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.

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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 lower with the European Euro Stoxx 50 Index down -1.04% and Sep S&Ps down -1.00 point. A bigger than expected slowdown in Chinese manufacturing along with Spain’s deteriorating creditworthiness fanned concern that the global economic recovery is faltering and kept stock prices on the defensive. Weaker-than-expected demand at a Spanish auction of 3.5 billion euros ($4.3 billion) of 5-year notes heightened sovereign-debt worries, with credit-default swaps tied to Spain’s debt climbing 10 bp to 273.6. Spanish bank stocks sold-off and led European bank stocks lower and mining stocks tumbled as well after metal prices slumped. The euro gained as the ECB said it will lend 111.2 billion euros ($136.5 billion) to banks in 6-day loans to help them cope with the expiry of its 12-month loans in which banks needed to repay 442 billion euros worth of debt by today.
• The Asian markets today closed lower with Japan down -2.04%, Homg Kong closed for holiday, China -1.44%, Taiwan -1.03%, Australia -1.49%, Singapore -0.53%, South Korea -1.00%, India -1.08%. China’s Shanghai Stock Index tumbled to a 14-1/2 month low after China’s manufacturing expanded at a slower pace for a second month in June, adding to signs that its economy is moderating. The Jun China purchasing mangers’ index fell -1.8 to 52.1, a bigger drop than the -0.7 drop the market was expecting. Japan’s Nikkei 225 Stock Index fell to a 7-month low despite the Q2 Japan Tankan large manufacturers index climbing to a 2-year high. Most Asian exporters closed lower on concern European demand for their goods may wane after Moody’s Investors Service warned that it may cut Spain’s top credit rating, while concerns that a global economic slowdown is deepening sent shipping companies lower after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7% a nd extended its 24-day slump to a whopping 43%.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.64% and Sep S&Ps up +7.40 points. The dollar and Treasuries are weaker and most commodities are higher as the euro strengthened after ECB figures suggested reduced funding pressure for European banks. The ECB said it would lend banks 131.9 billion euros ($161.5 billion) for 3 months, less than some market estimates of 250 to 300 billion euros. Banks on July 1 need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB, and a main cog in its extraordinary liquidity measures designed to fight the financial crisis last year. The weaker-than-expected demand suggests that funding pressures for European banks aren’t as bad as originally feared and helped push the euro higher and send European bank stocks soaring. AstraZeneca Plc, the UK’s second-biggest drug maker, climbed 9.7% after winning a US court ruling that will help prevent the sale of generic copies of it s cholesterol medicine Crestor until 2016, while Portugal Telecom SGPS SA jumped 5.8% after Telefonica SA increased its offer for the Portuguese company’s stake in Brazil’s largest mobile-phone operator.
• The Asian markets today closed mostly lower with Japan down -1.96%, Hong Kong -0.59%, China -1.12%, Taiwan -1.27%, Australia -1.02%, Singapore +0.18%, South Korea -0.76%, India +0.95%. Most Asian stock markets declined, with Chinese stocks falling to a 14-month low, as Asian markets play catch up to yesterday’s global equity market rout that was extended by weaker-than-expected US Jun consumer confidence that’s spurring concern about a slowdown in US economic growth. Most Asian exporters closed lower on concerns demand will weaken for their goods if the US economy slows and Japan’s Nikkei 225 Stock Index tumbled to a 7-month low after Japan’s wages unexpectedly declined in May. May Japan labor cash earnings dropped -0.2% y/y when the market was expecting a +0.8% y/y increase, eroding prospects for acceleration in domestic demand and deepening concern that the global economic recovery will slow.

