Stocks were generally higher in Asian trade. Australia led the way with a two percent gain, the Nikkei added more than one percent and the Hang Seng was up 0.4%. Bucking the trend was Shanghai which lost 0.6% on the session. European indexes are broadly higher, with the Footsie currently higher by almost 1.4% and the Dax up a bit more than one percent. US stock futures are higher by about one percent as I write.

*The Q2 reading of Australia’s GDP was the best in three years with quarter on quarter growth of 1.2%, better than the 0.9% forecast.

*The August reading of China’s manufacturing sector Purchasing Managers Index was up a half point on the month to 51.7, a couple tenths better than forecast.

*The July reading of Germany’s Retail Sales was -0.3%, well below the gain of 0.5% that was expected. That is the second month in a row in which Sales fell 0.3% and the fourth month in five that showed a decline.

*The final August reading of Germany’s manufacturing sector PMI was unrevised at 58.2; the index was 61.2 in July.

*The August reading of Switzerland’s manufacturing sector PMI was down 5.5 points on the month to 61.4, far short of the estimate of 65.8.

*The August reading of the UK’s manufacturing PMI was down 2.6 points on the month to 54.3. It had been expected to fall only a fraction to 57.0.

*US mortgage applications were up 2.7% in the week ended August 27. Applications for purchase were up 1.8% and those for Refi rose 2.8%.

*The Challenger Groups says that in August there were 34,768 job cut announcements, that is down 55% from last August. Announced job cuts last month were the fewest since June 2000.

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*Stocks were generally weak in Asian trade. The Nikkei in particular had a bad day as it fell almost 3.6% on the session; the biggest daily decline in about three months. Australia and the Hang Seng were each down by about one percent and Shanghai lost a half percent. European indexes were also broadly lower with both the Footsie and Dax off by one percent. US stock futures are trading down a half percent.

*The Q2 reading of Australia’s Current Account Balance was a deficit of AD$5.6 billion, about one billion less than forecast. Their Net Exports as a percent of GDP rose 0.4% in the quarter.

*The July reading of Australia’s Retail Sales were +0.7% on a month on month basis, beating the estimate of +0.4%.

*The preliminary July reading of Japan’s Industrial Production is +0.3% on a month on month basis, better than the forecast for a decline of 0.2%.

*The July reading of Japan’s Retail Trade was up 0.7% from the month before; it had been forecast to gain 0.5%.

*The August reading of Germany’s Unemployment Rate was steady at 7.6%, as expected. The net change in the number of Unemployed was -17k, just missing the -20k estimate.

*In July there were 48.7k Mortgage Approvals in the UK, according to the Bank of England; a couple thousand more than expected.

*The weekly report on chain store sales from ICSC shows an increase of 0.1% on a week to week basis for the week ended August 28. The Johnson Redbook report of the same thing is due out at 7:55am CDT.

*The June reading of the Case/Shiller Home Price Index is due out at 8:00am CDT, it is expected to be +3.50% on a year over year basis. The August reading of the Chicago Purchasing Managers Index is due out at 8:45am CDT, three minutes earlier for subscribers. The Chicago PMI is expected to be 57.0, which would be down from 62.3 the month before. The August reading of Consumer Confidence is set to be released at 9:00am CDT, it is forecast to improve three tenths on the month to 50.7.

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Overnight Developments

• European stocks are trading mildly lower with the European Stoxx 50 down -0.28%. Sep S&Ps are down 4.80 points (-0.44%). S&Ps are on edge ahead of this morning’s Q2 GDP report (expected +2.6%). There is also some caution ahead of Sunday’s expected release of China’s purchasing managers index due to talk of a sharply weaker figure. The market consensus is for a moderate 0.7 point decline to 51.4 from 52.1 in June. The Eurozone July CPI rose to a 20-month high of +1.7% y/y from +1.4% y/y in June, which was in line with market expectations. However, the core CPI rose to only +0.9% y/y from +0.8% y/y in June. Meanwhile, the Eurozone June unmeployment rate remained at 10%, the highest level in almost 12 years. The IMF said today that US banks may need as much as $76 billion more in capital. A senior executive from Moody’s said that Spain, already on review for a possible downgrade, will probably lose its Aaa rating. Spain has already lost its triple-A ra ting from S&P and Fitch. The Moody’s executive also said that the U.S. needs a "clear plan" for tackling its deficit.
• The Asian markets today closed lower across the board: Japan -1.64%, Hong Kong -0.30%, China -0.32%, Taiwan -0.49%, Australia -0.68%, Singapore -0.33%, South Korea -0.83%, Bombay -0.69%. Asian markets were undercut by the report that Japan’s June unemployment rate rose to a 7-month high of 5.3%, which was higher than the consensus of 5.2%. In addition, Japan’s factory output fell 1.5% m/m versus the consensus for a +0.2% rise.

