• European stocks are trading slightly lower this morning with the DJ Stoxx 50 down -0.09%. European stocks today were undercut by weaker than expected earnings reports from Munich Re, InBev NV, and UniCredit SpA. Global stocks were also hurt by yesterday's news that investment banks operating in the US will have to increase disclosure on capital, possibly hurting earnings power going forward. Asia-Pacific stocks today closed mostly lower: Japan -1.13%, Hong Kong -0.63%, China +2.71%, Taiwan -0.67%, Australia +0.97%, Singapore -1.77%, South Korea -0.54%, Bombay -1.49%. Japanese exporters were hurt today by continued concern about weaker US consumer demand.

• The Bank of England announced today that it left its base rate unchanged at 5.00%, which was in line with market expectations. The BOE refused to cut its benchmark rate to address a slower economy and weak housing sector due to inflation pressures from food and energy prices. The European Central Bank at its policy meeting today is expected to leave its refi rate unchanged at 4.00%.

• Claims � Today's weekly unemployment claims report is expected to fall 10,000 to 370,000, reversing about one-third of last week's +35,000 rise to 380,000. Weekly continuing claims are expected to show a slight +1,000 increase to 3.020 mln following last week's increase of +74,000 to 3.019 mln. The initial claims series is currently in the upper reaches of the range seen in the past 5 years, indicating businesses are laying off workers at a relatively fast rate. Continuing claims are at a 4-year high, indicating that the number of people on the unemployment rolls is piling up quickly. The labor market is likely to continue to deteriorate over at least the next several months given that most economic indicators are currently pointing downward and that the labor market typically lags the business cycle. Payrolls have so far fallen for four consecutive months by a total of 260,000 jobs. The unemployment rate in April fell by 0.1 point to 5.0%, but is only 0.1 point below the 6-year high of 5.1% posted in March. The US unemployment peaked at 6.3% in June 2003 during the last business cycle and the US unemployment rate is likely to climb to at least that high during this cycle as the current economic slump continues.

• June S&Ps this morning are trading +5.50 points on some short-covering after yesterday's sharp sell-off. The US stock market yesterday moved lower throughout the day and closed lower (Dow -1.59%, S&P 500 -1.81%, Nasdaq Composite -1.80%).

• Bearish factors for stock prices yesterday included (1) comments from Kansas City Fed President Hoenig that "serious" inflation pressures may compel the Fed to raise interest rates, (2) the 5.8% drop in Merrill Lynch and the 3.7% fall in Lehman Brothers after the SEC said it will require Wall Street firms to disclose capital and liquidity levels, (3) the drop in homebuilders as D.R. Horton fell 6.6% and Lennar fell 5.3% after US pending home sales for March fell an as-expected -1.0%, signaling no end in sight to the housing slump, and (4) the fall in the transportation sector with UPS, the world's largest package delivery company, falling 2.4% and smaller rival FedEx, tumbling 4% as the continued run-up in energy prices sent crude oil, gasoline and heating oil to all-time highs.

• Bullish factors for stock prices yesterday included (1) the greater than expected rise in Q1 nonfarm productivity and the smaller than expected rise in Q1 unit labor costs, (2) the 4.7% gain in DirecTV Group as the largest US satellite-tlevision provider posted a 10% increase in Q1 profit and said it will sell as much as $2.5 billion in debt to fund a share buyback, (3) the 2.9% gain in Disney after the largest operator of theme parks said increased visits to its resorts generated Q2 profit of 58 cents a share, handily topping analysts' estimates of 51 cents as the early Easter spurred more US Disney resort visitors while international travelers took advantage of a drop in the dollar, and (4) the 7.1% gain on Owens Corning as the largest US insulation maker reported Q1 profit of 7 cents a share, 4 cents higher than analysts' estimated as surging fuel prices spurred an 82% increase in sales of glass-fiber insulation.

• News Corp (NWS) rallied 1.2% in after-hours trading yesterday after the news company reported stronger than expected earnings.

• Crocs Inc (CROX) is up sharply by 16% in European trading this morning after providing full-year 2008 EPS guidance of $1.70-1.80 per share, which was above the analyst consensus of $1.69.

