Trade The News Market Internals Update at 12:00ET

Dow -118 S&P -12 NASDAQ -15

***Economic Data***

– (IC) Iceland Aug Unemployment Rate: 6.7% v 6.6% prior
– (PD) Poland Current Account: -€1.6B v -€1.6Be; Trade Balance: -€1.2B v -€1.1Be
– (MX) Mexico July Industrial Production M/M: +0.5% v -0.6% prior; Y/Y: 3.2% v 3.6%e
– (MX) Mexico Jun Gross Fixed Investment: 11.6% v 9.1% prior
– (EU) ECB completed €14.0B in weekly settlements vs. €13.3B prior in its Gov’t Bond Buying program (SMP); To drain €143.0B in next 7-day Term Deposit Tender vs. €115.5B prior

– Asian and European markets swooned on a fresh round of downgrade rumors in Monday trading, triggered this time by reports that Moody’s could imminently downgrade French banks due to Greece exposure. European official rhetoric has responded by asserting that the French banking sector has no liquidity or solvency problems. With little other major news or data in headlines and Greek peripheral spreads popping out to fresh record highs, markets reacted in a predictable manner. Calming rhetoric from ECB Chief Trichet helped tamp down some of the risk aversion, although traders remain risk averse in the US session. Spot gold has not moved too much on the morning’s headlines and remains well below Friday’s levels at around $1,835. Bund futures continue to push higher, pressing yield to another new all-time low below 1.75%.

– With European banks in the hot seat again this week, major US banking names traded off in the premarket this morning. No drastically bad stories are in headlines for US banks, although regulators continue to keep the pressure up. There are reports that the Fed was said to have asked Capital One to consider whether the proposed acquisition of ING’s US online banking business would create a “too big to fail” bank. COF’s response was said to be “we are not engaged in the kind or level of activities that raise the systemic risk issues that the Dodd-Frank Act sought to address.” In other news, JPMorgan CEO Dimon is making waves, after reports that he said the US should consider pulling out of Basel accord because the new capital rules are “anti-American.”

– In deal news, McGraw Hill said that it plans to separate into two separate traded companies, and also launched a big new share buyback program. The move to reorganize the firm was called for by activist investors last month in a meeting with McGraw-Hill directors. Neither firm details nor timing on the breakup were disclosed. Broadcom said that it had a deal to acquire NetLogic for $50/share, in a total deal valued at $3.7B. Broadcom sees the deal as accretive by $0.10 to FY12 EPS. The buy should expand Broadcom’s lineup of chips used in wireless network equipment. Shares of BRCM fell up to 4% in early trading and remain in the red this morning; NetLogic competitor CAVM is up 6%.

– The greenback retraced its earlier gains against the European pairs in what dealers labeled a position covering rally based on earlier risk aversion concerns. After the French banks got hammered, Trichet stated that central bankers stood ready to provide unlimited liquidity to the banking sector, which allayed fears of systemic risk should the euro zone situation unravel further. European officials continued to offer optimism that the Troika review of Greece will provide the release of the next schedule tranche. EUR/USD did meet some good offers ahead of the 1.37 handle and drifted down to 1.3625 by the mid-NY morning.

***Looking Ahead***

– (PE) Peru July Trade Balance: No est v $886.2M prior
– 11:30 (US) Treasury to sell $29.0B in 3-Month and $27.0B in 6-month Bills
– 12:00 (IC) Iceland Aug International Reserves (ISK): No est v 854.8B prior
– 13:00 (US) Treasury to sell $32B in 3-Year Notes
– 16:00 (US) Fed’s Fisher speaks on Monetary Policy in Dallas

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