Overnight Developments

• European stocks are little changed with the European DJ Stoxx 50 up +0.03% and Sep S&Ps are up +3.50 points. The market‘s attention is focused on speeches later today from Fed Chairman Bernanke and ECB President Trichet from the Fed’s annual symposium at Jackson Hole, Wyoming. Losses in European banks are undercutting European stock prices today with Banca Papolare di Milano down 5% after the Italian bank reported Q2 net income of 20.1 million euros, lower than analysts’ estimates of 41.6 million-euros, and Credit Suisse Group AG predicted that earnings estimates for 2010-12 will likely be revised down by 10 to 15% following the bank’s “very weak set of results.” Commerzbank AG slumped 2.6% after Handelsbatt said the bank plans to sell new shares as early as next month to pave the way for an exit by the German government. Limiting losses in European markets was the upward revision to Q2 UK GDP figures to +1.2% q/q and +1.7% y/y, higher than the initi al estimate of +1.1% q/q and +1.6% y/y, and shows the British economy expanding by its biggest amount since 2001.
• The Asian markets today closed mostly higher with Japan up +0.95%, Hong Kong -0.07%, China +0.30%, Taiwan +0.43%, Australia +0.32%, Singapore +0.44%, South Korea +0.06%, India -1.25%. Japanese stocks closed higher and the yen weakened against the dollar after Japanese Prime Minister Kan said the government is ready to take “bold” action in the currency market to stem the yen’s advance. Kan said he expects the BOJ to implement monetary policy “swiftly,” and that he plans on meeting with BOJ governor Shirakawa soon after he returns from the US. July Japan consumer prices excluding fresh food fell -1.1% y/y, their 17th consecutive monthly decline, while July Japan overall household spending rose +1.1% y/y, lower than expectations for a +1.5% y/y increase, and signals that Japan’s economic recovery may be faltering. On the bright side, Japan added 210,000 jobs in July from a month earlier, the most since Jan, while the unemployment dropped -0.1 to 5.2% , its first decline in 6 months as the job-to-applicant ratio rose to 0.53, meaning there are 53 job openings for every 100 job candidates, the most since March 2009.

Overnight U.S. Stock News

• Sep S&Ps this morning are up +3.50 points. The stock market yesterday fluctuated on both sides of unchanged until early afternoon when it ailed off into the close and finsihed just above its low (Dow -0.74%, S&P 500 -0.77%, Nasdaq Composite -1.07%). Bearish factors included (1) renewed concerns over Europe’s sovereign-debt crisis after El Economista reported that a Spanish court ruled Spain’s method of auditing sales tax was illegal and voided 5.1 billion euros ($6.48 billion) in value-added taxes collected in past years, which fuels concern about Spain’s fiscal stability, (2) concerns the US economic recovery is continuing to weaken after the Kansas City Fed said that manufacturing in its area slowed in Aug, with no companies reporting m/m increases, and (3) the prediction from Societe Generale that stocks are headed for their third bear market since 2000 as the global economy contracts and because “there is still too much hope” among investors t o suggest that stock prices will hit bottom any time soon.
• Bullish factors included (1) the larger-than-expected decline in weekly initial unemployment claims (-31,000 to 473,000 versus expectations of -10,000 to 490,000), (2) strength in raw materials and energy producers after a weak dollar prompted an advance in the prices of most commodities, and (3) the prediction from Kansas City Fed President Hoenig who said that he still expects the US economy to expand by about 3% this year, in line with his forecast from a month ago.
• J. Crew Group (JCG) fell 6.5% in pre-market trading after the clothing retailer cut its full-year earnings forecast to $2.35 a share at most, lower than a previous forecast of as much as $2.45.
• Omnivision Technologies (OVTI) dropped 4.1% in pre-market trading after the company reported Q1 sales of $193.1 million, below analysts’ extimates of $204.1 million.

