisis.

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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 +0.76% at a 1-month high and Sep S&Ps up +4.70 points at a 4-week high. European and US stocks rallied while the dollar index slipped to a 3-week low after a successful Spanish bond sale eased concern that Spain’s government will struggle to finance its widening deficit. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds at yields lower than the prevailing market rates with a strong bid-to-cover ratio of 2.45, assuaging concern that it would face difficulty meeting bond repayments. The yield premium demanded by investors to hold Spanish debt rather than equivalent German bunds narrowed to 209.5 bp after the sale, as it retreated from a record wide 221 bp yesterday, the highest since the introduction of the euro. Limiting stock gains was the 1% drop in Nokia Oyj, extending yesterday’s 9% sell off, after Goldman Sachs slashed their share price estimates and profit forecasts f or the world’s largest maker of mobile phones which started the slide yesterday after it lowered its revenue and margin forecasts.
• The Asian markets today closed mixed with Japan down -0.67%, Hong Kong +0.38%, China -0.58%, Taiwan +0.83%, Australia -0.70%, Singapore -0.11%, South Korea +0.05%, India +0.88%. James Hardie Industries SE, the biggest seller of home siding in the US, lost 3.8% in Sydney after US building permits unexpectedly fell to a 1-year low and most Japanese exporters closed lower as the yen gained against the dollar, which threatens to cut the value of overseas income when repatriated. On the positive side, Nintendo, the world’s number one maker of portable video-game players, rose 5.2%, adding on to yesterday’s 5.2% gain, after UBS boosted its rating on the stock to "buy" from "neutral" as the company introduced a new handheld video-game player this week.

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