• Hansen Natural (HANS) is down 12% in European trading this morning after the company reported Q1 earnings of 29 cents, which was well below the analyst consensus of 37 cents.

• American Micro Devices (AMD) rallied +0.7% in after-hours trading yesterday on news that it will start selling six-core processors, which the company hopes will boost its market share against Intel.

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading +5 ticks on overseas stock weakness and a rise in European corporate bond default risk. T-notes are trading mildly higher despite supply overhang going into today's 30-year T-bond auction. June T-notes yesterday overcame early weakness and closed up +8.5 ticks. Bullish factors for T-note prices yesterday included (1) the better than expected US Q1 nonfarm productivity (Q1 productivity +2.2% with Q1 unit labor costs +2.2% versus expectations of Q1 productivity +1.5% and Q1 unit labor costs of 2.6%), and (2) a flight-to-quality with the sell-off in the equity market. Bearish factors for T-note prices yesterday included (1) hawkish comments from Kansas City Fed President Hoenig who said the Fed must be ready to raise interest rates in a timely manner given the "troublesome" inflation outlook, (2) supply pressure ahead of today's $6 billion 30-year T-bond auction, and (3) inflation concerns with the continued rally in the energy complex to all-time highs for crude oil, gasoline and heating oil.

• The dollar is mixed today with the dollar/yen down -0.48 yen and the euro/dollar down -0.52 cents. The euro is trading lower ahead of today's ECB meeting outcome. The dollar index yesterday rallied throughout the day and closed higher. Bullish factors for the dollar yesterday included (1) comments from Kansas City Fed President Hoenig that "serious" US inflation pressure may compel the Fed to increase interest rates, (2) the unexpected drops in Mar Euro-Zone retail sales and Mar German factory orders, which undercut the euro, (3) the stronger than expected increase in US Q1 nonfarm productivity, and (4) speculation that the ECB will adopt a less hawkish tone when it meets to discuss monetary policy today.

• June crude oil prices this morning are trading +10 cents a barrel and June gasoline is trading +0.67 cents a gallon. June crude oil prices yesterday fell after the DOE inventory report was released but then reversed direction and rallied the rest of the day and closed up +$1.69 a barrel and June gasoline closed +1.270 cents a gallon. June crude oil yesterday posted an all-time high of $123.93 per barrel, June gasoline posted a record high of $3.1323 per gallon and June heating oil posted an all-time high of $3.460 per gallon. Bullish factors for crude oil prices yesterday included (1) the unexpected drawdown in distillate inventories in yesterday's DOE inventory report (distillates -107,000 bbl versus expectations of +1.0 mln bbl), (2) the prediction by the top oil official from Libya that crude oil may reach $125 a barrel this week because of concern over a supply shortage before the peak US summer driving season begins, and (3) the stronger than expected US Q1 productivity, signaling stronger economic growth and increased energy demand. Bearish factors for crude oil prices yesterday included (1) the stronger dollar, and (2) the much greater than expected increase in crude oil inventories in yesterday's DOE inventory report (crude oil +5.65 mln bbl versus expectations of +1.5 mln bbl)

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): AIG-American International Group (BEST earnings consensus -$0.21 per share), CELG-Celgene (.34), EIX-Edison International (.89), PSA-Public Storage (.40), EP-El Paso (.30), NVDA-Nvidia (.38), PGN-Progress Energy (.62), MIR-Mirant (.65), ATVI-Activision (.05), NDAQ-Nasdaq OMX Group (.49), DYN-Dynegy (.05), VRSN-Verisign (.21), PXP-Plains Exploration & Production (.98), CVC-Cablevision Systems (.03), MAC-Macerich (.30), BRL-Barr Pharmaceuticals (.79), POM-Pepco Holdings (.35), PCLN-Priceline.com (.59), VMED-Virgin Media (-.19), MYL-Mylan (.08), ATK-Alliant Techsystems (1.79), LEAP-Leap Wireless International (-.09), URS-URS Corp. (.50), NHP-Nationwide Health Properties (.27), ARE-Alexandria Real Estate Equities (.68), PDX-Pediatrix Medical Group (.68), ATW-Atwood Oceanics (1.13), ACM-AECOM Technology (.32), DPTR-Delta Petroleum (-.04)

Global Financial Calendar