Market Preview - 2 September 2011

UK Stocks: Expected to open lower
The FTSE 100 is likely to open 91 to 92 points in the red, following on from a soft close in the US overnight and weaker Asian stock markets. Friday's focus will undoubtedly be the US Non-Farm Payrolls report at 1230 GMT, though there are also reports of US regulatory action against some banks.

UK Construction PMI is scheduled for release today.

EMIS Group and Randall & Quilter Investment Holdings are scheduled to report their results later today.
BHP Billiton has indicated that it was shutting production and evacuating all workers from its two oil and gas platforms in the Gulf of Mexico, ahead of expected weather disturbance.
According to Reuters, BP has reissued a force majeure on its Destin Pipeline in the Gulf of Mexico, due to storm threats.
The Financial Times has reported that GlaxoSmithKline has taken a group of private equity funds and strategic bidders through to a second round of the sale of its non-core over-the-counter products.
According to the Financial Times, the London Stock Exchange Group has made an offer for a majority stake in the European clearing house, LCH.Clearnet Group Limited.
Barclays Capital, the investment banking division of Barclays, has appointed Charlie Berman as the Head of public sector for Europe, the Middle East and Africa.

Asia: Trading in negative territory
Asian markets are trading lower this morning, ahead of the key U.S. labour market report, scheduled to be released later today.
In Japan, Honda Motor and Toyota Motor have registered losses, following a drop in their U.S. car sales in August. Sony Corporation and Canon has moved lower, amid market speculation that exports to the U.S. might decline. Banking sector stocks, Mizuho Financial Group and Mitsubishi UFJ Financial Group have lost value, tracking overnight losses in their U.S. peers. On the other hand, KDDI Corporation has advanced, after a broker upgraded its rating on the stock to “Buy” from “Hold”. At 6 am, the Nikkei has lost 1.2 percent, to 8,950.5.
In Hong Kong, Esprit Holdings has recorded sharp losses, after it stated that it expects a “significant” drop its full year profit.  In China, Air China Limited has declined, after the International Air Transport Association stated that global airlines might face a “weaker end to the year”. In South Korean markets, shipbuilding sector stocks are under pressure, with Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries trading lower.

US Stocks: Futures trading lower
S&P 500 Index Futures are trading 4.6 points weaker.
Key economic indicators scheduled for release today include Change in Non-farm, Private & Manufacturing Payrolls, Unemployment Rate, Average Hourly Earnings and Change in Household Survey Employment.
Campbell Soup and Teavana Holdings are scheduled to announce their results today.
Netflix slumped 8.6 percent in after hours trade yesterday, after Starz Entertainment LLC indicated that it has ended contract renewal talks with the company. Lower-than-expected third quarter revenue and bleak earnings outlook for the full year led Esterline Technologies to tumble 8.6 percent. H&R Block dropped 4.8 percent, after its first quarter revenue trailed market expectations. Gramercy Capital rallied 12.5 percent, after it agreed to settle $549.7 million in mortgage debt. Better-than-expected first quarter earnings and buoyant second quarter earnings guidance helped Finisar to soar 8.7 percent.
Yesterday, the S&P 500 index retreated 1.2 percent, amid market speculation that the Labour Department’s monthly jobs report, scheduled for release today, might indicate sluggish economic recovery. SAIC, the top laggard on the S&P 500 index, tumbled 13.5 percent, after it lowered its FY2011-12 revenue and earnings outlook. Goldman Sachs Group lost 3.5 percent, after it agreed to pay future Federal Reserve penalties and write down $53.0 million of mortgage loans in New York to gain approval for the sale of Litton Loan Servicing LP. Additionally, a broker downgraded its rating on the stock to “Hold” from “Buy”. Other banking sector stocks, Citigroup, JPMorgan Chase, Morgan Stanley and Bank of America declined 3.4 percent, 3.4 percent, 3.3 percent and 3.2 percent, respectively. Novellus Systems retreated 3.3 percent, after it lowered the top end of its third quarter revenue estimate. Apparel retailer, Gap dropped 3.0 percent, following higher-than-expected decline in its August same store sales.

