Trade the News

Dow +239 S&P +27.9 NASDAQ +65

***Economic Data***

– (SA) South Africa Jun Manufacturing Production M/M: 0.6% v 0.4%e; Y/Y: 0.9% v 0.4%e
– (PD) Poland Jun Current Account: -€1.6B v -€1.4Be; Trade Balance: -€1.1B v -€835Me
– (BR) Brazil Jun Retail Sales M/M: 0.2% v 0.0%e; Y/Y: 7.1% v 6.4%e; Broad Retail Sales Y/Y: % v 12.8% prior
– (CA) Canada Jun New Housing Price Index M/M: 0.3% v 0.3%e; Y/Y: 2.1% v 2.1%e
– (CA) Canada Jun Int’l Merchandise Trade: -C$1.6B v -C$0.8Be
– (US) Jun Trade Balance: -$53.1B v -$48.0Be
– (US) Initial Jobless Claims: 395K v 405Ke; Continuing Claims: 3.688M v 3.725Me
– (MX) Mexico Jun Industrial Production M/M: -0.6% v +1.1% prior; Y/Y: 3.7% v 4.2%e
– (US) Weekly EIA Natural Gas Inventories:+25 bcf vs. +31 bcf to +40 bcf expected range

– Extreme volatility remains the order of the day as European indices swing from big gains to substantial losses and back again. Markets renewed their assault on French banks again this morning, prompted by rumors that Asian banks were cutting lines of credit to the French. In Switzerland, there were reports that the SNB was looking at the potential to peg the Swiss Franc to the Euro. Then just before the US open there was news that French President Sarkozy and German Chancellor Merkel would meet next week to discuss further reforms of the European fiscal apparatus. US markets jumped higher from the open, however the astonishing volumes seen in recent sessions have fallen off, and some analysts have expressed concern that gold is pulling back less than desired, indicating continued caution. Spot gold was around $1,790 before the open, and has fallen to around $1,760 in early trading. In data, initial jobless claims ducked below the key 400K level, while ag futures are surging after the USDA’s World Agricultural Supply and Demand report lowered 2011-12 forecasts for US wheat and corn crops. Bund and Treasury yields are rising in the context of risk on trades. The German 10-year yield has climbed back to 2.3% while the US benchmark is above 2.2%. The US long bond has retaken 3.6% ahead of this afternoon’s auction.

– Cisco moderately exceeded very soft expectations in its Q4 report, much as it has done for the last several quarters. The firm managed to impress markets by not totally flubbing its guidance for Q1, forecasting revenue would rise 1-4% versus the 2% gain expected. Margins at the firm are still under pressure, however, and CEO Chambers warned that comparisons for Q1 would be tough. In addition, he said that weak public sector spending would continue for a few more quarters. Multiple analysts upgraded Cisco to a buy this morning. CSCO is up nearly 18% on the news, while small competitor Juniper Networks is up almost 8%. In other earnings news, News Corp beat top- and bottom-line expectations and hiked its dividend by 27%. CEO Murdoch conceded that while it was a good quarter from a financial point of view, his company has faced “challenges” in “recent weeks” relating to the News of the World. NWSA is up 15%. Retailer Kohl’s met expectations and tweaked its FY11 guidance higher. KSS is up 8%. Sara Lee was right in line in its Q4, however its initial look at FY12 was much softer than expected. SLE is down 3%.

– In FX, EUR/USD tested the 1.4105 level in the wake of the French bank rumors then went back above 1.42 area following the Sarkozy/Merkel summit news. The CHF was broadly weaker throughout the NY morning on chatter that the ECB and SNB would get together and create a EUR/CHF band. Dealers commented that a EUR/CHF parity peg is already in the works with a level of 1.1500 speculated. Both the SNB and the ECB have declined comment on the rumors. USD/CHF probed towards 0.77 while the EUR/CHF surged over 600 pips to test 1.09.

***Looking Ahead***

– 13:00 (US) Treasury to sell $16B in 30-Year Bonds
– 19:00 (PE) Peru Central Bank Interest Rate Decision: Expected to leave the Reference Rate unchanged at 4.25%

This information was brought to you courtesy of TradetheNews.com, for your free trial Click Here