Overnight Developments

• European stocks are higher with the European DJ Stoxx 50 up +0.59% and Sep S&Ps up +0.10 of a point, both at 2-week highs. The dollar is weaker while Treasuries and most commodities are little changed as the markets anxiously await the monthly US payrolls report. Speaking to reporters in Seoul today, ECB Council member Draghi said that while the economic recovery remains "fragile," it is becoming more broad-based. Draghi, who is also the governor of Italy’s central bank, said the ECB’s monetary stance would remain "accommodative." The euro strengthened after ECB Council member Wellink told Market News International that the yen’s appreciation against the euro is helping some Euro-Zone exporters. Yell Group Plc rose 6.2% as the publisher of the UK’s yellow pages directories rallied for a third straight day on takeover speculation, while Theolia SA plunged 9.4% after the French wind-power company reported a first-half net loss of 24.2 milli on euros, larger than the 14.1 million-euro loss a year earlier.
• The Asian markets today closed mostly higher with Japan up +0.57%, Hong Kong +0.49%, China -0.04%, Taiwan +1.42%, Australia +0.19%, Singapore +0.53%, South Korea +0.16%, India -0.09%. Asian stocks rose after US reports showed an unexpected increase in pending home sales and improved retail sales that eased concerns of an economic slowdown. Sony, the electronics maker that gets 22% of sales from the US, rose 2.4% and James Hardie Industries SE, the biggest seller of home siding in the US, climbed 2.1%. Technology stocks also advanced with Wintek Corp., a component maker for Apple’s iPads, surging 7% after saying its Aug revenue rose 17% m/m, while Chimei Innolux, Taiwan’s largest maker of liquid-crystal displays, closed 6.9% higher amid speculation that Q4 demand for consumer electronics will improves from the previous 3 months. Japan’s economy probably grew more than three times the government’s initial estimate of +0.4% annualized in Q2 after a Finance Ministry repo rt today showed Japan Q2 capital investment excluding software fell -1.5% y/y, its smallest decrease since 2007 as a result of strong overseas demand. Japan will release its revised Q2 GDP growth estimate on Sep 10.

Overnight U.S. Stock News

• Sep S&Ps this morning are up +0.10 of a point. The stock market yesterday finished on its high with modest gains (Dow +0.49%, S&P 500 +0.91%, Nasdaq Composite +1.06%). The S&P 500 and the Dow climbed to 2-week highs and the Nasdaq posted a 1-1/2 week high. Bullish factors included (1) carry-over strength from a boost to European equity markets after the ECB raised its 2010 GDP estimate for the Euro-Zone to between 1.4% and 1.8%, up from a previous forecast of between 0.7% and 1.3%, (2) comments from ECB President Trichet who said a double-dip recession in the Euro-Zone is "not in the cards," which boosts confidence in the global economic recovery, (3) the unexpected decrease in weekly US initial unemployment claims (-6,000 to 472,000 versus expectations of +2,000 to 475,000), (4) strength in homebuilders after the unexpected increase in Jul pending US home sales (+5.2% m/m versus expectations of -1.0% m/m), and (5) a rally in retailers after Aug ICSC chain store sales rose +3.2% y/y, their ninth straight monthly increase.
• Bearish factors included (1) the weaker-than-expected Jul factory orders (+0.1% versus expectations of +0.2%), (2) the prediction from the chief economist at FTN Financial who said that with "the rate of layoffs still uncomfortably high, there’s no reason to expect an acceleration in US consumer spending," and (3) the prediction from Edward Prescott, senior adviser to the Minneapolis Fed, that the US economy is likely to experience a period of stagnation until the country reduces its debt.
• Take-Two Interactive (TTWO) surged 13% in European trading after the video game publisher reported an unexpected Q3 profit of 28 cents a share and boosted its earnings outlook on sales of the newest release "Red Dead Redemption."
• H&R Block (HRB) climbed 3.8% in pre-market trading after it reported a fiscal Q1 loss of 36 cents a share, beating analysts’ estimates for a loss of 40 cents.

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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.

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Overnight Developments

• Global stocks are mostly lower with the European Euro Stoxx 50 Index down -1.14% and Sep S&Ps down -4.50 points. The dollar and Treasuries are stronger while most commodities are weaker. European stocks declined on valuation concerns as investors fear that stock prices have outpaced the prospects for company earnings and economic growth. BNP Paribas fell 3.4% and led bank stocks lower after Fitch Ratings cut the long term credit rating of France’s largest bank one step to AA-, the fourth-highest investment grade, from AA citing a "deterioration" of the company’s asset quality. Bank stocks were also pressured after comments from ECB Council member Noyer who said "some banks have started facing increasing funding problems and that the situation reflects a general state of uncertainty which, left unchecked, could have significant consequences on financial stability and the real economy, as was the case during the last part of 2008." European debt concerns also undercut stock prices after Standard & Poor’s lowered its economic growth forecast for Spain to an average of 0.7% a year through 2016 from 1.0%, saying Spanish banks face mounting credit losses and "substantial strain" on revenue generation. Limiting losses in European stocks was the unexpected increase in German business confidence after the Jun German IFO business climate rose +0.3 to a 2-year high of 101.8 as the euro’s depreciation and a global economic recovery brightened the outlook for exports.
• The Asian markets today closed mostly lower with Japan down -1.22%, Hong Kong -0.45%, China +0.11%, Taiwan -0.30%, Australia -1.18%, Singapore -0.46%, South Korea -0.54%, India -0.71%. Asian shipping companies closed lower after freight rates slumped for a 17th consecutive day and basic resource companies fell as most commodity prices declined. Japan’s fiscal strategy released today has yet to impress upon the ratings’ agencies the ability of Japan’s government to cut the country’s massive debt. Under the plan, Prime Minister Kan’s administration pledged to balance its books in 10 years, restrict bond sales and overhaul the tax system. Annual spending will be capped at 71 trillion yen ($781 billion) over the next 3 years, and the government will decide changes to the tax regime "soon." The director of sovereign ratings at Standard & Poor’s in Singapore said that while the strategy is "better than nothing," the country’s credit quality is &quo t;still eroding slowly," while the director of Fitch Ratings’ Asia-Pacific sovereign group said the plan "does not have enough details for us to reach a firm conclusion or for us to say that we have confidence that Japan has a detailed fiscal consolidation plan."

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