Overnight Developments

• European stocks are weaker with the European Stoxx down -1.15% and Sep S&Ps down -15.10 points. The drop in US stocks that began after the FOMC meeting yesterday afternoon accelerated in overnight trade with Sep S&Ps falling to a 1-week low as the Fed signaled the recovery is decelerating. Treasuries around the globe gained, with the US 2-year T-note yield dropping to a record low of 0.4892%, while the yield on the 10-year German bund slipped to a record low of 2.458%. The dollar index rose to a 1-1/2 week high and commodities slumped with copper declining to a 1-week low. Adding to pressure on European stocks was the Bank of England’s quarterly inflation report in which the BOE cut its economic growth estimate for England to a 3.0% annual pace instead of the 3.6% rate forecast in May and said that inflation will be at about 1.5% in 2012, lower than its 2.0% goal, which signals the economy may need more emergency stimulus. July UK nationwide consumer con fidence tumbled a more-than-expected 7 points to a 15-month low of 56, which aided a drop in the British pound to a 1-1/2 week low against the dollar.
• The Asian markets today closed mostly lower with Japan down -2.70%, Hong Kong -0.83%, China +0.62%, Taiwan -1.02%, Australia -1.88%, Singapore -1.17%, South Korea -1.32%, India -0.82%. Japan’s Nikkei 225 Stock Index fell to a 2-1/2 week low on economic growth concerns after Jun Japan machine orders, an indicator of business investment in 3 to 6 months, rose +1.6% m/m, far less than the expected +5.4% m/m increase. Japan’s exporters also closed lower after the yen surged to a 15-year high against the dollar as a stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Chinese bank stocks weakened after China’s banking regulator ordered banks to transfer off-balance-sheet loans onto their books and make provisions for those that may default. Adding to evidence that China’s economy is cooling, China’s July industrial output rose +13.4% y/y, the least in 11 months, while new loans in July were 532.8 billion yuan, be low expectations of 600 billion yuan. China’s July inflation quickened to 3.3% y/y, the fastest pace in 21 months, boosted by a low year-earlier base for comparison and rising food costs.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -15.10 points. The stock market yesterday traded in negative territory throughout the day, although a late-day rally helped it to close well above its worst levels (Dow -0.51%, S&P 500 -0.60%, Nasdaq Composite -1.24%). Bearish factors included (1) carry-over weakness from a fall in Chinese stocks on evidence that China’s economic growth is slowing after July China imports rose at their slowest pace of growth in 9 months, while July property prices in 70 major Chinese cities posted their smallest increase in 6 months, (2) the unexpected decline in Q2 nonfarm productivity which fell for the first time in over 2 years (-0.9% versus expectations of +0.2%), (3) weakness in materials and energy producers after the dollar index rallied to a 1-week high and the prices of most commodities tumbled, and (4) the fall in technology stocks led by a slump in semiconductor shares after Barclays Plc and R.W. Baird & Co. reduced their rating s on Intel, the world’s largest semiconductor manufacturer, because of weakening orders for personal computer components.
• Bullish factors included (1) strength in US phone companies after Wells Fargo upgraded the sector to “marketweight” from “underweight,” saying that US telephone stocks are increasingly appealing as a haven from slowing growth in the economy and because the industry pays out historically high dividends relative to the S&P 500 Index and that the industry “appears to be on the verge of a turnaround,” and (2) the post FOMC statement in which the Fed said they will reinvest principal payments on mortgage holdings into long-term Treasury securities as they expand their quantitative easing in an attempt to bolster economic growth and keep the US economy from lapsing back into recession.
• Cree (CRE) slumped 9.8% in European trading after the company forecast Q1 sales of $280 million at most, below analysts’ estimates of $284.3 million.

A123 Systems (AONE) dropped 4.6% in European trading after the company reported a Q2 loss of 33 cents a share, wider than the 27-cent loss estimated by analysts.

