Overnight Developments

• European stocks are lower with the European DJ Stoxx 50 down -0.03% and Dec S&Ps down -2.60 points. The euro retreated from a 1-week high against the dollar and Treasuries strengthened after German investor confidence tumbled. The Sep German ZEW economic sentiment survey fell for the fifth consecutive month and by a larger-than-expected -18.3 to a 19-month low of -4.3 as budget cuts across the Euro-Zone and slowing global growth clouded the outlook for Europe’s largest economy. Declines in utility stocks also pressured stock prices with E.ON sliding 3.0% after Germany’s biggest utility was downgraded to "hold" from "buy" at UniCredit SpA, which cited uncertainty on nuclear power plant extensions. Aug UK consumer prices unexpectedly rose +3.1% y/y, the same pace as July, and the sixth straight month prices have exceeded the government’s 3.0% limit as higher costs from airfare to food stoked price pressures.
• The Asian markets today closed mixed with Japan down -0.24%, Hong Kong +0.17%, China +0.09%, Taiwan +0.51%, Australia +0.25%, Singapore -0.59%, South Korea -0.15%, India +0.72%. Japanese stocks fell as the yen climbed to a fresh 15-year high against the dollar after Japanese Prime Minister Kan beat his rival Ozawa in a party vote today, reducing the likelihood the government will intervene in the foreign-exchange markets to weaken the yen. China’s yuan gained after the PBOC fixed the reference rate at 6.7378 per dollar, the highest since a peg against the dollar was scrapped in July 2005, on speculation the Chinese government will allow faster appreciation of the yuan to head off US trade sanctions. The action by the European Commission to raise its Euro-Zone GDP estimate yesterday for this year to 1.7% from 0.9% gave support to Asian equity markets on optimism that demand for Asian exports will remain strong. Asian bank stocks rallied for a second day after regulato rs agreed to give banks as long as 8 years to comply with new capital requirements and after Zhu Min, former deputy governor of the PBOC and current vice president of Bank of China Ltd. said that banks in Asia have high capital ratios and will be able to avoid the degree of fundraising needed elsewhere to meet the new international standards.

Overnight U.S. Stock News

• Dec S&Ps this morning are down -2.60 points. The stock market yesterday gapped higher and traded in positive territory the entire day and finished moderately higher (Dow +0.78%, S&P 500 +1.11%, Nasdaq Composite +1.93%). The Nasdaq rose to a 2-1/2 month high and the S&P 500 and the Dow both rallied to 1-month highs. Bullish factors included (1) carry-over support from stronger-than-expected Chinese economic data and comments from China’s Premier Wen Jiabao who said that China’s economy is in "good shape," which eases concern that the global economy will lapse back into recession, (2) a rally in bank stocks after the Basel Committee on Banking Supervision reached a compromise that doubles capital requirements for banks while giving them until 2019 to meet the buffer requirements to withstand future crisis, (3) carry-over strength from a rally in European equity markets after the European Commission raised its economic growth forecast for the Eur o-Zone this year to 1.7% instead of a previously projected 0.9%, (4) gains in raw-materials and energy producers as the slumping dollar pushed most commodities higher, with crude oil climbing to a 1-month high, (5) strength in chipmakers after research firm Gartner Inc. predicted that semiconductor equipment spending will double in 2010, (6) the smaller-than-expected US budget deficit in Aug as the economic recovery generated more tax revenue for the Treasury (-$90.5 billion versus expectations of -$100.0 billion), and (7) the prediction from CLSA Ltd. that US stock prices are "screamingly cheap" and will rally at least 30% in the next 12 months as the cheapest valuations in decades lure investors.
• Bearish factors included (1) the statement from IMF Managing Director Strauss-Kahn that the global economy may not generate much employment growth in coming years, and (2) the prediction from well-known bank analyst Richard Bove that legislators who don’t understand the banking industry and a sense of "mass hysteria" led to the passage of financial-reform law that will hurt US consumers.
• Campbell Soup (CPB) fell 2.3% in European trading after Goldman Sachs cut the stock to "sell" from "neutral" as they downgraded the packaged foods industry to "cautious" from "neutral," citing a mixed outlook for US sales, margin risks and valuations.