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Overnight Developments

• Global stocks are weaker with the European Euro Stoxx 50 Index down -1.99% and June S&Ps down -14.50 points. The dollar index rose to a 14-month high and most commodities sank on concern that global economic growth is starting to slow. The euro sank to a 4-year low and bank stocks tumbled after the ECB said in its bi-annual Financial Stability Report yesterday 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, which may be even bigger amid "heightened sovereign risks and possible second-round effects of the fiscal consolidation." European stocks weakened further after the April Euro-Zone unemployment rate unexpectedly rose +0.1 to a 12-year high of 10.1% as the region’s sovereign debt crisis undermined the outlook for the economy. ECB Vice President Papademos, speaking on the final day of his term as Vice President , said that Europe’s economy may struggle to gather strength after contagion from Greece’s fiscal crisis eroded confidence in consumers and companies last month and forced governments to deepen spending cuts to reduce budget deficits and that "the consolidation measures can be expected to have some short-term negative impact on growth and employment."
• The Asian markets today closed lower with Japan down -0.58%, Hong Kong -1.36%, China -1.05%, Taiwan -1.15%, Australia -0.37%, Singapore -1.35%, South Korea -0.62%, India -2.20%. Chinese stocks declined and helped to send global stock markets lower after manufacturing in China slowed more than expected. China’s Federation of Logistics and Purchasing reported that the April China Purchasing Managers’ Index fell -1.8 to 53.9, lower than estimates for a decline to 54.5, which raises concern that China’s economy, the engine of global growth, is slowing. China’s real estate market may also be weakening after the Shanghai Securities reported that real estate closings in Beijing, Shanghai and Shenzhen in May plunged as contract numbers dropped by as much as -70% m/m from April. Japanese stocks closed lower on concern the nation’s political instability may slow the economic recovery after Prime Minister Hatoyama said he will consider his political future and do "what’s b est for the people of Japan" after polls showed 80% of Japanese voters want him to step down 6 weeks before mid-term elections.

Overnight U.S. Stock News

• June S&Ps this morning are trading down -14.50 points on global economic growth concerns. The US stock market weakened last Friday and finished with moderate losses (Dow Jones -1.19%, S&P 500 -1.24%, Nasdaq Composite -0.91%). Bearish factors included (1) the action by Fitch Ratings to cut Spain’s credit rating to AA+ from AAA, spurring concern the European debt crisis will worsen, (2) concerns that the US economic recovery will slow after April personal spending unexpected failed to increase for the first time in the last 7 months (unchanged versus expectations of +0.3%), (3) the weaker-than-expected May Chicago purchasing managers index (-4.1 to 59.7 versus expectations of -2.8 to 61.0), (4) an escalation of tensions in Korea after a North Korean general warned of "all out war" if any accidental clashes with South Korea break out, and (5) weakness in oil-services companies and energy producers after President Obama extended a moratorium on deep-w ater offshore drilling permits, suspended exploration in two areas off of Alaska, cancelled pending lease sales in the Gulf of Mexico and proposed sales off Virginia’s coast, and suspended operations at 33 deep-water wells being drilled in the Gulf of Mexico.
• Bullish factors included (1) an easing of liquidity concerns after the 3-month dollar Libor rate fell for the first time in the last 14 sessions, (2) the unexpected increase in the May US University of Michigan consumer confidence (+0.3 to 73.6 versus expectations of unchanged at 73.3), and (3) the action by Goldman Sachs to raise their operating earnings per share estimates for S&P 500 companies to $78 for 2010 and $93 for 2011, up from $76 and $90 respectively, citing stellar Q1 results and better net margins than they had expected.
• British Petroleum Plc (BP) plunged nearly 17% in European trading after it abandoned an attempt to plug the leaking well in he Gulf of Mexico.
• Alcoa (AA) fell nearly 2% and Freeport-McMoRan (FCX) dropped 2.4% in pre-market trading after industrial metals prices slumped.

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