• Asian stock markets closed mixed today (Nikkei index +1.15%, Hang Seng -0.75%, Shanghai-Shenzhen 300 -2.45%, Australia +0.15%). The European stock markets this morning are trading lower with the European DJ Stoxx 50 down -0.41% this morning.

   

• May retail sales in Germany declined more than expected as the wettest May on record in Germany and the pinch to consumers from the higher VAT tax kept consumer spending at bay. May retail sales declined -1.8% m/m and -3.7% y/y versus market expectations of a -0.3% m/m and -0.5% y/y drop.

   

• Mortgage approvals in the U.K. increased more than expected in May with 114,000 mortgages approved versus market consensus of 105,000. This strength along wiht Q1 U.K GDP being revised up to 3.0% y/y will keep the pressure on the Bank of England to increase rates. BOE Governor Mervyn King said yesterday that economic expansion has proved resilient and there are "upside" risks to inflation. He added that capacity pressures building up at firms over the past year may be fueling higher pricing intentions. The market is expecting the BOE to raise its benchmark rate to a 6-year high of 5.75% when it convenes next Thursday.

   

• The market today is expecting strong May personal income and spending reports of +0.6% and +0.7%, respectively. However, market attention will focus mainly on the May core PCE deflator, which is the Fed’s preferred inflation index. On a month-on-month basis, the May core PCE deflator is expected to show a small increase of +0.1%, matching April’s +0.1% increase. But the big news is that the May core PCE deflator on a year-on-year basis is expected to ease to +1.9% from +2.0% y/y in April. If the core PCE deflator does in fact fall to +1.9%, that would a 3-year low and would be the first time the core PCE deflator fell below the generally-accepted 2.0% ceiling for inflation since March 2004. It would be somewhat ironic if inflation falls below 2.0% just after the market finally threw in the towel on expecting a Fed easing this year. Yet even if the core PCE deflator falls below 2.0%, the core CPI is still at +2.2% and the overall CPI is at +2.7%. The market is not expecting the inflation figures to drop fully within the Fed’s comfort zone this year, meaning there is still little likelihood that the Fed will give up on its inflation concerns.

   

• Today’s June Chicago purchasing managers index is expected to show a -3.7 decline to 58.0, reversing part of May’s +8.8 increase to 61.7. The expected decline would not be particularly discouraging given the very strong level of 61.7% seen in May. Nevertheless, the market is attuned to any signs of economic weakness tied to the recent 1/2 point increase in interest rates, which may discourage some businesses into cutting their spending plants. The market is expecting Monday’s national June ISM manufacturing index to show a small +0.1 point increase to 55.1 following May’s +0.3 point increase to 55.0. The ISM index in the past 4 months has rebounded upward to a 1-year high of 55.0 from the sub-50 level of 49.3 seen in January, reflecting the improved sentiment in the US manufacturing sector with the improvement in business spending and continued strong US consumer spending.

   

• Today’s final-June US consumer confidence index from the University of Michigan is expected to show a small upward revision by +0.3 points to 84.0 from the early-June level of 83.7, which would reduce the decline from May to 4.3 points from the early-June report of 4.6 from May’s level of 88.3. US consumer confidence took a dip in June because of high gasoline prices and the sharp 1/2 point rise in mortgage rates. However, US consumers can at least take heart that the US economy is chugging along at a respectable pace and that the US labor market remains strong, meaning job and income security remains relatively strong.

   

• Sep S&Ps this morning are trading down -3.80 points. Bearish factors include this morning's +70 cent rally in crude oil prices. The US stock market yesterday closed little changed after trading higher most of the day and retreating into the close (Dow -0.04%, S&P 500 -0.04%, Nasdaq Composite +0.12%). Bearsh factors included the hawkish post FOMC Fed statement, weak T-Note prices and the continued rally in crude oil to a 9-1/2 month high. Bullish factors included the upgrading of Intel and CIsco from analysts at Lehman Brothers and Merrill Lynch and general optimism about the earnings outlook.

   

• Research in Motion (RIMM) rose +16% in after-hours trading as the company said Q1 profits were $1.20 a share, well above analysts estimates of $1.09 a share and the company also announced a 3 for 1 stock split.

   

• Apollo Group (APOL) rose +6.8% in after-hours trading as the company said Q3 profit was 81 cents a share, higher than the 68 cents a share analysts had estimated.

   

• Heelys (HLYS) rose +8.6% in after-hours trading as the company withdrew its registration with the SEC for a 4.5 million share offering.

   

• Christopher & Banks (CBK) fell -9.6% in after-hours trading as the women's clothes retailer said it expects to earn 11 to 12 cents a share in Q2, below analysts estimates of 21 cents a share.

   

• Komag (KOMG) rose +7.7% in after-hours trading as the company agreed to be bought by Western Digital (WDC) for $32.25 a share, or $1 billion in cash.

   

• Palm (PALM) fell -2.7% in after-hours trading as the company said profit fell for a fourth straight quarter and Q4 sales declined to $401.3 million, missing analysts estimates of $406 million in sales.

   

• American Home Mortgage Investment Corp. (AHM) fell -8.8% in after-hours trading as the company withdrew its fical 2007 earnings guidance ans said it will likely have a Q2 loss.

   

• Black Box Corp. (BBOX) rose +5.5% in after-hours trading as the company said Q4 earnings were 71 cents a share, exceeding analysts estimates of 61 cents a share.

   

• Robbins & Myers (RBN) rose +8.9% in after-hours trading as the company raised its outlook for fiscal 2007 to $2.60 to $2.70 a share, up from $2.20 to $2.40 a share.

   

• Priceline.com (PCLN) may be active this morning as analysts at Goldman Sachs raised their recommendation on the stock to a "buy" from "neutral".

   

• TIBCO Software (TIBX) fell -6.2% in European trading this morning as the company said Q2 income was 7 cents a share, below analysts estimates of 8 cents a share.

   

   

• Sep 10-year T-notes this morning are trading +4 ticks as the market awaits this mornings batch of economic reports. Sep T-note prices yesterday closed -9 ticks as the Fed as expected kept the funds rate at 5.25% and stated in its post FOMC statement that inflation is still the greatest risk facing the economy. The Fed acknowledged the slowing in inflation but said "Readings on core inflation have improved modestly in recent months, however, a sustained moderation in inflation pressures has yet to be convincingly demonstrated". Despite continued market worries about the mortgage bond fall-out the Fed is siganaling it is on hold indefinitely. Other bearish factors yesterday included the jump in the Q1 core PCE to 2.4% y/y from 2.2% y/y and the slightly larger than expected drop in unemployment claims to 313,000, versus an expected drop to 315,000.

   

• The dollar this morning is trading at a 3-week low with the dollar/yen up +0.24 yen and the euro/dollar up +0.05 cents. The dollar index yesterday posted a 3-week low but closed slightly higher on the Fed's post FOMC statement that said they are still worried about inflation.

   

• August crude oil prices this morning are trading +.70 cents and August gasoline is trading +1.84 cents. August crude oil posted a 9-1/2 month high yesterday at $70.52 as it saw some carry-over momentum from Wednesday's +1.20 rally and closed +.60 at $69.57. Bullish factors yesterday centered on carry-over from Wednesday's bullish DOE report which showed the first decline in gasoline inventories after 7 straight weeks of gains. The -749,000 bbl decline in gasoline inventories, versus expectations for a +750,000 gain, left gasoline inventories -4.4% below the 5-year seasonal average. With refineries running at 89.4% capacity last week versus 93.8% at the same time last year, product inventories are below normal and refinery usage is not keeping pace.

   

Earnings reports (confirmed releases for companies with market caps above $1.0 bln listed by mkt cap): H-Realogy Corp. (BEST consensus earnings estimate: $0.05 per share), TSG-Sabre Holdings (.31), SGR-Shaw Group (.18), THO-Thor Industries (.63), FOSL-Fossil Inc. (.21), PHH-PHH Corp.(n/a)
 

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