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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

• Global stocks are mixed with the European Euro Stoxx 50 Index down -0.45% and Sep S&Ps down -7.30 points. US Stock futures retreated and led European shares lower after IBM and Texas Instruments reported revenue that missed analysts’ estimates. Treasuries and the dollar are higher as the drop in stocks prompts an increase in safe-haven demand. Spain sold 6 billion euros ($7.8 billion) of Treasury bills, the maximum target for the auction, which pushed down the borrowing costs due to the increase in demand. Spain, which has to repay 24.7 billion euros of debt this month, has the third-largest deficit in the Euro-Zone and many of its banks are dependent on the ECB for funds. Greece sold 1.95 billion euros ($2.53 billion) of 13-week Treasury bills with a bid-to-cover ratio of 3.85, higher than last week’s 3.64, which shows strong demand and indicates an increase in investor confidence towards Greek government debt. Hungary, however, raised less than planned in a debt sale for a fourth time since June, which sent its borrowing costs soaring to a 19-week high and reignited concern about the ability to tame its budget deficit as the economy slows.
• The Asian markets today closed mixed with Japan down -1.15%, Hong Kong +0.86%, China +2.20%, Taiwan +0.81%, Australia +1.04%, Singapore +0.11%, South Korea +0.23%, India -0.28%. China’s Shanghai Stock Index closed higher after the International Strategy & Investment Group said China would relax polices that were aimed at curbing its housing industry as the economy faces a bigger risk from a slowdown than inflation. At a briefing in Beijing, China’s Commerce Ministry said that China’s domestic consumption will become the most important element of the nation’s economic growth in the future and that domestic consumption in the second half of this year will continue to grow at a relatively fast pace. Japanese stocks fell, led by declines in semiconductor-related stocks, after Texas Instruments reported disappointing profit and sales, while automakers and electronics companies also closed lower fell on concern demand from the US may falter after US home-builder confide nce sank to a 16-month low.

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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.35% and Sep S&Ps up +7.30 points. Treasuries are weaker, the dollar is little changed and commodities are mixed. A rally in media stocks is boosting European equities, led by a 20% surge in BSkyB, the UK’s biggest pay-TV provider, after News Corp. raised its bid for the shares of the company that it doesn’t already own. European stocks are higher and the euro is little changed despite the plunge in German investor confidence in June. The June German ZEW economic sentiment dropped a larger-than-expected -17.1 to a 14-month low of 28.7 as concerns mount that the European sovereign debt crisis will undermine exports and crimp growth in Germany, Europe’s largest economy. Greek bond yields surged 82 bp today to 8.89% after Moody’s Investors Service yesterday cut the country’s government bond rating 4 levels to junk. The downgrade prompted Citigroup to remove Greek government debt from it s World Government Bond Index.
• The Asian markets today closed mostly higher with Japan up +0.08%, Hong Kong +0.05%, China closed for holiday, Taiwan +0.90%, Australia -0.01%, Singapore unchanged, South Korea -0.04%, India +0.43%. The yen was little changed after the BOJ kept its benchmark interest rate at 0.10% as expected following the conclusion of its 2-day policy meeting. The BOJ did say however, that it would offer as much as 3 trillion yen ($33 billion) for a new program aimed at expanding credit available to companies. Financial stocks prompted a mild rally in Japanese equities led by a 2.8% rise in Nomura, a 4.1% gain in Mizuho Securities and a 2.8% gain in Daiwa after Credit Suisse boosted its ratings on the stocks to "outperform" from "neutral," saying their valuations have fallen to "attractive" levels. The Australian dollar weakened after the release of the Reserve Bank of Australia’s (RBA) minutes of its Jun 1 meeting. The minutes said "the situatio n in Europe had deteriorated significantly over the previous month" and that previous rate increases had given them "flexibility," fueling speculation that it will keep interest rates unchanged until at least Q4.

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The overall focus in the U.S. market as of late has been Europe, whether it is BP, Greece or Turkey, Wall Street’s collective eye has been away from our economic numbers and on those of our friendly neighbors to the east.

And rightly so, in such an interconnected world economy, any little tick can set off alerts in HFT programs everywhere setting off trading all over the globe. The butterfly effect absolutely applies. Today, European worries have again been blamed in the market‘s poor performance. The DOW finished down 89 points of .9%, S&P closed down 11 points of 1.13% and the NASDAQ ended the day 41 points lower or 1.8%.

Oil closed low, finishing the day at 70.93 down .58 or .81%.

Gold, as highlighted by our previous posts increased 23 points or 1.9% for the day as investors continue to run for the safe investment. It would appear that investment banks ran to the metal in order to cover, and many day traders were stuck short thinking that the price was inflated. The combination of the two has sent prices soaring

The European Union has begun to finalize its bailout planning, structuring the package as a vehicle chartered under the law of Luxembourg, owned and guaranteed by all 16 members of the European Union. A few details remain such as how the vehicle will market its debt. Whether the debt will be packaged as a whole; or if slices debt will be applied to certain bonds is still undecided.

