Trade the News Market Internals Update at 15:30ET

Dow -67 S&P -9 NASDAQ -18

***Economic Data***

– (PE) Peru July Consumer Price Index M/M: 0.8% v 0.3%e v 0.1% prior; Y/Y: 2.9%e v 2.9% prior; Wholesale Prices M/M: 0.3% v 0.3% prior
– (CZ) Czech July Budget Balance (CZK): -61.1B v -62.9B prior
– (BR) Brazil July PMI Manufacturing: 47.8 v 49.0 prior
– (BR) Brazil July Trade Balance: $3.1B v $3.9Be
– (US) Jun Construction Spending M/M: +0.2% v +0.1%e
– (MX) Mexico Jun Remittances: $2.0B v $2.0Be v $2.2B prior
– (US) July ISM Manufacturing: 50.9 v 54.5e; ISM Prices Paid: 59.0 v 64.0e

Fixed Income:

– (FR) France Debt Agency (AFT) sold approx €8.5B vs. €8.5B in 3-month, 6-month and 12-month Bills
– (EU) ECB completed €0.0M (nil) in settlements in its Gov’t Bond Purchase program; to drain €74.0B in next 7-day Term-Deposit Tender

– European and Asian equity markets made solid gains on news that a provisional deal had been reached in Washington to raise the debt ceiling and cut spending. US futures gained hand-in-hand with overseas markets, however markets began to slide from the bell, with US and European equities back in the red within 30 minutes of the open. The July ISM Manufacturing index skidded to 50.9, its lowest level since July 2009 and just a hair above contraction, reflecting the impact of the economic soft patch in the United States. The new orders sub index dipped into contraction territory. The ISM’s Holcomb warned that the debt limit debate was a main concern within the survey. Rating agency Moody’s had no comment on current developments on the debt ceiling issue, simply reiterating earlier comments from Friday, to the effect that an extended debate over the debt ceiling was increasing the likelihood of ratings action. Spot gold has reversed its earlier losses to move back above the $1,625/oz level. US Treasury prices continue to rally as traders have shifted focus to the soft data from Friday and today. The curve has flattened noticeably with the 2-10 year spread back below 240 basis points with the benchmark US 10-yield has dropped back below 2.75%. European peripheral spreads are blowing out into the equity close. Spanish 10-year paper now yields 6.16% ahead of auctions scheduled for tomorrow.

– Earnings in focus this morning include second quarter results from property insurer Allstate and healthcare insurance name Humana. Quarterly losses at Allstate were lower than expected, despite the more than giant $2B in catastrophe losses racked up in the spring quarter. However revenue also crushed expectations and grew strongly over 2010 levels. Additionally, Allstate said it had cancelled an agreement with Discover for the latter to purchase substantially all of the deposits of Allstate Bank. Humana’s profit beat expectations (ex reserve items) and the firm also raised its FY11 expectations. ALL is up 2%, while HUM has fallen 2%. In deal news, Peabody and ArcelorMittal took their A$15.66/shr offer MacArthur Coal directly to shareholders. Earlier in the session there had been unconfirmed reports that the two companies would be willing to boost their offer to A$16/shr. Recall that back in 2010, Macarthur rejected a bid from Peabody worth approx A$15/share. PAETEC agreed to be acquired by Windstream in an all-stock transaction valued at approximately $2.3B.

– With risk appetite melting away quickly during the US session, the Swiss Franc continues to hit fresh all-time highs against dollar, pound and euro pairs as European bourses retreat into negative territory. The weaker ISM Manufacturing data only added to the risk aversion sentiment, the USD/JPY also hitting fresh all-time lows as it tested below 76.43 below the former all-time low achieved on March 18th in the aftermath of the 9.0 earthquake and resulting Tsunami in Japan.

***Looking Ahead***

– 11:30 (US) Treasury to sell $27B in 3-Month and $24B in 6-Month Bills
– 12:00 (IT) Italy July New Car Registrations Y/Y: No est v -1.7% prior
– 13:00 (IT) Italy July Budget Balance: No est v €1.3B; Budget Balance YTD: No est v -€43.5B prior
– 14:00 (US) Possible US Senate vote on Debt-hike Bill; House vote like at some point afterwards (could be Tuesday)
– 18:00 (SA) South Africa Mines Min speaks on Mine Nationalization
– (AU) Australia Central Bank (RBA) Interest Rate decision

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