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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

• 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

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +5.70 points. The euro and Treasuries are little changed despite the action by Moody’s Investors Service to downgrade Ireland’s credit rating one notch to Aa2 from Aa1, citing the government’s "gradual but significant loss of financial strength." European stocks and the euro also saw little reaction after the cost to insure debt payments from Hungary surged and the forint tumbled 2.6% against the euro when deficit-reduction talks with the IMF broke down. Credit-default swaps on Hungarian government debt jumped 45.5 bp to a 5-week high of 362 bp after the IMF and European Union declined to endorse Prime Minister Orban’s plans to control the budget deficit as part of a 20 billion-euro ($25.8 billion) emergency bailout because "a range of issues remain open." The EU said that Hungary’s government must make "tough decisions, notably on spending," to comply with deficit requirements. M&A activity boosted European stock prices after International power and GDF Suez climbed after GDF Suez, operator of Europe’s largest natural-gas network, said it’s in preliminary talks to combine some of its assets with International Power, creating an enlarged company majority-owned by GDF. Tomkins rallied 34% after Onex Corp., Canada’s biggest publicly traded buyout firm, and the Canada Pension Plan Investment Board signaled they might bid 2.9 billion pounds ($4.4 billion) for Tomkins.
• The Asian markets today closed mostly lower with Japan closed for holiday, Hong Kong down -0.79%, China +2.54%, Taiwan -0.19%, Australia -1.46%, Singapore -0.42%, South Korea -0.45%, India -0.15%. Asian stocks were undercut as concern deepened that the global economic recovery is faltering which may hurt exports and curb demand for Asian goods after US July University of Michigan consumer confidence tumbled to an 11-month low. The China Securities Journal said a report from the State Information Center said that China’s export growth might slow over the rest of the year to less than half the pace of the first six months. The report states that China’s exports between July-through-December may rise only +16.3% from a year earlier, slowing from the +35% y/y increase in the first half as the removal of tax rebates, weaker demand because of Europe’s debt crisis, and comparisons with higher base levels leads to smaller increases. Still, the report predicts that China’s ex ports for the full year of 2010 will climb 24.5% compared with a -16% decline in 2009.

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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 -0.55% and June S&Ps down -7.40 points. The euro sank to a 4-year low and is undercutting European stock prices after Hungarian Prime Minster Orban said Hungary’s economy is in a "very grave situation" because the previous government manipulated figures and lied about the state of the economy and that talk of a default is "not an exaggeration." The dollar and Treasuries rallied on the Hungary news, which undercut commodity prices. Limiting losses in stocks today is speculation that the US payrolls report, released later this morning, will show a fifth month of gains and add to evidence that the economy is gaining momentum. Q1 Euro-Zone GDP was revised up to +0.6% y/y from +0.5% y/y, the first annual gain since Q3 of 2008, led by a +6.0% y/y jump in exports and a +2.0% y/y increase in government spending. European technology stocks rallied, led by a 2.9% advance in S TMicroelectronics; after UBS raised its recommendation on Europe’s largest chipmaker to "neutral" from "sell," saying the chipmaker was a "strong beneficiary" from recent currency moves. Infineon Technologies AG gained 2.7% and ASML Holding NV rose 3.1% after the Dramexchange Index, which tracks prices of the most widely used computer memory chips, rose 1.2% and indicates an increase in demand.
• The Asian markets today closed mostly lower with Japan down -0.13%, Hong Kong -0.03%, China +0.30%, Taiwan -0.21%, Australia -0.82%, Singapore +0.47%, South Korea +0.21%, India +0.56%. South Korean stocks closed higher after the country’s Q1 GDP was revised up to a gain of +2.1% q/q from April’s initial estimate of +1.8% q/q, as exports surged and domestic demand strengthened. The South Korean Finance Ministry said in its monthly economic report today that the government will keep its expansionary economic-policy stance "for the time being" to support the recovery, citing risks from Europe and North Korea tensions. Japanese stocks were little changed as the Democratic Party of Japan is scheduled to vote on a new prime minister today to replace Yukio Hatoyama who resigned earlier this week. Asian mining companies closed lower and limited gains in other sectors after the CEO of Freeport-McMoRan said that China is a "risk to the world’s market place in t he near term" as it takes measures to cool its economy.

