3SOF

Friday, January 14, 2011...

Overnight Developments

•   Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.86% and March S&Ps down -4.40 points. The dollar index slipped to a 2-week low and most commodities are lower after China raised reserve requirements for its banks in an attempt to cool its economy. Inflation concerns are also hurting stock prices after ECB Council member Weber said, "the economic outlook has brightened considerably" and that inflation risks "could well move to the upside." Dec Euro-Zone CPI climbed to +2.2% y/y and rose above the ECB's +2.0% limit for the first time in more than 2 years. Citigroup revised its forecast for the ECB's first rate increase to the second half of this year from the first quarter of 2012. A rally in technology companies is limiting declines in European stocks with ASML, Europe's biggest maker of semiconductor equipment, up 1.9% and Infineon Technologies AG up 1.1% after Intel, the biggest maker of computer chips, fore cast Q1 revenue will range from $11.1 billion and $11.9 billion, ahead of analysts' estimates of $10.7 billion.


•   The Asian stock markets today closed mostly lower with Japan down -0.86%, Hong Kong +0.18%, China -1.57%, Taiwan -0.03%, Australia +0.13%, Singapore -0.30%, South Korea +0.96%, India -1.68%. In an attempt to slow expansion in money supply to control price increases, China told banks to set aside more deposits as reserves for the fourth time in 2 months as the PBOC raised banks' reserve ratio requirements by 50 bp to 19.0%. Asian stock markets tumbled today, led by losses in commodity producers, on concern that monetary tightening may slow economic growth. Chinese property developers also sank after the China Securities Journal reported that the deputy director of the pricing department at the National Development and Reform Commission said that China wouldn't rule out introducing new price control measures if inflationary pressures in Q1 are too great.

Tuesday, January 18, 2011...

Overnight Developments

•   Global stocks are trading higher with the European Euro Stoxx 50 index up +1.03% and at an 8-1/2 month high and March S&Ps up +1.60 points at a fresh contract high. The dollar index slipped to a 1-3/4 month low and most commodities strengthened after Euro-Zone finance ministers pledged to strengthen the safety net for debt-strapped countries. After a meeting with Euro-Zone finance ministers in Brussels yesterday, European Union Economic and Monetary Affairs Commissioner Rehn said, "We shall improve our current existing financial backstops so that the so-called market forces cannot have even the slightest doubt about our capacity to act even in the most stresses scenarios." Also helping to boost European stocks was the larger-than-expected increase in the Jan German ZEW survey of economic sentiment, which rose +11.1 to 15.4, a 6-month high. European bank stocks rallied after Belgium's finance minister pushed for a "common view" on bank stre ss tests with the IMF and said greater transparency in stress tests can be achieved by having "the same criteria in the US and Europe." Undercutting stock market gains was a 4.5% slump in Apple stock in European trading after CEO Jobs announced he would take a leave of absence to focus on his health. The British pound surged to a 1-3/4 month high against the dollar after Dec UK CPI rose more-than-expected and climbed to a 2-year of +3.7% y/y, which fueled speculation that the BOE may need to raise interest rates.


•   The Asian stock markets today closed mostly higher with Japan up +0.15%, Hong Kong -0.01%, China +0.11%, Taiwan +0.70%, Australia +0.81%, Singapore +0.34%, South Korea -0.16%, India +1.11%. Asian technology stocks closed higher and led the broader market with gains after the Nikkei newspaper reported Elpida Memory, the world's third-largest maker of computer memory chips, will raise prices on its dynamic random-access memory chips by 10% as early as this month. China's Ministry of Commerce reported that foreign direct investment in China rose +17.4% y/y in 2010 to a record $105.7 billion, which underscores global confidence in the Chinese economy and puts pressure on the PBOC's policy of restraining yuan appreciation. India's Sensix Stock Index closed higher after Tata Consultancy Services Ltd., India's biggest software services company, posted record profit.

Wednesday, January 19, 2011...

