Market Preview - 13 July 2012; Italian bond auction on tap

Forex Overnight: EUR trading almost flat
The EUR is trading unchanged against most of its major peers ahead of the outcome of the Italian bond auction slated later in the day. Meanwhile, Moody's Investors Service (Moody’s) has downgraded Italy’s government bond rating by two notches to “Baa2” from “A3”. At 5 am GMT, the EUR is trading marginally higher against the USD at $1.2209 while it is trading flat against the GBP at £0.7911.
The AUD has climbed 0.3 percent against the USD after data released earlier today indicated that the Chinese economic growth in the second quarter of 2012 was broadly in line with market consensus.
The JPY has advanced marginally against the USD while it has declined marginally against the EUR.

UK Stocks: Expected to open firmer
The FTSE 100 is likely to open 27 points in positive territory.
No major economic indicators are scheduled for release today.
Electrocomponents, Arden Partners, Turbotec Products, Fletcher King and Nakama Group are scheduled to announce their results today.
According to Bloomberg, HSBC Holdings’s North American head, Irene Dorner and Global Legal Chief, Stuart Levey, are likely to face questions from Senate over the company’s failure to protect against money laundering.
BP has agreed to pay $13.0 million as a settlement for safety violations at its Texas City refinery which witnessed an explosion in 2005.
The Financial Times has reported that Lloyds Banking Group is on the verge of selling over 600 branches to the Co-operative Group at a steep discount to the previously quoted £1.5 billion price.

Asia: Trading mostly in the green
Asian markets are trading mostly higher this morning after data indicated that the Chinese economic growth in the second quarter was broadly in line with market expectations.
In Japan, Renown has rallied after it reported a significant rise in its operating profit for the March-May quarter. IHI Corporation and Sojitz Corporation have risen amid news that both the companies are planning to acquire foreign firms on the back of a shale gas boom. On the contrary, Nippon Yusen KK, Kawasaki Kisen Kaisha and Mitsui OSK Lines have recorded losses following a decline in cargo rates. Dentsu has slumped after it agreed to acquire UK-based Aegis Group Plc for a consideration of £3.2 billion. At 5 am GMT, the Nikkei 225 index has jumped 0.1 percent to trade at 8,732.5.
In South Korea, Hyundai Heavy Industries has lost value after a broker lowered its target price on the stock. In Hong Kong, Belle International Holdings has advanced after it reported robust second quarter sales. Banks, Industrial & Commercial Bank of China, Bank of China and China Construction Bank have registered gains. In China, Jiangxi Copper is trading lower after data indicated that Chinese economy expanded at the slowest pace in three years.

US Stocks: Futures trading firmer
At 5 am GMT, S&P 500 futures are trading 4.2 points in the green.
Reuters/Michigan Consumer Confidence Index and Producer Price Index are the key economic indicators scheduled for release today.
JPMorgan Chase & Company, Wells Fargo & Company, Webster Financial Corporation, iGATE Corporation and Websense are scheduled to release their results today.
Acme Packet surged 6.3 percent in after hours trading session yesterday after it stated that its board has authorised share buyback up to $200.0 million over the next year. Christopher & Banks climbed 2.8 percent after it stated that it has signed a five-year line of credit of about $50.0 million. Resources Connection advanced 4.3 percent on the back of better-than-expected fourth quarter results. On the other hand, Darden Restaurants dropped 1.4 percent after it agreed to acquire Yard House USA Inc. for about $585.0 million. Box Ships slumped 12.5 percent amid news that it intends to offer and sell about $30.0 million of its common stock in an underwritten public offering. Amongst other laggards, MPG Office Trust, Tractor Supply and Abercrombie & Fitch declined 3.6 percent, 2.8 percent and 2.7 percent, respectively.
The S&P 500 index dropped 0.5 percent in the regular trading session yesterday amid persistent concerns about the global economic outlook. Marriott International plunged 6.4 percent after it lowered its growth forecast outside the US. Starwood Hotels & Resorts Worldwide, Wynn Resorts and Host Hotels & Resorts retreated 5.3 percent, 3.9 percent and 3.2 percent, respectively. Safeway and Kroger Company plummeted 12.5 percent and 3.7 percent, respectively, after their peer, Supervalu, suspended its quarterly dividend and stated that it is considering strategic alternatives. Microsoft Corporation lost 2.3 percent amid reports that it has reduced advertising and marketing expenditure as part of a realignment process. Wells Fargo & Company dropped 1.3 percent following reports that it has agreed to pay $175.0 million as settlement charges for alleged violation of fair-lending laws. On the upside, Fastenal Company surged 6.3 percent on the back of a rise in its second quarter profit. Merck & Company rose 4.1 percent after a broker upgraded its rating on the stock to “Buy” from “Neutral”.

European Stocks: Likely to open in positive territory
The DAX and CAC are expected to open 48 to 50 points and 23 to 24 points higher, respectively.
Swiss Producer and Import Price Index and Spanish & Italian Consumer Price Index are the key economic indicators scheduled for release today.
Elisa Oyj, Storebrand ASA, Atea ASA, Eniro AB and Sigma AB are scheduled to report their results today.
Volkswagen AG has stated that it has sold 1.3 million cars in mainland China and Hong Kong in the first half of 2012, a 17.5 percent annual rise.
According to Bloomberg, Jean-Rene Fourtou, the Chairman of Vivendi SA, has stated that the company might sell its $8.1 billion stake in Activision Blizzard Inc.
According to Reuters, Highstar Capital is in advanced talks to acquire Veolia Environnement SA’s US waste management business, in a deal that could be valued at as much as $2.0 billion.

Macro Update
Chinese economic growth slows
On an annual basis, the Chinese economy grew 7.6 percent in the second quarter of 2012, a three year low pace of expansion and compared to an 8.1 percent growth recorded in the earlier quarter.
Moody’s lowers Italian debt rating
Moody’s has downgraded Italy’s government bond rating by two notches to “Baa2” from “A3” and reiterated its “Negative” outlook.
China’s industrial production rises less-than-expected
On an annual basis, industrial production in China has climbed 9.5 percent in June compared to a 9.6 percent rise reported in May.
Chinese retail sales climb more-than-forecast
The retail sales in China have jumped more-than-forecast by 13.7 percent Y-o-Y in June compared to a 13.8 percent growth reported in the previous month.
US budget deficit widens
The US budget deficit has widened to $59.7 billion in June compared to a $43.1 billion deficit posted in the same period last year.
Fed must be ready to act if economy weakens further, says Williams
John Williams, the President of the Federal Reserve Bank (Fed) of San Francisco, has indicated that the Fed must be ready to take measures to support the economy, if the economic conditions deteriorate further.
Bank of Korea cuts economic growth outlook
The Bank of Korea has lowered its 2012 economic growth forecast on South Korea to 3.0 percent from an earlier growth estimate of 3.5 percent.

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