European Stocks: Likely to open in the red
The DAX and CAC are likely to open 112 and 52 to 54 points, lower, respectively.
Eurozone’s Producer Price Index and Swiss Employment are scheduled for release today.
Santhera Pharmaceuticals Holding AG, Merrion Pharmaceuticals, Netconnect ASA and U Blox Holding AG are scheduled to report their results  later today.
SAP AG has won a case in the U.S., reversing the earlier $1.3 billion awarded to Oracle Corporation in a copyright-infringement lawsuit.
SGL Automotive Carbon Fibers, a joint venture of Bayerische Motoren Werke AG and SGL Group AG, has opened a new carbon fiber manufacturing plant in Moses Lake, WA.
The Financial Times has reported that Repsol YPF SA is preparing a legal challenge against Sacyr Vallehermoso SA, on whether the joint shareholder pact signed between the latter and Pemex, Mexico’s state energy group, breaches the Spanish takeover regulations.
The U.S. House Financial Services Committee Chairman, Spencer Bachus, has criticised the Federal Reserve’s decision to intensify its scrutiny of Capital One Financial Corp.’s planned acquisition of ING Groep NV’s unit, ING Direct USA.

Forex Overnight: USD trading under pressure
The USD is trading under pressure against major currencies, amid market expectations of a dismal report on U.S. non-farm payrolls, scheduled for release later today. At 6 am, the EUR and the GBP have strengthened 0.1 percent each against the USD, to $1.4269 and $1.6197, respectively. The EUR is trading marginally lower against the GBP, at £0.8810. 
The JPY has gained 0.1 percent against the USD, amid reports that the U.S. would sue several large banks over mortgage-backed securities.
The AUD has weakened 0.1 percent against the USD.

Macro Update
White House slashes growth forecast
The White House has lowered its 2011 GDP growth forecast for the U.S. economy to 1.7 percent, compared to the prior estimate of 2.7 percent, while unemployment is projected to be at 8.8 percent in 2011.
Nowotny says European inflation set to fall in 2012
European Central Bank Governing Council member, Ewald Nowotny, has indicated that inflation in Europe is set to decline significantly next year, while global growth prospects have dimmed significantly.
Global economic risks increasing, cautions Chinese Central Banker
The People's Bank of China Vice-Governor, Ma Delun, has warned that the global economy faces risks from both slower growth and persistent inflationary pressure.
Japan’s capital spending declines
Capital spending in Japan dropped 7.8 percent Y-o-Y, in the second quarter of 2011, compared to a downwardly revised 3.0 percent rise in the previous quarter.
Japan’s monetary base climbs
On an annual basis, monetary base in Japan advanced 15.9 percent in August, following a 15.0 percent rise recorded in July.
Japan's PM appoints Jun Azumi as Finance Minister
Japan's Prime Minister (PM), Yoshihiko Noda, has named Jun Azumi, the former Head of Parliamentary Affairs for the ruling Democratic Party of Japan, to be the country's next Finance Minister.

Economic Calendar

Country	BST	Economic Indicator	Relevance	Consensus/*Actual	Previous	Frequency
Japan	0:50	Capital Spending (Q2)	P	-7.80%*	3.00%	Quarterly
Japan	0:50	Capital Spending excluding Software (Q2)	P	-8.20%*	3.40%	Quarterly
Japan	0:50	Monetary Base (YoY) (Aug)	P	15.90%*	15.00%	Monthly
Switzerland	8:15	Employment Level (QoQ) (Q2)	PP	4.11 mn	4.11 mn	Quarterly
UK	9:30	Construction Purchasing Manager Index (Aug)	P	53.20	53.50	Monthly
Eurozone	10:00	Producer Price Index (MoM) (Jul)	PPP	0.50%	0.00%	Monthly
Eurozone	10:00	Producer Price Index (YoY) (Jul)	PPP	6.10%	5.90%	Monthly
US	13:30	Unemployment Rate (Aug)	PPP	9.10%	9.10%	Monthly
US	13:30	Average Hourly Earnings (MoM) (Aug)	PP	0.20%	0.40%	Monthly
US	13:30	Average Hourly Earnings (YoY) (Aug)	PP	2.20%	2.30%	Monthly
US	13:30	Average Weekly Hours All Employees (Aug)	PP	34.30	34.30	Monthly
US	13:30	Change in Non-farm Payrolls (Aug)	PPP	75.00 K	117.00 K	Monthly
US	13:30	Change in Private Payrolls (Aug)	PP	105.00 K	154.00 K	Monthly
US	13:30	Change in Manufacturing Payrolls (Aug)	P	0.00 K	24.00 K	Monthly
US	13:30	Change in Household Survey Employment (Aug)	P	-	-38.00	Monthly

Note: PPPHigh           PPMedium           PLow


Corporate Calendar

Country	Company Name	Index	Announcement
US	Campbell Soup Company	S&P 500	Q4 Earnings Release