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Overnight U.S. Stock News

• Sep S&Ps this morning are down -15.10 points. The stock market yesterday traded in negative territory throughout the day, although a late-day rally helped it to close well above its worst levels (Dow -0.51%, S&P 500 -0.60%, Nasdaq Composite -1.24%). Bearish factors included (1) carry-over weakness from a fall in Chinese stocks on evidence that China’s economic growth is slowing after July China imports rose at their slowest pace of growth in 9 months, while July property prices in 70 major Chinese cities posted their smallest increase in 6 months, (2) the unexpected decline in Q2 nonfarm productivity which fell for the first time in over 2 years (-0.9% versus expectations of +0.2%), (3) weakness in materials and energy producers after the dollar index rallied to a 1-week high and the prices of most commodities tumbled, and (4) the fall in technology stocks led by a slump in semiconductor shares after Barclays Plc and R.W. Baird & Co. reduced their rating s on Intel, the world’s largest semiconductor manufacturer, because of weakening orders for personal computer components.
• Bullish factors included (1) strength in US phone companies after Wells Fargo upgraded the sector to “marketweight” from “underweight,” saying that US telephone stocks are increasingly appealing as a haven from slowing growth in the economy and because the industry pays out historically high dividends relative to the S&P 500 Index and that the industry “appears to be on the verge of a turnaround,” and (2) the post FOMC statement in which the Fed said they will reinvest principal payments on mortgage holdings into long-term Treasury securities as they expand their quantitative easing in an attempt to bolster economic growth and keep the US economy from lapsing back into recession.
• Cree (CRE) slumped 9.8% in European trading after the company forecast Q1 sales of $280 million at most, below analysts’ estimates of $284.3 million.

A123 Systems (AONE) dropped 4.6% in European trading after the company reported a Q2 loss of 33 cents a share, wider than the 27-cent loss estimated by analysts.

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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

• European stocks are higher with the European Stoxx 50 up 0.55% after hitting a 3-month high. Sep S&Ps are up 5.70 points (+0.52%). European stocks received support from positive earnings reports from AstraZeneca and Volkswagen and from positive confidence and employment reports. The European Commission’s business and consumer confidence index rose to a 2-1/3 year high of 101.3 from 99 in June. Meanwhile, Germany unemployment fell by 20,000 to 3.21 million, which was the lowest level in 1-1/2 years and was the 13th consecutive monthly decline. The Germany unemployment rate fell to 7.6% from 7.7%. French Finance Minister Christine Lagarde today said she expects a "serious pickup" in global growth in 2011, "if only because global trade has significantly improved." UBS upgraded European stocks to "neutral" from "underweight," cut U.S. stocks to "neutral," and cut Japanese stocks to "underweight."
• The Asian markets today closed mixed: Japan -0.59%, Hong Kong +0.01%, China +0.50%, Taiwan +0.18%, Australia -0.13%, Singapore +0.41%, South Korea -0.17%, Bombay +0.19%. Asian stocks were undercut by Wednesday’s U.S. Beige Book report, which suggested lackluster U.S. demand for Asian exports. Panasonic fell 7.7% today after news that the company would offer stock to help it purchase full control of its Sanyo Electric and Panasonic Electric Works units.

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Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +1.20 points. The dollar index is little changed, Treasuries are weaker and most commodities are higher. Rio Tinto rose 3.5% and led mining companies higher as copper rallied after LME copper inventories declined to a 7-1/4 month low. Antofagasta gained 3.4% after Citigroup raised its recommendation for the copper producer to "buy" from "hold." Also helping European stocks was the larger-than-expected +1.7% m/m increase in May French industrial production which was boosted by improving global trade and a pickup in output at car plants, while ECB President Trichet said that while the fiscal crisis isn’t over, the economic signs are "encouraging."
• The Asian markets today closed higher with Japan up +0.52%, Hong Kong +1.64%, China +2.76%, Taiwan +0.50%, Australia +0.91%, Singapore +0.69%, South Korea +1.66%, India +1.03%. Asian stocks were helped higher by Citigroup’s prediction that emerging-market stocks will rally as much as 25% by the end of the year as the global economy avoids a "double dip" recession and attractive valuations lure investors. The South Korean won strengthened over 1% against the dollar after the Bank of Korea unexpectedly raised its 7-day repurchase rate to 2.25% from a record low 2.00%, citing a pre-emptive strike against inflation. South Korea joins India, Malaysia and Taiwan in lifting interest rates in recent weeks, signaling that Asia’s expansion will remain resilient to Europe’s debt crisis.

