Good morning,

Markets are called to open flat this morning. This is what's happening today:

  • Asian Stocks Rise on U.S. as Kospi Soars While Gold Rebounds;
  • European Finance Ministers Said to Reach a Deal on Handling Failing Banks;
  • Repsol Rejects Argentina’s $5 Billion YPF Compensation Offer;
  • Subsea 7 Says 2012 Adj. Ebitda Won’t ‘Show Progress’ vs 2012;
  • SocGen CEO Says European Banks Need Leverage Reflecting Lending;
  • News Corp. Italy Unit Sues Saying Telecom Agency Favors Mediaset;
  • Morphosys, Celgene to Co-Develop MOR202 for Multiple Myeloma

EARNINGS All times CET, estimates where available:

  • John Wood Group (WG/ LN) 2Q sales, trading;
  • DS Smith (SMDS LN) 8am, FY adj. EPS GBP0.17;
  • Greene King (GNK LN) 8am, FY adj. EPS GBP0.57;
  • Betfair (BET LN) 8am, FY adj. EPS GBP0.34;
  • Debenhams (DEB LN) 3Q LFL sales up 1.5% Y/y

Asian stocks rose for a second day, extending a global rebound, as investors speculated the Federal Reserve may hold back from reducing monetary stimulus and

Chinese money-market rates decreased. South Korea’s won strengthened, while gold advanced.

The MSCI Asia Pacific Index gained 1.7 percent at 12:14 p.m. in Tokyo, trimming its June decline to 4.8 percent. South Korea’s Kospi index surged the most since September. Futures on the Standard & Poor’s 500 Index added 0.1 percent. The cost of locking in China’s interest rates fell for a fifth day. The Dollar Index halted its longest stretch of gains since May 2012, while the won rose against most of its major peers. Gold added 0.8 percent.

The U.S. revised lower its reading for first-quarter economic growth, while German consumer confidence is set to increase next month. Global equities have lost 3.7 percent in June, trimming this year’s advance to 4.1 percent, as the Federal Reserve said it may pare asset purchases that have fueled gains and investors speculated that rising Chinese funding costs will curb growth in Asia’s largest economy.

“Central bank statements have combined with some softish data to remind people that the U.S. recovery remains the weakest in history and that policy action is not imminent,” Matthew Sherwood, the Sydney-based head of investment market research at Perpetual Ltd., which manages about $25 billion, said by e-mail. “The risk of tapering has not gone away.”

Stocks Climb

More than six stocks rose for each that fell in MSCI’s Asian index, led by gains in technology and telecommunication companies. Japan’s Topix index, Australia’s S&P/ASX 200 Index and Hong Kong’s Hang Seng Index climbed at least 1.3 percent. The Shanghai Composite Index advanced 0.4 percent from its lowest level in more than four years, trimming its loss for June to 15 percent.

Chinese companies have dropped out of the ranks of the world’s 10 biggest stocks by market value for the first time since 2006 amid the cash crunch, slower growth and the biggest U.S. stock rally in a decade. PetroChina Co., the state oil producer that was the world’s sixth-biggest company in May, lost $35 billion in market value this month to $214 billion, dropping to 12th, according to data compiled by Bloomberg based on closing prices yesterday.

South Korea’s Kospi jumped 2.9 percent, paring its decline this month to 8.3 percent. The Kospi 200 Volatility Index sank 11 percent today, after climbing over the past six days. Samsung Electronics Co. surged 5.6 percent as its shares rose for the first time in seven days.

Quarterly Moves

The S&P 500’s advance trimmed its June decline to 1.7 percent. The index is up 2.2 percent in the second quarter and 12 percent in 2013. MSCI’s Asia Pacific gauge is down 0.8 percent in 2013 and 5.3 percent in the second quarter, while the MSCI World Index of developed nations boosted its 2013 advance over the past three days to 6.8 percent.

Gross domestic product for the U.S. expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent, figures from the Commerce Department showed yesterday in Washington. Household purchases, which account for about 70 percent of the economy, were revised to a 2.6 percent advance compared with the 3.4 percent gain estimated last month.

