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• The European DJ Stoxx 50 this morning is trading -0.53% as HSBC Holdings Plc helped to lead European financial companies lower after Europe's biggest bank said first-half profit declined 29% as it set aside more money for bad loans in the US. Also hurting European share prices this morning was the +8.0% y/y rise in Jun Euro-Zone producer prices to the highest level since the series began in Oct 1983 and the greater-than-expected decline in Aug Euro-Zone Sentix investor confidence to a 5-year low of -15.3. Asia-Pacific stocks today closed lower: Japan -1.23%, Hong Kong -1.52%, China -2.38%, Taiwan -0.36%, Australia -0.33%, Singapore -1.03%, South Korea -1.92%, Bombay -0.54%.
• Market focus - The markets this week will focus on (1) the US stock market which closed little changed last week as a weaker-than-expected Q2 GDP (+1.9%) and contracting nonfarm payrolls (-51,000) for the seventh straight month were offset by an unexpected climb in US consumer confidence in July (+0.9 to 51.9) and generally better-than-expected Q2 earnings, (2) the T-note market which closed last Friday at a 2-week high ahead of tomorrow’s FOMC meeting and this week’s Aug refunding of $27 billion in 10-year T-notes and 30-year T-bonds, (3) the dollar which has grinded higher the past 3-weeks on concerns of weakening European growth, (4) crude oil which gained just over $1.50 a barrel last week on rekindled concerns of an Israeli attack on Iran’s nuclear sites, and (5) the continued heavy slate of earnings reports this week.
• US calendar - On this week’s US economic calendar, today brings the June personal income and consumption reports (expected –0.2% and +0.5%, respectively), the June core PCE deflator (expected +2.2% y/y vs +2.1% in May), and June factory orders (expected +0.7%). Tuesday brings the FOMC meeting and the July ISM non-manufacturing index (expected –0.2 to 48.0). Wednesday brings the $17 billion 10-year T-note auction. Thursday brings unemployment claims (expected –35,000), Jun pending home sales (expected –1.0% m/m), the Treasury’s $10 billion 30-year T-bond auction, July monthly chain store sales, and June consumer credit (expected +$6.4 billion). Friday brings Q2 non-farm productivity (expected +2.6%) and June wholesale inventories (expected +0.6%).
• Fed policy – Market expectations last week for Fed tightening in 2009 were little changed after Friday’s unemployment report. The market is currently discounting the chances for a 25 bp rate hike at tomorrow’s FOMC meeting at only about 10% and at about 18% for the next FOMC meeting on September 11. The Fed is obviously alarmed about the inflation situation but cannot afford to raise interest rates until the banking system crisis settles down and until the housing crisis stabilizes. The market is fully discounting a 25 bp rate hike to 2.25% by January 2009, a 50 bp rate hike by May 2009, and a 75 bp rate hike by June 2009.

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• September S&Ps this morning are trading -2.80 as the US equity market follows declines today in Asia and Europe. The US stock market last Friday couldn't hold onto early gains and closed lower (Dow -0.45%, S&P 500 -0.56%, Nasdaq Composite -0.63%).
• Bearish factors for stock prices last Friday included (1) the larger-than-expected rise in the Jul unemployment rate to a 4-1/4 year high, (2) the +$1.02 a barrel rally in crude oil on rekindled concerns of an Israeli attack on Iran's nuclear sites, (3) the 7.6% drop in GM after the largest US automaker said they lost $15.5 billion in Q2 for their fourth straight quarterly loss on plunging domestic sales, and (4) concerns the US economic slowdown is deepening as US Jul domestic vehicle sales fell to a 21-1/2 year low of 9.1 million units and total US Jul vehicle sales fell to a 16-year low of 12.5 million units. 
• Bullish factors for stock prices last Friday included (1) the smaller-than-expected decline in Jul nonfarm payrolls, (2) the small-than-expected decline in the Jul ISM manufacturing index, and (3) th 7.4% jump in Lehman Brothers after CNBC reported the brokerage firm is in talks to sell mortgages and collateralized debt obligations (CDOs) to Blackrock.
• HSBC Holdings Plc is trading 2% lower this morning after Europe's biggest bank said first-half profit declined 29% as it set aside more money for bad loans in the US.
• Chicago Bridge & Iron (CBI) may be active this morning after a weekend article in Barron's said the company may rise to $75 a share within the next five years because of higher spending on energy infrastructure.
• Union Pacific (UNP) and Canadian National Railway (CNI) may be active to the upside today after a Barron's article suggested that rising energy prices may increase train travel for goods and people.

