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 mixed with the European Euro Stoxx 50 Index down -0.04% and Sep S&Ps down -3.50 points. The dollar and Treasuries are stronger and most commodities are weaker. European stocks fluctuated between slight gains and losses ahead of Q2 earnings season, which officially begins when Alcoa reports its earnings results after the close of today’s trading. European bank stocks are weak, led by a 3.2% decline in Allied Irish Banks Plc, as European finance ministers meeting in Brussels today are under pressure to disclose more about the stress tests being conducted on banks to see whether they could withstand losses if the region’s debt crisis worsens. Limiting losses is the 6.7% jump in BP Plc after the Sunday Times reported that Exxon Mobile may bid for the company along with reports that BP is selling assets in Alaska, while Volkswagen AG climbed 1.9% after the biggest foreign carmaker in China boosted sales +46% y/y in the first half of this year in the world’s largest vehicle market after introducing new models to attract customers.
• The Asian markets today closed mixed with Japan down -0.37%, Hong Kong +0.44%, China +1.10%, Taiwan -0.10%, Australia +0.31%, Singapore +0.28%, South Korea +0.63%, India +0.58%. Japanese banks closed lower and led losses in stock prices after the Democratic Part of Japan won only 44 seats in the upper house, 12 short of majority, making it unlikely Prime Minister Kan will be able to reduce the world’s largest public debt. The yen weakened to a 2-week low against the dollar after Standard & Poor’s said Kan’s defeat is "potentially negative" for Japan’s debt rating because of legislative gridlock. The yen’s weakness provided a boost to Japan’s exporters, helping to limit declines. China’s Shanghai Stock Index closed higher, led by gains in property developers, on speculation the government will relax curbs on mortgage lending amid a slowdown in property prices. China’s June property prices declined -0.1% m/m, snapping 15 straight months of increases, whi le Chinese new lending in June was 603 billion yuan ($89 billion), the least in 3 months. Morgan Stanley predicts that the Chinese government may loosen this year’s 7.5 trillion yuan new-lending quota for banks in Q4, when a slowdown in inflation will be "well established." Rounding out the bullish factors for Chinese stocks was the more-than-forecast 44% y/y increase in June China exports to $137 billion, which signals that global demand has withstood Europe’s sovereign-debt crisis so far.

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Overnight Developments

• Global stocks are higher with the European Euro Stoxx 50 Index up +2.34% and Sep S&Ps up +11.00 points. Speculation that stock valuations have become attractive is boosting global stocks today after the recent decline in equity prices may have overrun the outlook for company earnings. Analysts are projecting profit for S&P 500 companies will climb 34% in 2010 compared with a 27% projected gain on March 29. The revision, the most during any quarter in at least 6 years, comes as stocks posted their biggest losses in 16 months. Basis resource stocks are leading the rally today in European stocks as rising commodities boosts share prices. BHP Billiton, the world’s biggest mining company, gained 4% and Rio Tinto rose 4.8%. BP rallied 3.7% after RBS upgraded the company to "buy" from "hold," saying the "pessimistic view on the probable costs of Macondo oil spill is currently discounted" in the share price.
• The Asian markets today closed higher with Japan up +0.77%, Hong Kong +1.22%, China +2.00%, Taiwan +!.46%, Australia +1.28%, Singapore +0.84%, South Korea +0.76%, India +0.99%. The Australian dollar and financial stocks rallied today after Australia’s central bank paused in raising borrowing costs for a second month. RBA Governor Stevens kept the overnight cash rate at 4.5% and said "caution in financial markets has been evident in the past couple of months, driven principally by concerns about European sovereigns and banks but also by some uncertainty about the pace of future global growth." China’s Shanghai Stock Index rallied off of a 15-month low to close higher and provided support for gains in other Asian stock markets. Technology shares gained after Taiwan Semiconductor Manufacturing, the world’s largest contract manufacturer of chips, increased 2.6% after JPMorgan Chase maintained its "overweight" rating on the company, while Elpida Memory advanced 4.5% after the world’s third-biggest maker of computer-memory chips said it plans to cut debt and "seek opportunities including acquisitions" as a recovery in computer sales boosts profits.