Overnight U.S. Stock News

• Sep S&Ps this morning are trading up +7.40 points. The US stock market yesterday opened lower and continued lower throughout the day and finished with sharp losses (Dow Jones -2.65%, S&P 500 -3.10%, Nasdaq Composite -3.85%). The S&P 500 plunged to a 7-3/4 month low, the Dow Jones fell to 3-week lows while the Nasdaq slid to a 1-3/4 month low. Bearish factors included (1) carry-over weakness from a plunge in Asian and European stock markets as industrial and commodity stocks declined on concern that China’s economy is weakening after the Conference Board revised down its April gauge for the outlook of China’s economy to indicate slower growth, (2) the larger-than-expected decline in Jun US consumer confidence (-9.8 to 52.9 versus expectations of -0.8 to 62.5), (3) weakness in bank stocks led by a plunge in JPMorgan Chase after Moody’s Investors Service said JPMorgan Chase, Bank of America and Wells Fargo may lose $1.38 billion in annual revenue from the proposed cap on credit-card swipe fees being considered by Congress, and (4) concerns over the health of European banks after the 3-month Euribor rate rose to an 8-month high of 0.688%, signaling a lack of trust between lenders, along with concerns that European banks must refinance $540 billion in 1-year ECB loans into 3-month loans by July 1.
• Bullish factors included (1) the larger-than-expected increase in the Apr S&P/CaseShiller composite-20 home price index which had its biggest year-over-year gain in 3-1/2 years (+0.4% m/m and +3.8% y/y versus expectations of -0.15% m/m and +3.4% y/y), (2) comments from President Obama who said after meeting with Fed Chairman Bernanke that he and the Fed Chairman both agree that the US economy is strengthening "into recovery," and (3) the plunge in the 10-year T-note yield to a 14-month low of 2.95%.
• Citigroup (C) rose 2.1% and Bank of America (BAC) climbed 1.5% in pre-market trading on carry-over support from a rally in European bank stocks on weaker-than-expected demand for ECB funds.
• Peabody Energy (BTU) increased 1.3% in pre-market trading after Deutsche Bank AG raised its recommendation on the stock to "buy" from "hold."

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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.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.73% and Sep S&Ps up +2.90 points. The dollar is little changed and Treasuries and stock indexes are higher after the Group of 20 leaders meeting over the weekend in Toronto said they would focus on nurturing economic growth and cutting deficits. Group leaders also agreed to pursue higher capital requirements for banks once their economic recoveries gain momentum. The G-20 leaders endorsed targets to cut their deficits at least by half by 2013 and stabilize their debt-to-output ratios by 2016. Stock gains in Europe were led higher by strength in automakers when PSA Peugeot Citroen climbed 2.7% after La Lettre de L’Expansion reported that France’s biggest carmaker lifted its sales target for the DS3 model to 70,000 from 45,000 and Porsche SE rose 2.3% after Bankhaus Metzler upgraded the carmaker to "buy" from "sell."
• The Asian markets today closed mixed with Japan down -0.45%, Hong Kong +0.17%, China -0.71%, Taiwan +0.35%, Australia -0.65%, Singapore +0.64%, South Korea -0.04%, India +1.14%. Asian stocks were undercut after the weekend meeting of Group of 20 leaders failed to reassure investors about the strength of the global economic recovery. Speaking at the G-20 Summit in Toronto, a Chinese Ministry of Commerce director general said that his country’s pledge for a more flexible yuan will slow its exports this year and add to difficulties that include the European debt crisis and rising costs. China, the world’s largest exporter, is aiming to raise domestic consumption and reduce its reliance on exports for economic growth. Chinese coal companies closed lower after China’s National Development and Reform Commission ordered China’s coal companies to keep prices agreed to in annual supply contracts stable as the government seeks ways to manage inflation. Japanese stocks closed lower after Japan’s May retail sales climbed a slower-than-expected 2.8% y/y, the slowest pace since Jan, and a sign that government incentives to purchase cars and household appliances are fading. Japan’s May retail sales slumped a seasonally adjusted -2.0% m/m, the biggest drop in 5 years as automobile sales in May fell -5.9% m/m and household machinery, which includes appliances such as flat-screen TVs, tumbled -7.9% m/m in May.

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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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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.

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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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