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• September 10-year T-notes this morning are trading +2.5 ticks as the T-note market finds support today from weaker global equity markets. September T-note prices last Friday closed +6.5 ticks at a 2-week high. Bullish factors for T-note prices last Friday included (1) the larger-than-expected increase in the Jul unemployment rate (+0.2 to a 4-1/4 year high of 5.7% versus expectations of +0.1 to 5.6%), and (2) a flight-to-quality as the stock market sold-off. Bearish factors for T-note prices last Friday included (1) the better-than-expected Jul nonfarm payrolls (-51,000 versus expectations of -75,000), and (2) the smaller-than-expected decline in the Jul ISM manufacturing index (-0.2 to 50.0 versus expectations of -1.2 to 49.0).
• The dollar index is trading slightly lower this morning with the dollar/yen +0.27 yen and the euro/dollar +0.28 cents. The dollar index last Friday closed higher. Bullish factors for the dollar last Friday included (1) the stronger thn expected Jul nonfarm payrolls, (2) the smaller-than-expected decline in the Jul ISM manufacturing index, and (3) the much-weaker-than-expected decline in Jun German retail sales. Bearish factors for the dollar last Friday included (1) the larger-than-expected rise in the the US Jul unemployment rate to a 4-1/4 year high, and (2) the rally in crude oil on fears of escalating tensions in the Middle East over Iran's nuclear ambitions. 
• September crude oil prices this morning are trading -6 cents a barrel and September gasoline is trading +0.57 cents a gallon. Crude oil prices are seeing support today from the threat of Tropical Storm Edouard which has formed in the Gulf of Mexico and may strengthen into a hurricane later today as it heads west toward Texas. September crude oil prices last Friday overcame early weakness and closed +$1.02 a barrel and September gasoline closed +1.34 cents a gallon. Bullish factors for crude oil prices last Friday included (1) comments from Israeli Deputy Prime Minister Mofaz that Iran is on a path toward a "major breakthrough" in its "unacceptable" nuclear weapons program, raising concern Israel may attack Iran's nuclear sites, and (2) the comment from Iranian President Ahmadinejad that Iran will "resist with force" any outside efforts to slow its nuclear program. Bearish factors for crude oil prices last Friday included (1) possible lessening of crude oil demand in China after Chinese manufacturing contracted below the 50 level for the first time since its survey of purchasing managers began in 2005 (-3.6 to 48.4 in Jul), and (2) concerns the US economy is weakening further as Jul nonfarm payrolls fell for the seventh straight month and the US unemployment rate rose to a 4-1/4 year high.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): APC-Anadarko Petroleum (BEST earnings consensus $1.77 per share), DISH-Dish Network (0.60), PFG-Principle Financial (0.96), HCP-HCP (0.20), HUM-Humana (1.18), ICE-IntercontinentalExchange (1.18), PBI-Pitney Bowes (0.67), DVA-Davita (0.83), MDU-MDU Resource Group (0.57), SBAC-SBA Communications Corp. (-0.12), NU-Northeast Utilities (0.35), CHD-Church & Dwight (0.63), UDR-UDR (-0.15), MCY-Mercury General (0.98), SM-St. Mary Land & Exploration (1.28), HE-Hawaiian Elecrtic (0.41), GAS-Nicor (0.28), WGL-WGL Holdings (0.14), HMA-Health Management Associates (0.11), HR-Healthcare Realty Trust (0.12), BDE-Bois dArc Energy (0.73), GWR-Genesee & Wyoming (0.44), PPS-Post Properties (-0.03), HL-Hecla Mining (0.05), ACC-American Canpus Communities (0.33), BAS-Basic Energy Services (0.50), SVR-Syniverse Holdings (0.37)

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