Germany remains the biggest critic of the bailout because of its economic upstanding and fiscal long-sightedness, but the country’s parliament has caved and given its share of the credit guarantee. Today German manufacturing orders were reportedly increased.

Whether these developments take root is still unseen, investor confidence has not been re-established, with many investors running away from currency in general, especially the euro (trading at 1.1923 against the dollar) Euro-fear will continue to plague American markets until this is resolved.

  For WMM, our Micro Cap Index closed down 27 points or 3% lead by PSWS, Puresafe Water Systems and ASYI, AISystems.  our Nano Cap Index closed down 23 points or 2% lead by EDGR, Edgar Online, and AEMD, Aethlon Medical Inc.

Disclosure: no positions

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.02% and June S&Ps up +2.20 points. The dollar index rallied to a 14-3/4 month high and copper slid to an 8-month low after the weekend meeting of the Group of 20 finance chiefs failed to agree on steps to ensure the economic recovery will strengthen. The G-20 post meeting statement said the global economic rebound faces "significant challenges," while US Treasury Secretary Geithner warned that the world cannot count on the US consumer to drive growth and urged other nations to stimulate their own demand. The euro fell to a fresh 4-year low against the dollar but erased its losses after German factory orders unexpectedly gained for a second month on April as the weaker euro boosted export demand and companies increased investment. April German factory orders rose +2.8% m/m, when the market was expecting a -0.4% m/m decline, and gained +29.6% y/y, the biggest year-over-year increase s ince data began in 1992. Greece’s benchmark stock index, the ASE index, tumbled to a 12-year low, and was led lower by weakness in bank stocks, while European telecommunication stocks fell after Hellenic Telecommunications Organization SA plunged 6.6% when it announced that it will pay a lower dividend than planned. Also giving European stocks a lift was the unexpected increase in the June Euro-Zone Sentix investor confidence, which climbed +2.3 points to -4.1 when the market was expecting a -0.6 point decline to -7.0.
• The Asian markets today closed lower with Japan down -3.84%, Hong Kong -2.03%, China -1.77%, Taiwan -2.54%, Australia -2.78%, Singapore -1.95%, South Korea -1.67%, India -1.97%. Asian stock markets closed lower as they played catch up with last Friday’s losses in European and US markets. Asian mining companies and raw materials producers weakened on concerns a slowing global economy may undercut demand for commodities, while Japanese exporters slid after the yen strengthened. KB Financial Group fell 5.3% and led Asian financial companies lower on concern the European sovereign debt crisis is spreading, while China’s Hon Hai Precision Industry, the world’s largest contract electronics manufacturer, declined 5.6% after the company announced the base wage for workers at a China factory will double following recent employee suicides at its plant.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +2.20 points. The US stock market last Friday traded lower the entire day and finished with sharp losses (Dow Jones -3.15%, S&P 500 -3.44%, Nasdaq Composite -3.64%). The Dow Jones, S&P 500 and the Nasdaq all dropped to 1-week lows. Bearish factors included (1) carry-over weakness from a slump in European equity markets on concern that the European sovereign debt crisis is spreading 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," (2) concerns that the US economic recovery may not be robust after the weaker-than-expected May nonfarm payrolls (+431,000 versus expectations of +520,000) with private payrolls up +41,000 (versus expectations of +178,000), (3) weakness in energy and raw material producers after the doll ar surged to a 14-3/4 month high and prompted a sell off in most commodities, and (4) comments from Atlanta Fed President Lockhart who said that falling commercial property prices pose a growing challenge to the banks in the Southeastern US where more failures are likely to occur.
• Bullish factors included (1) the larger-than-expected drop in the May US unemployment rate (-0.2 to 9.7% versus expectations of -0.1 to 9.8%), (2) the +31,000 increase in temporary workers in May, the eighth straight monthly increase, which may be a harbinger of future payroll gains as employment at temporary-help agencies often picks up before companies take on permanent staff, and (3) the drop in the yield on the 10-year T-note to a 1-week low of 3.20% which cuts the cost of capital for consumers and businesses.
• Talecris Biotherapeutics (TLCR) soared 38% in pre-market trading after Grifols, Europe’s largest maker of blood-plasma products, agreed to buy Talecris for about $3.4 billion in cash and stock.

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