• The European DJ Stoxx 50 is trading with a solid gain of +1.67%. European stocks were boosted by positive earnings from Ericsson which rallied sharply by 25% in Stockholm trading, by a 5% rally in Volvo on news of strong sales to eastern Europe, and a rally of more than 2% in HBOS and Barclays after Goldman predicted the banks will not need to sell shares to raise new capital. Asian stocks were boosted by stronger than expected earnings from Samsung. The Asia-Pacific stock markets today closed mostly higher: Japan +2.38%, Hong Kong -0.64%, China +0.76%, Taiwan -0.47%, Singapore +0.37%, South Korea +1.64%, Bombay +2.42%.

• US consumer confidence? Today's final-April US consumer confidence index from the University of Michigan is expected to be unchanged from early-April at 63.2. That would leave intact the sharp 6.3 point decline in the index seen in early-April versus March. The early-April US confidence level of 63.2 was a 26-year low going back to March 1982, which was in the middle of the long recession from July 1981 to November 1982 (which in turn was second leg of the double-dip recession, the first leg being the recession in Jan-1980 to July-1980). US consumer confidence is currently even lower than it was during the last two US recessions in July-1990/March-1991 and March-2001/November-2001. US consumer confidence has of course been hit hard by falling home prices, tight consumer and mortgage credit, soaring food and gasoline prices, and a weakening labor market.

• Interbank lending stress remains high? The recent rise in the 3-month dollar Libor rate and consistently strong demand from banks for loans at the Fed's Term Auction Facility (TAF) may prompt the Fed to boost the amount of funds available. Banks are still hoarding cash even as the Fed has lowered interest rates 300 bp since September and auctioned $360 billion in temporary funds through TAF. The most recent TAF auction rate came in at 82 bp above the minimum, the highest spread to date, signaling banks still need cash. The Fed has increased the size of the monthly TAF auctions twice already since they first announced the new lending facility on Dec 12 to increase the availability of cash in the banking system and stimulate lending. The tightness in US interbank lending is also seen in the very high 73 bp spread of the 3-month Libor rate above the fed funds target rate. The spread is currently the highest since the serious end-year-settlement pressure emerged last November and December.

• June S&Ps this morning are trading +5.80 points on support from European stocks and on positive earnings news from American Express and Juniper Networks. S&Ps have been able to shake off mildly disappointing earnings news from Microsoft. The US stock market yesterday closed with solid gains (Dow +0.67%, S&P 500 +0.64%, Nasdaq Composite +0.99%).

• Bullish factors for stock prices yesterday included (1) the unexpected drop in weekly unemployment claims to a 2-month low, (2) the 7% gain in Merrill Lynch after the company said it will maintain its dividend at 35 cents, renewing speculation that the worst is over for financial companies from the subprime mortgage crisis, (3) the 12% gain in Ford after the world's third-largest automaker reported an unexpected Q1 profit of $100 million as reduced North American expenses made up for falling US sales, (4) the rally in the airlines with UAL and American up 10%, Delta and Northwest up 11% and US Airways up 13% after US Airways (the seventh-largest US airline) posted a Q1 loss of $2.56 a share, lower than analysts' estimates of a $2.64 a share, and (5) the over $2 a barrel sell-off in crude oil prices.

• Bearish factors for stock prices yesterday included (1) the bigger than expected drop in new home sales for March to a 16-1/2 year low with the median house price falling 13.3% y/y, the steepest y/y drop in 37-1/2 years, and with the supply of new homes on the market rising to a 26-1/2 year high of 11 months, (2) the 4% drop in Amazon.com as the world's largest Internet retailer provided 2008 full-year operating income guidance of $940 million, which was less than the $985 million the company predicted earlier this year, and (3) the 10% plunge in Starbucks as the world's biggest coffee-shop chain said full-year earnings guidance this year may be weaker than last year's 87 cents a share on slowing US sales as analysts estimated full-year earnings would be 97 cents a share.

• American Express (AXP) rallied over 4% in after-hours trading yesterday as the biggest US credit card lender reported Q1 profit from continuing operations at 84 cents a share, topping the 80 cents-a-share estimate by analysts.

• Juniper Networks (JNPR) is up +3.4% in European trading this morning after the network equipment maker reported Q1 earnings of 20 cents that beat the analyst consensus.

• Ambac Financial Group (ABK) is up 7% in European trading this morning after the CEO said that the bond insurer has enough capital and does not need to sell stock to retain its AAA rating, contrary to predictions by some analysts and the NY Insurance Commissioner.