Overnight Developments

•   Global stocks are trading mixed with the European Euro Stoxx 50 index down -0.30% and March S&Ps off by -1.40 points. The dollar index weakened to its lowest level in 1-3/4 months, which has given most commodities a lift. The British pound strengthened against eh dollar after Dec UK jobless claims unexpectedly fell -4,100 to their lowest level in 21 months, while Nov Spain home sales fell -6.2% y/y, their third month of declines. Greek 10-year government bonds fell, which widened the yield spread with German bunds by 24 bp to 856 bp, after Die Zeit newspaper reported that the German government is considering a plan that would help Greece "restructure" its debt. ECB officials are toning down their threat to raise interest rates, saying financial markets have over-reacted to their change in tone on inflation when ECB Council member Nowotny said that ECB President Trichet's CPI statements were interpreted in a "one-sided-way" and that he &quo t;sees present rates adequate" for the "foreseeable future."


•   The Asian stock markets today closed mostly higher with Japan up +0.36%, Hong Kong +1.10%, China +2.26%, Taiwan +1.09%, Australia +0.68%, Singapore -0.23%, South Korea +0.96%, India -0.60%. Asian technology stocks rose after US bellwethers Apple and IBM reported earnings that exceeded analyst expectations. Phoenix Television reported that an unidentified official with the PBOC said economic figures due tomorrow were leaked and will show Dec China CPI rising +4.6% y/y, right on market expectations, and that China's economy grew 10.3% last year, which would exceed market expectations of 10.2% y/y. Jan Australia consumer confidence plunged -6.4 to 104.6, its lowest level in 7 months on concern that flood damage in Queensland state will weaken the country's economy. The worst floods in 50 years in Australia may cost as much as A$20 billion ($19.9 billion), or about 1.5% of GDP, according to the Australia & New Zealand Banking Group Ltd., and prompt the RBA from raisi ng interest rates in the foreseeable future.

Thursday, January 20, 2011...

Overnight Developments

•   Global stocks are trading mostly lower with the European Euro Stoxx 50 index down -0.53% and March S&Ps down -1.00 point. Commodities are lower on concern that further action by China to curb economic growth will hurt demand for raw materials after China's Q4 economic growth quickened to +9.8% q/q from +9.6% q/q in Q3. European automakers are leading the overall market lower with Volkswagen down 3.5% and Fiat down 5.1% amid speculation that further action by China to cool its economy may hurt demand. Fiat was also pressured after JPMorgan Chase downgraded Italy's biggest carmaker to "underweight" from "neutral." EasyJet tumbled 13% and led airline stocks lower after it forecast a first-half loss of as much as 160 million pounds due to surging fuel costs and exchange rate losses. German bund prices fell as inflation concerns increased when Dec German producer prices rose a more-than-expected +0.7% m/m, its biggest gain in 7 months, and als o rose +5.3% y/y, the biggest annual increase in 2 years.


•   The Asian stock markets today closed mostly lower with Japan down -1.13%, Hong Kong -1.70%, China -3.29%, Taiwan -0.70%, Australia -1.05%, Singapore -1.13%, South Korea -0.54%, India +0.36%. China's Shanghai Stock Index tumbled to a 3-1/2 month low after strong Chinese economic data prompted speculation the country will take further measures to slow its economy and curb inflation. Q4 China GDP increased +9.8% q/q, faster than market expectations of +9.4% q/q, and expanded 10.3% for all of 2010, the fastest pace in 3 years. Dec China CPI rose 4.6% y/y and while it slowed from November's +5.1% y/y pace, for 2010 as a whole, consumer pries rose +3.3% y/y, which breached the government's target of +3.0%. Also undercutting Asian stocks was the weaker-than-expected Dec US housing starts data, which raised concern about the sustainability of the US recovery and demand for Asian goods.

Friday, January 21, 2011...

Overnight Developments

•   Global stocks are trading higher with the European Euro Stoxx 50 index up +0.98% at a 9-month high and March S&Ps up +4.50 points. Commodities strengthened and the euro rose to a 1-3/4 month high against the dollar after German business confidence unexpectedly climbed to an all-time high. The Jan German IFO business climate rose +0.5 to 110.3, the highest since records for a reunified Germany began in 1991. Also boosting the euro and helping to lift the Euro Stoxx 50 to a 9-month high was the +6 point increase in the Jan French business indicator to a 2-3/4 year high of 108. Helping to lift US stocks in early trade is the 2.7% increase in GE after the company late yesterday reported Q4 profit from continuing operations of 36 cents a share, beating analysts' estimates of 32 cents. Undercutting the euro and stock gains was the warning from Fitch Ratings that there is a continuing risk that Euro-Zone nations will have their credit ratings downgraded until fisca l consolidation is secured and the economic recovery is broad-based.


•   The Asian stock markets today closed mostly lower with Japan down -1.56%, Hong Kong -0.53%, China +1.32%, Taiwan -0.75%, Australia -0.59%, Singapore -0.65%, South Korea -1.83%, India -0.20%. In its monthly report released today, Japan's Cabinet Office raised its assessment of the Japanese economy for the first time in 7 months, saying the economy is beginning to show signs of a rebound and that industrial production was beginning to bottom out. The Cabinet Office also said Japan is still in a "mild deflationary phase" and the government will work together with the BOJ to put an end to price declines. China's Shanghai Stock Index closed higher, led by a rebound in commodity producers, while South Korea's Kospi Index closed lower after Morgan Stanley downgraded the nation's stocks.

Monday, January 24, 2011...

Overnight Developments

•   Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.03% and March S&Ps down -0.20 of a point. The euro retreated from a 2-month high after ECB President Trichet hinted that a temporary jump in commodity prices would not prompt the central bank into raising interest rates. In an interview with the WSJ, President Trichet said the ECB wouldn't react to a temporary jump in inflation caused by higher commodity prices as long as it doesn't fuel wage increases, or so-called "second-round effects." Crude oil prices fell in overnight electronic trade after Saudi Arabian Oil Minister Ali al-Naimi said OPEC might boost oil supply this year to meet growing demand in China and India. A drop in automakers, led by a 4.1% slide in Porsche, a 2.8% drop in Volkswagen, and a 3.3% fall in Fiat SpA led the overall market lower after BofA Merrill Lynch Research downgraded Fiat to "underperform" from "neutral." Philips sank 6.4% after the company reported Q4 profit of 463 million euros, below analysts' estimates of 513 million-euros. Limiting stock declines was the unexpected increase in the Jan Euro-Zone PMI composite index, which expanded +0.8 to 56.3, a 6-month high.


•   The Asian stock markets today closed mixed with Japan up +0.69%, Hong Kong -0.31%, China -0.98%, Taiwan -0.07%, Australia +0.64%, Singapore +0.04%, South Korea +0.67%, India +0.76%. The Japanese yen weakened and helped Japanese stocks to close higher after an economic policy paper released today in Tokyo said that authorities stand ready to take action on the yen should the nation's currency appreciate and that "We will continue to take bold action when necessary." Also helping to lift Japanese stocks was the 3.8% advance in Honda Motor after Nomura Holdings upgraded its recommendation on he stock to "buy," citing the outlook for earnings from North America. Chinese stocks finished lower, led by declines in bank shares, after the 21st Century Business Herald reported that China's banking regulator will require lenders to "strictly" control growth in loans to local government financing vehicles in 2011 and will hold bank executives account able for any violations.

Tuesday, January 25, 2011...

Overnight Developments

•   Global stocks are trading lower with the European Euro Stoxx 50 index down -0.61% and March S&Ps down -4.40 points. Treasuries advanced and most commodities fell as crude oil slid to a 1-3/4 month low after the UK economy unexpectedly contracted in Q4. The British pound declined to a 1-1/2 week low against the dollar and stock prices were pressured after Q4 UK GDP fell -0.5% q/q, mostly due to the adverse weather in Dec that hampered services and retailing, although the statistics office said growth would have been "flattish" without the weather's impact. Another negative factor for the market is concern that Spanish banks may need more capital after Spain's Finance Minister said his country's banks will probably need no more than 20 billion euros ($27 billion) of capital. Bankinter SA led a sell off in Spanish banks as it fell 4.8%, while Santander SA, Spain's biggest bank, fell 2.8%. Limiting declines in stocks was the unexpected +0.2 increase in the Feb German GfK consumer confidence survey which rose to a 3-year high of 5.7 along with the action by the IMF to raise their forecast for global economic growth this year to 4.4%, up from an Oct forecast of 4.2%. Despite its upward revision to global growth, the IMF warned that risks to its projections remain "elevated" and that Euro-Zone governments should build a comprehensive plan to prevent sovereign-debt "financial stresses" from spreading to other countries.


•   The Asian stock markets today closed mixed with Japan up +1.15%, Hong Kong -0.05%, China -0.53%, Taiwan +0.49%, Australia +0.46%, Singapore -0.14%, South Korea +0.25%, India -0.95%. Japanese stocks rallied after the BOJ raised its growth forecasts for the year to March to 3.3% from 2.1% and BOJ Governor Shirakawa said "The economy will probably emerge from its slump soon and return to a moderate recovery path." Japanese bonds fell as the BOJ also predicted faster inflation as they raised their forecast for consumer prices to increase +0.3% in the year starting April, up from an Oct prediction of +0.1%, citing strength in overseas demand that will bolster exports and push up commodity prices. Stock prices in India closed lower after India's central bank (RBI) lifted the repurchase rate by 25 bp to a 2-year high of 6.50% and the RBI hiked its inflation outlook to 7.0% by March 31, more than its earlier prediction of 5.5%. RBI Governor Subbarao also warned of further interest rate hikes saying "current growth and inflation trends warrant persistence with the anti-inflationary monetary stance."

Wednesday, January 26, 2011...

Overnight Developments

•   Global stocks are trading higher with the European Euro Stoxx 50 index up +1.00% and March S&Ps up +5.50 points. The dollar index slid to a 2-1/2 month low and most commodities gained on speculation the Fed will keep stimulus measures intact when it concludes its 2-day policy meeting today. US stock prices rose after President Obama in Tuesday night's State of the Union speech vowed to create jobs and spur growth. Treasuries weakened as stocks rallied and bund prices were also pressured after Dec German import prices surged +12.0% y/y, the fastest annual pace in 29 years. European automakers are leading stock gains with Porsche SE up over 5% after it reported unit sales in China rose 63% to a record, while Renault SA climbed 3.3% after Barclays Plc boosted its recommendation on the company. The British pound rose against the dollar after BOE policy maker Weale joined fellow policy maker Sentance in voting for a 25 bp interest rate increase this month. In th e minutes of the Jan 13 BOE policy meeting, the BOE voted 6-2-1 to maintain policy at current levels, although officials said the balance of risks to inflation had moved "upwards." England's inflation rate as a whole has exceeded the central bank's 2.0% target for more than a year and BOE Governor King forecast yesterday that the inflation rate may rise above 4.0% in the coming months due to higher commodity prices and an increase in the sales tax.


•   The Asian stock markets today closed mostly higher with Japan down -0.60%, Hong Kong +0.23%, China +1.35%, Taiwan +0.71%, Australia closed for holiday, Singapore +1.25%, South Korea +1.32%, India closed for holiday. Japanese stocks closed lower as a drop in commodity prices weakened raw materials and energy producers, while a stronger yen undercut exporters. Strong earnings results are underpinning most Asian markets as earnings have grown at 44 of the 61 companies in the MSCI Asia Pacific Index that reported results since Jan 10. In an attempt to control soaring real estate prices, China's State Council set the minimum down payment for second home purchases at 60% and Fitch Ratings warned that inflation in China could hinder Asia's economic growth and damage the ratings outlook for countries in the region this year as China battles "hot money inflows" and consumer prices that are near multi-year highs.

Thursday, January 27, 2011...

Overnight Developments

•   Global stocks are trading mostly higher with the European Euro Stoxx 50 index up +0.14% and March S&Ps down -0.10 of a point. The dollar index relinquished early gains and sank to a 2-1/2 month low and European and US stocks fluctuated after Standard & Poor's downgraded Japan's sovereign credit rating for the first time since 2002. S&P also said that it sees Spain, Ireland, Greece and Portugal "stuck in recession," as it forecasted a "three-speed recovery" in Western European economies, with Germany and Finland growing the fastest. The 10-year German bund yield jumped to a 9-1/2 month high and the euro rebounded from losses and rose to a 2-month high against the dollar after ECB Council member Bini Smaghi said policy makers in advanced economies "can no longer afford" to ignore imported inflation. European stocks maintained slight gains, despite the plethora of negative news, on carry-over support from the Fed's actions ye sterday to maintain its stimulus plans. Mining companies and raw material producers rallied as metals prices climbed, while the Jan Euro-Zone business climate indicator rose a larger-than-expected +0.20 to 1.58, the highest level since data began in 1985.


•   The Asian stock markets today closed mixed with Japan up +0.74%, Hong Kong -0.27%, China +1.61%, Taiwan +0.52%, Australia -0.04%, Singapore -0.03%, South Korea +0.14%, India -1.50%. The Japanese yen fell to a 2-week low against the dollar after Standard & Poor's cut Japan's credit rating one step to AA-, with a stable outlook, saying the government lacks a "coherent strategy" to address a 943 trillion yen ($11 trillion) debt burden, the world's largest. Asian stocks held gains after the Fed maintained efforts to stimulate the US economy and US new home sales topped forecasts, which bolstered confidence in a global recovery. Saying rising real-estate prices are the "biggest danger," Li Daokui, academic advisor to the PBOC, said that China needs to extend interest-rate increases and allow the yuan to gain by about 5.0% annually to combat inflation and avoid fueling asset bubbles. Australian stocks closed slightly lower after Prime Minister Gilla rd said the government would apply a one-off levy to most income earners from July 1 to fund rebuilding after major floods decimated Queensland state.

Friday, January 28, 2011...

Overnight Developments

•   Global stocks are trading mixed with the European Euro Stoxx 50 index down -0.02% and March S&Ps unchanged. The dollar and Treasuries are weaker after Treasury Secretary Geithner said the US fiscal situation is "unsustainable" in the long run and Moody's Investors Service said its timeframe for possibly placing a negative outlook on the Aaa rating of US government bonds is shortening as the deficit widens. Leading losses in European stocks is weakness in mining companies with BHP Billiton down 2% and Rio Tinto down 1.5% after European basic-resource stocks were downgraded to "neutral" from "buy" at Royal Bank of Scotland Group Plc. Also undercutting stock prices was the larger-than-expected decline in Jan UK GfK consumer confidence which plunged -8 points to a 22-month low of -29 after UK Prime Minister Cameron raised the value-added tax this month to 20% from 17.5% and hurt consumers' appetite for spending. Limiting losses in eq uity markets is the gain in Bayerische Motoren Werke AG (BMW), which advanced 2.5% after the stock was added to Goldman Sachs Group's "conviction buy" list.


•   The Asian stock markets today closed mixed with Japan down -1.13%, Hong Kong -0.68%, China +0.34%, Taiwan +0.47%, Australia -0.65%, Singapore +0.31%, South Korea -0.27%, India -1.54%. Japanese stocks closed lower, led by a sell-off in bank stocks, after Japan had its credit rating cut to AA-, which is negative for banks that hold government bonds. Consumer spending in Japan also weakened after Dec Japan overall household spending plunged -3.3% y/y, its biggest decline in 1-3/4 years. Japanese stocks fell despite the unexpected -0.2 point drop in Dec Japan jobless rate to 4.9%, the lowest in 10 months. A rally in Asian semiconductor stocks limited declines in Asia-Pacific markets after Hynix Semiconductor, the world's second-largest maker of computer-memory chips, rose 5.4% after Mirae Asset Securities and Meritz Securities raised their share-price estimates on the stock, citing an expected price recovery in computer-memory chips.

Monday, January 31, 2011...

Overnight Developments

•   Global stocks are trading mostly lower with the European Euro Stoxx 50 index down -0.53% and March S&Ps up +1.60 points. The dollar and Treasuries are weaker as the US stock market recovers slightly, despite the continuing civil unrest in Egypt, which has prompted the closure of banks and the stock market there for a second day. European banks are leading stocks lower in Europe after the BIS reported that international banks have lent $49.3 billion to Egyptian lenders, with European banks having the most exposure with $40.3 billion of loans outstanding. European travel companies and airlines also declined on concern that earnings at those companies will fall because of political instability in Egypt. Weakness in Dec German retail sales is another negative for the market after sales unexpectedly fell -0.3% m/m, the second month of declines. German bund prices also weakened after the Jan Euro-Zone CPI estimate rose +2.4% y/y, more than expected and a 2-1/4 yea r high.


•   The Asian stock markets today closed mostly lower with Japan down -1.18%, Hong Kong -0.72%, China +1.31%, Australia -0.44%, Singapore -1.55%, South Korea -1.91%, India -0.37%. Japan's Nikkei 225 Stock Index tumbled to a 1-1/2 month low as the Egyptian crisis undercuts the earnings potential of Japanese companies doing business there. Nissan Motor closed 2.2% lower after closing its factory in Egypt, while Chiyoda, a Japanese engineering company that counts the Middle East as its main market by sales, fell 2.5%. Japanese stocks fell despite industrial production rising more than expected. Dec Japan industrial production climbed +3.1% m/m, the largest increase in 11 months, driven by higher output in the transport equipment and electronic parts industries. Japanese industrial output gained +15.9% for all of 2010, the first increase in 3 years, led by strong demand from the US and China.

Tuesday, February 1, 2011...

Global stocks are trading higher with the European Euro Stoxx 50 index up +0.93% and March S&Ps up +6.40 points. The dollar index fell to a 2-1/2 month low and copper soared to a record on the outlook for global economic growth. The crisis continues in Egypt with its stock market closed again today and for the rest of the week, although concerns eased somewhat after the Egyptian military said it wouldn't fire on anti-government demonstrators as it recognized "the legitimacy of the people's demands." German unemployment in Jan fell -13,000, more than expected, to 3.135 million, the lowest in 18 years as the jobless rate slipped -0.1 to 7.4%. Unemployment in the Euro-Zone also declined after the Dec Euro-Zone unemployment rate slipped -0.1 to 10.0%. All of the Jan European PMI manufacturing indexes were unexpectedly revised higher with the Jan Euro-Zone PMI manufacturing index revised up +0.4 to 57.3, a 9-month high. Inflation concerns helped to boo st the euro to a 2-1/4 month high against the dollar after Dec French producer prices rose +5.4% y/y, more-than-expected and a 2-1/4 year high.


The Asian stock markets today closed mostly higher with Japan up +0.36%, Hong Kong +0.15%, China +0.03%, Australia -0.04%, Sngapore +0.16%, South Korea +0.12%, India -1.67%. The Jan China PMI manufacturing index slipped -1.0 point to 52.9 as it remains above the 50.0 level and continues to show expansion, while Jan China home prices rose +1.0% m/m, the biggest month-on-month gain in 6 months, according to SouFun Holdings. Asian mining companies rallied as copper posted a record high and commodity producers also gained on optimism that further economic growth would boost demand for raw materials. In Japan, the yen rallied to a 4-week high against the dollar and Honda Motor closed 2.0% higher after forecasting net income of 530 billion yen ($6.5 billion) in the year ending Mar 31, compared with an earlier estimate of 500 billion yen. The Australian dollar strengthened above parity with the US dollar after Australia's central bank refrained from raising interest rates a nd RBA Governor Stevens characterized the outlook for the world economy as "strong going into 2011" and said it will "look through" the near-term impact on growth and prices of flooding across Australia's east coast.

Wednesday, February 2, 2011...

Overnight Developments

•   Global stocks are trading mostly higher with the European Euro Stoxx 50 index up +0.48% at a 9-1/2 month high and March S&Ps down -0.20 of a point. The dollar index slumped to a 2-3/4 month low and most commodities are higher with copper posting yet another record high. Concerns that the political turmoil in the Middle East will spread eased as Egyptian President Mubarak said he wouldn't seek a new term. The euro rose to a 2-3/4 month high against the dollar and bond-risk premiums for Spain, Portugal, Italy and Belgium narrowed for a third day on speculation that a summit this Friday in Brussels by European leaders will lead to stronger efforts to end the sovereign-debt crisis. European Union President Rompuy said that leaders will set out a "clear path" to forging a "comprehensive package" to stamp out the debt crisis by the end of March. An increase in inflation pressures is also boosting her euro after Dec Euro-Zone PPI rose more than expected at +5.3% y/y, its biggest annual increase in 2 years.