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Overnight Developments

• Global stocks are lower with the European Euro Stoxx 50 Index down -0.67% and Sep S&Ps down 6.60 points (-0.61%). The markets remain concerned about the European economy with Greek credit default swaps today rising 27 bp to a record high of 959 bp, indicating that the markets are increasingly concerned about a Greek debt default. Meanwhile, the Greek 10-year bond spread against Germany rose by 10 bp to a 1-1/2 month high of 782 bp. Global stocks are also lower on yesterday’s news that US May new home sales plunged by 33%. On the brighter side, April Eurozone industrial orders today rose by +0.9% m/m, adding to March’s +5.1% surge and marking the third consecutive monthly increase. The report boosted hopes for a continuance in the surge in European exports tied to the recent depreciation of the euro.
• The Asian markets today closed mostly lower: Japan +0.05%, Hong Kong -0.59%, China -0.04%, Taiwan +0.10%, Australia -0.14%, Singapore -0.82%, South Korea +0.82%, and Bombay -0.14%. Taiwan’s central bank today unexpectedly raised its key policy rate to 1.375% from 1.25%, as opposed to the unanimous market consensus that the bank would leave rates unchanged. Taiwan’s Q1 GDP soared by 13.3% and the government last month hiked its 2010 GDP forecast to +6.14% from +4.72% and its 2010 inflation forecast to +1.4% from +1.27%. Adding to the news of tighter policy in Asia, South Korea’s Finance Ministry today said that South Korea will “normalize” its accommodative policies and take pre-emptive action against inflation due to stronger-than-expected economic growth. The Finance Ministry raised its forecast for South Korean 2010 GDP to +5.8% from +5.0%.

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Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 Index up +0.76% at a 1-month high and Sep S&Ps up +4.70 points at a 4-week high. European and US stocks rallied while the dollar index slipped to a 3-week low after a successful Spanish bond sale eased concern that Spain’s government will struggle to finance its widening deficit. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds at yields lower than the prevailing market rates with a strong bid-to-cover ratio of 2.45, assuaging concern that it would face difficulty meeting bond repayments. The yield premium demanded by investors to hold Spanish debt rather than equivalent German bunds narrowed to 209.5 bp after the sale, as it retreated from a record wide 221 bp yesterday, the highest since the introduction of the euro. Limiting stock gains was the 1% drop in Nokia Oyj, extending yesterday’s 9% sell off, after Goldman Sachs slashed their share price estimates and profit forecasts f or the world’s largest maker of mobile phones which started the slide yesterday after it lowered its revenue and margin forecasts.
• The Asian markets today closed mixed with Japan down -0.67%, Hong Kong +0.38%, China -0.58%, Taiwan +0.83%, Australia -0.70%, Singapore -0.11%, South Korea +0.05%, India +0.88%. James Hardie Industries SE, the biggest seller of home siding in the US, lost 3.8% in Sydney after US building permits unexpectedly fell to a 1-year low and most Japanese exporters closed lower as the yen gained against the dollar, which threatens to cut the value of overseas income when repatriated. On the positive side, Nintendo, the world’s number one maker of portable video-game players, rose 5.2%, adding on to yesterday’s 5.2% gain, after UBS boosted its rating on the stock to "buy" from "neutral" as the company introduced a new handheld video-game player this week.

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