• Merrill Lynch (MER) is up +1.2% in European trading this morning on a Financial Times report saying that Merrill is in talks with TPG Inc about a possible capital investment, should that become necessary.

• UBS raised its rating on the US banking sector to "neutral" from "underweight" as the UBS analysts wrote that "the return to balance sheet stability is taking place considerably faster than expected."

• Microsoft (MSFT) fell over -4% in after-hours trading yesterday and is down -4.4% in European trading this morning as the world's largest software maker reported an 11% drop in Q3 profit and said earnings for the current quarter may be 45 cents a share, below analysts estimates of 48 cents.

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading -12.5 ticks on higher S&Ps and European stocks, and improved sentiment about the US and European banking sectors. June T-notes yesterday sold off and closed down -23.5 ticks at a 1-3/4 month low settlement. Bearish factors for T-note prices yesterday included (1) the unexpected drop in weekly unemployment claims (-33,000 to a 2-month low of 342,000 versus expectations of +3,000 to 375,000), (2) the poor demand seen at yesterday's $19 billion 5-year T-note auction with the lowest bid-to-cover ratio (1.65) in the last 5 years, and (3) the rally in the equity market. Bullish factors for T-note prices yesterday include (1) the larger-than-expected decline in March new home sales (-8.5% to a 16-1/2 year low of 526,000 versus expectations of -1.7% to 580,000), and (2) the rise in borrowing by commercial banks through the Fed's discount window to a daily average of $10.7 billion in the week ended yesterday, a sign of persisting funding strains in money markets.

• The dollar/yen is up +0.17 yen this morning and the euro/dollar is down sharply by -0.94 cents. The dollar index yesterday rallied to a 3-week high and closed sharply higher. Bullish factors for the dollar yesterday included (1) the drop in German business confidence in April to a 2-year low and the drop in French business confidence in April to a 16-month low, (2) the German Economy Ministry's cut in its 2009 German economic growth forecast to 1.2%, the slowest since 2005, and (3) the comment from ECB President Trichet that the central bank is concerned that the euro's surge to a record against the dollar may hurt Europe's economy. Bearish factors for the dollar yesterday included (1) the larger-than-expected drop in US new home sales for Mar to a 16-1/2 year low, and (2) the strength in the Canadian dollar after the BOC said Canada will weather the credit woes better than other industrialized countries because banks and consumers were in better financial shape beforehand, leading to speculation the BOC may be less agressive in future rate cuts.

• June crude oil prices this morning are trading +$1.03 a barrel and June gasoline is trading +0.32 cents a gallon. June crude oil prices yesterday sold-off sharply and closed down -$2.24 a barrel and June gasoline closed -3.310 cents a gallon. Bearish factors for crude oil prices yesterday included (1) the sharp rally in the dollar, (2) the letter by several US Senators to President Bush saying that they won't support arms deals with OPEC nations until the cartel makes more oil available on the world market, and (3) the drop in German business confidence in April to a 2-year low and the fall in French business confidence in April to a 16-month low. Bullish factors for crude oil prices yesterday included (1) the better than expected US durable goods orders report for Mar, (2) the unexpected drop in US weekly unemployment claims to a 2-month low, and (3) the possible disruption of North Sea crude oil through a British-Petroleum-operated Forties pipeline because of a strike at a Ineos refinery in Scotland

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): PCU-Southern Copper (BEST earnings consensus $1.96 per share), ETR-Entergy (1.51), ITT-ITT (.82), ETE-Energy Transfer (.61), CVH-Coventry Health Care (.81), CCO-Clear Channel (.05), GT-Goodyear Tire (.48), ENR-Energizer Holdings (1.45), ENDP-Endo Pharmaceuticals Holdings (.47), IDXX-Idexx Labs (.39), WEN-Wendy's International (.18), CGI-Commerce Group (.71), OSIP-OSI Pharmaceuticals (.45), GHL-Greenhill & Co. (.78), APL-Atlas Pipeline Partners (.43), GAS-Nicor (.83), MGLN-Magellan Health Services (.43), ISBC-Investors Bancorp (.04), WST-West Pharmaceutical Services (.69), MTX-Minerals Technologies (.71), SWX-Southwest Gas (1.20), BFAM-Bright Horizons Family Solutions (.45), AXL-American Axle & Manufacturing Holdings (.01), MBFI-MB Financial (.44)

Global Financial Calendar