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Overnight Developments

• Global stocks are lower with the European Euro Stoxx 50 Index down -1.04% and Sep S&Ps down -1.00 point. A bigger than expected slowdown in Chinese manufacturing along with Spain’s deteriorating creditworthiness fanned concern that the global economic recovery is faltering and kept stock prices on the defensive. Weaker-than-expected demand at a Spanish auction of 3.5 billion euros ($4.3 billion) of 5-year notes heightened sovereign-debt worries, with credit-default swaps tied to Spain’s debt climbing 10 bp to 273.6. Spanish bank stocks sold-off and led European bank stocks lower and mining stocks tumbled as well after metal prices slumped. The euro gained as the ECB said it will lend 111.2 billion euros ($136.5 billion) to banks in 6-day loans to help them cope with the expiry of its 12-month loans in which banks needed to repay 442 billion euros worth of debt by today.
• The Asian markets today closed lower with Japan down -2.04%, Homg Kong closed for holiday, China -1.44%, Taiwan -1.03%, Australia -1.49%, Singapore -0.53%, South Korea -1.00%, India -1.08%. China’s Shanghai Stock Index tumbled to a 14-1/2 month low after China’s manufacturing expanded at a slower pace for a second month in June, adding to signs that its economy is moderating. The Jun China purchasing mangers’ index fell -1.8 to 52.1, a bigger drop than the -0.7 drop the market was expecting. Japan’s Nikkei 225 Stock Index fell to a 7-month low despite the Q2 Japan Tankan large manufacturers index climbing to a 2-year high. Most Asian exporters closed lower on concern European demand for their goods may wane after Moody’s Investors Service warned that it may cut Spain’s top credit rating, while concerns that a global economic slowdown is deepening sent shipping companies lower after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7% a nd extended its 24-day slump to a whopping 43%.

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Overnight Developments

• Global stocks are weaker with the European Euro Stoxx 50 Index down -1.87% and Sep S&Ps down -12.40 points. Commodities sank and the dollar and Treasuries gained on concern that growth in China, the main engine of the world’s economic recovery, is slowing. The Conference Board’s Apr leading economic index for China was revised down to show a 0.3% gain, far less than the 1.7% increase reported Jun 15. Mining companies took a hit on demand concerns with Rio Tinto down 4.7% and BHP Billiton losing 3.1%. A 2% drop in Vodaphone added to the negative price action in European stocks after Credit Suisse cut its recommendation on the world’s largest mobile-phone company to "neutral" from "outperform." On the positive side, the Jun Euro-Zone economic confidence unexpectedly rose +0.3 to 98.7 as the drop in the euro bolstered the prospects for exports and optimism in Europe’s recovery. Three people familiar with the results said that Deutsche Bank AG, Commerzbank AG and Bayerische Landesbank passed a stress test that evaluated how about 25 European lenders would handle an economic downturn. The results are based on data from April that were passed on to the Committee of European Banking Supervisors. The European Union pledged on Jun 17 to disclose the results of the tests by the end of July.
• The Asian markets today closed lower with Japan down -1.27%, Hong Kong -2.31%, China -4.59%, Taiwan -1.03%, Australia -0.88%, Singapore -1.38%, South Korea -1.33%, India -1.35%. China’s Shanghai Stock Index plunged to a 14-month low after the Conference Board revised down its April gauge for China’s economic outlook to its smallest gain in 5 months, signaling a weaker expansion. Citigroup said in a report that China’s exports face "strong headwinds" in the second half of the year from policy tightening measures and the European debt crisis, reducing prospects of a rebound in the stock market. Concerns over the prospect for growth sent commodities tumbling which undercut most Asian commodity producers, while Chinese banks fell after Moody’s Investors Service said that China’s banks will face a rise in bad loans caused by the real estate industry and local-government financing vehicles. Stocks in Japan also closed lower on concern that its economic recovery i s stalling. The May Japan jobless rate unexpectedly rose +0.1 to 5.2% for its third straight monthly increase while the job-to-applicant ratio for May rose to 0.50, its highest level in more than a year, meaning there are 50 positions for every 100 candidates. May Japan household spending unexpectedly declined -0.7% y/y and May Japan industrial production also unexpectedly fell -0.1% m/m for its first decline since Feb. Japanese exporters were also undercut after the yen climbed to a 1-1/2 month high against the dollar.

Overnight U.S. Stock News

• Sep S&Ps this morning are trading down -12.40 points. The US stock market yesterday lacked direction the entire day and finished a volatile session slightly lower (Dow Jones -0.05%, S&P 500 -0.20%, Nasdaq Composite -0.13%). Bearish factors included (1) weakness in energy producers after crude oil tumbled, (2) the warning from the Bank for International Settlements (BIS) that European banks may struggle to refinance their debt if investor sentiment remains negative, which could start another banking crisis, and (3) the prediction from Columbia University finance professor Calomiris that the recently passed US financial services overhaul legislation will result in a "hidden tax" to consumers as banks levy an estimated $19 billion in additional fees to pay for the cost of the overhaul.
• Bullish factors included (1) comments from G-20 leaders after this past weekend’s summit in Toronto that they will focus on spurring economic growth and reducing deficits, (2) optimism that the US recovery is strengthening after the slightly larger-than-expected increase in May personal spending (+0.2% versus expectations of +0.1%), (3) the rally in phone service and wireless infrastructure companies after President Obama proposed doubling the airwaves available for smartphones, laptop connections to the Internet and new wireless devices, (4) the recommendation by Nomura Securities to buy stocks because equities "will be supported by valuations, monetary policy and earnings upgrades," and (5) the drop in the yield on the 10-year T-note to a 14-month low of 3.03%.
• Alcoa (AA) fell 1.7% in European trading on concern that metals demand from China may weaken.

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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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