Federal Reserve Bank of Richmond President Jeffrey Lacker said he expects the U.S. expansion to remain “sluggish” for “a couple more years,” and yesterday’s downward revision to first-quarter growth is in line with his outlook. Lacker said he sees growth of about 2.25 percent next year.

Fed Stimulus

Fed Chairman Ben S. Bernanke said last week that the central bank may curb bond buying aimed at supporting growth this year and end the so-called quantitative easing program in 2014 should risks to the U.S. economy continue to abate and growth is in line with Fed projections.

The Dollar Index, which measures the U.S. currency against six major peers, snapped a six-day climb to retreat 0.2 percent today, cutting its advance to 3.8 percent in 2013. The won strengthened 0.5 percent to 1,149.05 per dollar.

The so-called Aussie added 0.4 percent to 93.11 U.S. cents, appreciating for a fifth day. Kevin Rudd, Australia’s former prime minister, ousted Prime Minister Julia Gillard yesterday as leader of the nation’s Labor Party before elections scheduled for September. Rudd, new treasurer Chris Bowen and incoming deputy leader Anthony Albanese have been sworn in by Governor-General Quentin Bryce today, according to an e-mailed statement.


The yen slid 0.1 percent to 97.78 per dollar and lost 0.2 percent to 127.43 versus the euro. Japan’s currency has strengthened 2.7 percent against the greenback in June and weakened 3.6 percent in the quarter. The yen will end 2013 at 105 per dollar, according to the median strategist forecast compiled by Bloomberg.

The euro added 0.2 percent to $1.3033 after weakening below $1.30 yesterday for the first time in almost a month. European Central Bank President Mario Draghi said that monetary policy will remain stimulative, curbing the allure of euro-denominated assets.

European Union finance chiefs forged an agreement on how to handle failing banks in the region, German Finance Minister Wolfgang Schaeuble told reporters. German consumer confidence will rise to 6.8 next month from 6.5 in June, Nuremberg-based research company GfK SE said yesterday.

Currency Volatility

The JPMorgan Global FX Volatility Index rose to 11.48 percent after touching 11.96 percent June 24, the highest level since June 2012. The average for 2013 is 9.2 percent.

Gold gained 0.8 percent to $1,236.80 an ounce after prices slid in New York. The precious metal was headed for a quarterly drop of 23 percent, the most since at least 1920, according to data compiled by Bloomberg. Silver rose 1.3 percent, retracing some of yesterday’s 5.6 percent slump. Platinum increased 1.1 percent, while palladium added 1.4 percent.

West Texas Intermediate oil added 0.5 percent to $95.97 a barrel.

China’s one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, fell eight basis points to 3.83 percent. It reached an all-time high of 5.06 percent on June 20 and rose 54 basis points this month, the most since January 2011.

The People’s Bank of China has provided liquidity to some financial institutions to stabilize money-market rates, according to a June 25 release. “It takes pains to get through the liquidity crunch, but it also paves way for future gains,” the official Xinhua News Agency said in a commentary last night. “For the blessing of a more sustainable economy, banks are the first, but certainly not the last to suffer the hardship.”

Stock to watch: Monsanto (Price $100.84, Price Target $116)

Monsanto's yield driven growth engine seems to be improving with age. Nearer tmer, 2013 looks likely to be a repeat of a strong '12 (EPS +26%) driven by a 5-10% price uplift in US corn, acreage growth in both reduced refuge corn and RR2Y soybeans and market share gains in corn and soybeans. Longer term, with Monsanto poised to launch a major new technology every year between now and the end of the decade, we believe the company could generate mid-teens EPS growth every year thru 2020. With '13 possibly Monsanto's third straight year of 20%-plus EPS growth and the product pipeline the strongest in history, Monsanto is our preferred way to gain exposure to a global agricultural sector largely insulated from macro shocks: Buy.

For more information on Monsanto or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli