Market Preview - 2 August 2012; ECB Rate Decision on tap

Forex Overnight: EUR trading firmer
The EUR is trading higher against the major currencies this morning amid optimism ahead of the European Central Bank’s (ECB) monetary policy decision due later today wherein the central bank is expected to unveil measures to tackle the region’s debt crisis. Additionally, markets are keeping a tap on the interest rate decision from the Bank of England (BoE) and the Spanish bond auctions scheduled later in the day. At 5 am GMT, the EUR has risen 0.3 percent and 0.1 percent versus the USD and the GBP to trade at $1.2253 and £0.7883, respectively.

The JPY has weakened 0.3 percent against the EUR while it has declined marginally against the USD after the International Monetary Fund stated that the Japanese currency is “moderately overvalued”.

UK Stocks: Likely to open higher
The FTSE 100 is expected to open 10 to 11 points firmer.

Construction Purchasing Managers’ Index (PMI) and Halifax House Prices are the key economic indicators scheduled for release today. Additionally, investors await the BoE monetary policy decision slated later in the day.

BAE Systems, Reed Elsevier, Smith & Nephew, Aggreko, RSA Insurance Group, Schroders and Ladbrokes are scheduled to announce their results today.

In an interview to The Australian, Jimmy Wilson, the President of BHP Billiton’s iron ore division, has warned of potential delays in its major growth projects.

The Financial Times has reported that senior British government officials are mulling the possibility of nationalising Royal Bank of Scotland Group.

Burberry Group has dropped a US lawsuit against Bogart LLC that was filed in defence of its display of the late actor, Humphrey Bogart’s image in its advertising.

Asia: Trading mostly in the red
Asian markets are trading mostly lower this morning tracking overnight losses on Wall Street.

In Japan, automobile sector stocks, Toyota Motor Corporation and Nissan Motor Company have climbed tracking yesterday’s buoyant US vehicle sales report for July. Kyocera Corporation has surged after its first quarter profit came in line with market expectations. Ibiden Corporation Company has rallied after it stated that it would buy back about 5.0 million of its shares. At 5 am GMT, the Nikkei 225 index has climbed 0.4 percent to 8,677.5.

In Hong Kong, HSBC Holdings, China Life Insurance Company and Industrial & Commercial Bank of China have retreated amid waning risk appetite among investors.

On the upside, Korea Gas Corporation has risen amid reports that it discovered 230.0 million tonnes of additional gas reserves at an offshore gas field in Mozambique. In China, China Railway Construction Corporation has dropped amid reports that it has agreed to acquire a 15.0 percent stake in an Italian soccer club, Inter Milan. Construction sector stocks, Poly Real Estate and Gemdale Corporation are trading lower.

US Stocks: Futures trading higher
At 5 am GMT, S&P 500 futures are trading 2.7 points in the green.

Initial & Continuing Jobless Claims, Factory Orders and ISM New York Index are the key economic indicators scheduled for release today.

Kraft Foods, American International Group, Apache, DIRECTV, General Motors, Time Warner Cable, CBS Corporation, Spectra Energy, Kellogg, Sempra Energy, Becton Dickinson, Cardinal Health, Xcel Energy and Activision Blizzard are scheduled to announce their results today.

First Solar surged 18.9 percent in after hours trading session on Wednesday after it reported better-than-expected second quarter results and hiked its full-year guidance. Yelp soared 14.8 percent after its second-quarter revenue beat market consensus and it raised its full year revenue and adjusted EBITDA guidance. Green Mountain Coffee Roasters rallied 12.7 percent after it reported a rise in its third quarter profit and approved a share buyback plan worth $500.0 million.

On the contrary, Halozyme Therapeutics tumbled 54.7 percent after the US Food and Drug Administration raised questions about the safety of its drug ingredient that is being studied to help inject several medicines. Abercrombie & Fitch slumped 16.2 percent after it lowered its full year earnings guidance. Downbeat second quarter revenue and a cut to its full year earnings guidance led Weight Watchers International to plunge 12.9 percent.

Yesterday, the S&P 500 index slid 0.3 percent in the regular trading session as investor sentiment was dented after the US Federal Reserve provided no hints about fresh easing measures to boost the economy. Genworth Financial slumped 11.1 percent after it indicated that spinning off its mortgage insurance unit “may not be viable” now. BMC Software declined 5.3 percent following a sharp decline in its first quarter earnings. MasterCard and Harley Davidson dropped 3.6 percent and 2.2 percent, respectively, after their second quarter revenue fell short of market expectations. Avon Products retreated 1.2 percent after its second quarter profit declined sharply. On the other hand, buoyant second quarter results led CB Richard Ellis Group to climb 7.0 percent.

European Stocks: Likely to open in positive territory
The DAX and CAC are likely to open 19 to 22 points and 11 to 13 points higher, respectively.

Eurozone Producer Price Index and Swiss Retail Sales & SVME PMI are the key economic indicators scheduled for release today. Investors also await the interest rate decision from the ECB due later today.

GDF Suez SA, BNP Paribas SA, Enel SpA, Deutsche Post AG, Assicurazioni Generali SpA, Continental AG, Beiersdorf AG, Adidas AG, Veolia Environnement SA, Deutsche Lufthansa AG and Neste Oil Oyj are scheduled to report their results later today.

Repsol SA has sued Bank of New York Mellon Corporation for more than $50.0 million for failing to carry out voting instructions in the election of the board of the Argentinean oil company, YPF SA.

Fiat SpA has stated that the company has temporarily halted new investments in Italy following difficult conditions in the European automobile market.

Macro Update
S&P affirms Germany's “AAA” rating
Standard & Poor's (S&P) has affirmed Germany's “AAA” long term sovereign debt rating with a “Stable” outlook, citing the nation’s ability to withstand potential financial and economic shocks.

Greek coalition leaders back budget cuts
The two coalition partners of the conservative-led government of Greek Prime Minister, Antonis Samaras, have agreed to an €11.5 billion of budget cuts which are required as a requisite to qualify for further international rescue funds.

BoJ's Morimoto cautions of uncertainty over recovery

Bank of Japan (BoJ) board member Yoshihisa Morimoto, has signaled uncertainties over Japan’s economic recovery, indicating that Europe's worsening debt crisis could delay an expected boost in external demand.

Japanese monetary base expands
On an annual basis, the monetary base in Japan grew 8.6 percent in July compared to a 5.9 percent expansion posted in the prior month.

Australian retail sales climb
On a seasonally adjusted monthly basis, retail sales in Australia rose 1.0 percent in June compared to an upwardly revised 0.8 percent rise posted in May.

Australia swings to trade surplus
On a seasonally adjusted basis, the merchandise trade surplus in Australia stood at A$9.0 million in June compared to a revised A$313.0 million deficit recorded in the previous month.

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