Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.56% and June S&Ps up +3.20 points. The dollar and Treasuries are weaker after comments last night from Kansas City Fed President Hoenig who said that the US economy is in a sustained recovery, and he repeated his call to raise the Fed funds rate to 1.00% by the end of Sep. Hoenig warned that "monetary policy can cause asset-price bubbles and that we need to take out the excess stimulus." He also said that the US has a "very serious fiscal situation" and that "we need to pass a law that is very firm that says you cannot spend more unless you cut something else." European technology stocks are leading a slight rally in equities today led by a 2.3% gain in STMicroelectronics which rallied after it was rated a "buy" in new coverage at Jeffries Group. IMF Deputy Managing Director Shinohara said most advanced economies are experiencing a "subdued" recovery and risks to the global economic outlook have "risen significantly" and policy makers have limited room to provide support to growth. European banks still remain wary of counterparty risk as they refuse to lend and rather deposit their excess funds with the ECB. Banks lodged 364.6 billion euros ($436 billion) in the ECB’s overnight deposit facility yesterday, the most since the euro’s inception in 1999, with deposits close to or above 300 billion euros for the past 9 sessions.
• The Asian markets today closed mixed with Japan down -1.04%, Hong Kong +0.69%, China +3.07%, Taiwan -1.12%, Australia +0.09%, Singapore -0.03%, South Korea -0.38%, India +0.25%. China’s Shanghai Stock Index closed higher after Reuters reported a surge in the nation’s exports and higher-than-expected new loans in May, signaling Europe’s debt crisis hasn’t derailed the economy. Chinese banks and property developers gained as new loans in May totaled 630 billion yuan ($92.3 billion), exceeding market expectations by 5%, while exporters rallied after May China exports surged +50% y/y. Tempering the rally in Chinese stocks was the +3.1% y/y increase in May consumer prices, which is above the PBOC’s targeted full-year ceiling of 3.0%, and adds to risks of overheating the economy. Japanese stocks closed lower led by losses in exporters, as the yen neared an 8-year high against the euro, raising concern a stronger yen will hurt the value of repatriated overseas earnings.

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