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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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +1.78% and June S&Ps up +3.80 points. The dollar is little changed, Treasuries are weaker and most commodities are higher on increased economic optimism. European stocks received a boost after the May Euro-Zone PMI composite was unexpectedly revised up to 56.4 from the originally reported 56.2. Automakers gained, led by a 5.5% jump in Peugeot, after Deutsche Bank AG raised its recommendation on Europe’s second-largest carmaker to "buy" from "hold," and Daimler AG rose 2.5% after its Mercedes Benz division reported a 23% gain in US sales in May. Air France-KLM Group jumped 4.8% after Europe’s biggest airline said passenger traffic rose 4.3% in May. Limiting stock gains was the unexpected decline in Apr Euro-Zone retail sales which fell -1.2% m/m, the biggest drop in 1-1/2 years and weaker than market expectations for a +0.1% m/m increase. European banks are parking c ash with the ECB amid concern that a 750 billion-euro European rescue package may not be enough to stop the crisis from spreading and spilling into the banking industry. Overnight deposits with the ECB rose to a record 320.4 billion euros ($394 billion) and deposits have exceeded 300 billion euros for the past five days as the sovereign debt crisis makes banks wary of lending to each other.
• The Asian markets today closed mostly higher with Japan up +3.24%, Hong Kong +1.62%, China -0.78%, Taiwan +2.29%, Australia +2.40%, Singapore +2.42%, South Korea +2.14%,India +1.68%. Japanese businesses cut spending for the 12th consecutive quarter after Q1 capital spending excluding software fell -12.9% y/y. The much larger than expected decrease in capital spending will lead the government to downgrade Japan’s Q1 GDP figures later this month. Japanese exporters closed higher as the yen slumped to a 2-week low against the dollar and Asian carmakers gained on increased US sales. Nissan Motor closed 4.8% higher after reporting a +24% y/y increase in US car sales in May, Toyota rose 3.6% after posting a 5.7% sales gain and Kia Motors advanced 3.2% after its US sales rose 21% last month. The South Korean won rose sharply after JPMorgan Chase raised the nation’s equities to "overweight" and said the won is one of the "most undervalued" emerging-marke t currencies.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +3.80 points. The US stock market yesterday opened higher and maintained a positive tone throughout the day as it trended higher into the close and finished on its high (Dow Jones +2.25%, S&P 500 +2.58%, Nasdaq Composite +2.64%). Bullish factors included (1) a rally in homebuilders after the stronger-than-expected Apr US pending home sales (+6.0% m/m and +24,6% y/y versus expectations of +5.0% m/m and +21.0% y/y), (2) a rally in energy producers and oil service providers after crude oil rose, (3) strength in airline stocks after Continental airlines beat monthly estimates for monthly unit revenue, which signals a stronger return of business travelers who pay higher fares, and (4) the prediction from MFS Investment Management that "the US is in the middle of a V-shaped economic recovery and that the European bank crisis does not have the scale and scope of Lehman and AIG and it doesn’t have the ingredients to bring down the banking system."
• Bearish factors included (1) the slump in the MBA’s home purchase index to its lowest level since Apr 1997, which indicates future US housing sales may be weak as the expiration of government tax incentives to purchase homes by the end of April has led to a reduction in home sales since then, and (2) carry-over weakness from a slump in European stocks on concern the region’s sovereign debt contagion is spreading after the yield premium between Spanish 10-year government bonds and 10-year German bunds widened to a 13-year high of 177 bp.
• Alcoa (AA) rose 1.6% in European trading after the company was upgraded to "outperform" from "neutral" at Macquarie Group Ltd.
• Las Vegas Sands (LVS) climbed 2.6% in pre-market trading after Morgan Stanley raised its recommendation on the casino company to "overweight" from equal weight."

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