•   The Asian stock markets today closed mostly higher with Japan up +1.78%, Australia +0.93%, India +0.38%. Stock markets in China, Hong Kong, South Korea and Singapore are shut from today for the Lunar New Year. The Asian stock markets that were open rallied on upbeat earnings results along with strength in the US manufacturing sector that boosts confidence in the global economic recovery. BOJ board member Kamezaki said today that Japan's economic slowdown is probably temporary and is showing signs of picking up due to growing exports and a weaker yen. He also added that any rebound in Japan's growth probably wouldn't be strong because companies and households remain unwilling to spend "actively" because of uncertainties over the outlook.

Thursday, February 3, 2011...

Overnight Developments

•   Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.36% and March S&Ps down -1.50 points. The dollar strengthened and crude oil rallied after protests in Egypt turned violent and unrest spread to Yemen with tens of thousands of Yemeni pro- and anti-government protesters flooding the capital city of Sanaa. The euro weakened ahead of the conclusion of this morning's ECB meeting and after retail sales in the Euro-Zone unexpectedly declined for a second month in December. The Dec Euro-Zone retail sales fell -0.6% m/m and -0.9% y/y, much weaker than expectations of +0.5% m/m and +0.2% y/y, with the -0.9% drop the biggest year-over-year decline in 13 months. The British pound climbed to a 2-3/4 month high after the Jan UK PMI services index increased a more than expected +4.8 to an 8-month high of 54.5, which bolstered speculation the BOE has room to raise interest rates this year. Limiting losses in European stocks and helping send copp er prices to a record high of $4.5800 a pound was the unexpected +0.7 point upward revision to the Jan Euro-Zone PMI composite index to a 9-month high of 57.0.


•   The Asian stock markets today closed mixed with Japan down -0.25%, Australia +0.50%, India +1.98%. The rest of the Asian-Pacific markets remained closed for the Lunar New Year holiday. Japanese stocks closed lower as company earnings missed estimates and violence flared among protesters in Egypt's 10th day of unrest. Panasonic, the world's largest maker of plasma televisions, fell 3.2% after it reported Q3 net income of 40 billion yen ($491 million), missing analysts' estimates of 44.7 billion yen. Australian stocks closed higher, led by gains in raw material and energy producers, after crude oil gained on violence in Egypt and copper climbed to a record high. Sugar prices remained near a 30-year high after Tropical Cyclone Yasi severely damaged sugar cane plantations in Australia, while Chinese Premier Wen Jiabao said a drought in China may cut grain output and undermine government efforts to stabilize prices.

Friday, February 4, 2011...

Overnight Developments

•   Global stocks are trading higher with the European Euro Stoxx 50 index up +0.25% and March S&Ps up +0.60 of a point. The dollar and Treasuries are little changed and stock prices are fluctuating ahead of the release of the Jan US payrolls report later this morning. The cost of insuring European sovereign debt fell as Euro-Zone leaders are meeting in Brussels today to discuss solutions to the region's debt crisis. A rally in European bank stocks is leading the overall market higher today with UniCredit, Italy's largest bank, up 2.8% and Barclays Plc, the UK's third-biggest, up 2.0% after Goldman Sachs Group upgraded European banks to "overweight." The euro weakened and expectations for ECB interest rate increases were pushed back after Austria's Der Standard newspaper reported that ECB Council member Nowotny said "The ECB anticipates 1.8% inflation" next year. Although the ECB isn't supposed to publish its 2012 inflation forecast until nex t month, Nowotny's comments suggest the ECB still expects inflation to fall back below its 2.0% limit over its policy-relevant time horizon, which reduces pressure on the central bank to increase interest rates.


•   The Asian stock markets today closed mostly higher with Japan up +1.08%, Australia +0.87%, India -2.39%. The rest of he Asia-Pacific markets remain closed for the Lunar New Year holiday. Better-than-expected earnings results pushed Japanese stocks higher with Sony closing up 1.8% after it reported Q3 profit of 72.3 billion yen ($886 million), beating analysts' estimates of 65.9 billion yen. Softbank Corp., the exclusive provider of Apple's iPhone in Japan, gained 3.6% after it raised its profit forecast and Nippon Steel, Japan's largest steelmaker, jumped 9.1% on plans to combine with Sumitomo Metal Industries Ltd., which surged 16%. India's Sensitive Stock Index finished sharply lower after Prime Minister Singh said inflation posed a "serious threat" to growth, which ramped up expectations for further interest rate increases from the RBI.