Overnight U.S. Stock News

• June S&Ps this morning are trading down -7.40 points on concern that Hungary may default on its sovereign debt. The US stock market yesterday finished with modest gains (Dow Jones +0.06%, S&P 500 +0.41%, Nasdaq Composite +0.96%). All of the stock indexes climbed to 2-week highs. Bullish factors included (1) optimism the economy is strengthening after Apr factory orders gained for the eighth consecutive month (+1.2% m/m) and the May ISM non-manufacturing index expanded for the fifth straight month (unchanged at 55.4), (2) strength in retailers after May ICSC chain store sales rose +2.6% y/y, their sixth straight monthly increase, and (3) Goldman Sachs’ hike in its May US payroll forecast to increase +600,000 from +500,000.
• Bearish factors included (1) concerns that the European debt crisis will worsen after the euro weakened on liquidity concerns as overnight deposits with the ECB rose to a record 320.4 billion euros ($394 billion), the fifth consecutive day deposits with the ECB have exceeded 300 billion euros as the sovereign debt crisis makes banks wary of lending to each other, (2) the weaker-than-expected May ADP employment change (+55,000 versus expectations of +70,000), and (3) weakness in mining companies and raw material producers after the CEO’s of Codelco and Freeport-McMoRan, the two largest copper producers, said that China’s plans to slow its economy threatens to reduce demand for metals and other commodities.
• Comtech (CMTL) gained 5.5% in pre-market trading after the provider of mobile-data communications equipment reported Q3 revenue of $216.3 million, well ahead of analysts’ estimates of $190.3 million.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.89% and June S&Ps up +6.40 points. European stocks retreated and were led lower by losses in energy producers and oil service companies as the US opens up criminal and civil investigations into BP Plc’s Gulf of Mexico oil spill. Prudential Plc, the UK’s biggest insurer, fell nearly 3% after its $35.5 billion takeover attempt of American International Group’s Asian unit collapsed, while Aegis Group Plc slipped 3.1% after the world’s largest independent buyer of advertising space was downgraded to “sell” from “hold” at Deutsche Bank AG. Also undercutting European stock prices was the larger-than-expected +0.9% m/m increase in April Euro-Zone PPI, the biggest monthly gain in 1-3/4 years, as a weaker euro made imports more expensive and energy costs rose.
• The Asian markets today closed mostly lower with Japan down -1.12%, Hong Kong -0.13%, China +0.49%, Taiwan -1.28%, Australia -0.73%, Singapore +0.45%, India +1.02%. Most Asian stock markets fell and the yen droppped to a 2-week low against the dollar after Japanese Prime Minister Hatoyama said he will resign, less than 2 months before elections, which raises uncertainty after the future direction of the Japanese economy. The next prime minister will inherit an economy that’s dependent on exports and remains within the throes of deflation that the BOJ has failed to stop. With consumer spending slowing in Q1, the reliance on trade leaves Japan vulnerable to any slump in overseas demand stemming from Europe’s debt crisis. Australia’s Q1 GDP rose +0.5% q/q, its fifth straight quarterly increase, as government stimulus spending helped counter consumer demand that weakened. Policy makers expect Australia’s economic growth to almost double in he next 2 years, as China’s de mand for resources spurs a mining investment boom.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +6.40 points. The US stock market yesterday shook off early weakness and rallied into early afternoon, but then plummeted into the close and finished on its low (Dow Jones -1.11%, S&P 500 -1.72%, Nasdaq Composite -1.54%). Bearish factors included (1) concerns that the global economy may begin to slow after China’s May purchasing managers index slowed more than forecast (-1.8 to 53.9 versus expectations of -1.2 to 54.5) (2) weakness in bank stocks after the ECB said in its bi-annual Financial Stability Report that Euro-Zone banks may see another 90 billion euros in net writedowns this year on loans and securities and will need to make provisions for losses of about 105 billion euros next year, (3) the plunge in the euro to a 4-year low against the dollar after the April Euro-Zone unemployment rate unexpectedly rose +0.1 to a 12-year high of 10.1%, and (4) geopolitical concerns after AFP reported that Lebanon fired on Isr aeli warplanes that were flying over its airspace.
• Bullish factors included (1) optimism the US economy may be able to overcome the negative effects of the European debt crisis after the May ISM manufacturing index fell less than expected (-0.7 to 59.7 versus expectations of -1.0 to 59.4), (2) the unexpected increase in April construction spending which had its largest monthly increase since June 1998 (+2.7% m/m versus expectations of unchanged), and (3) the prediction from the chief equity strategist at JPMorgan Chase who said that the 5-week decline in the S&P 500 Stock Index is consistent with a temporary pullback within a bull market.
• JPMorgan Chase (JPM) climbed 1.6% in pre-market trading after UBS upgraded the stock to “buy” from “neutral.”
• Joy Global (JOYG) rose 2.7% in pre-market trading after Goldman Sachs raised its recommendation on the stock to “buy” from “neutral.”

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