Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks sank, with benchmark gauges declining the most in almost three weeks, as home sales unexpectedly dropped and the Standard & Poor’s 500 Index slipped for a second day below chart levels monitored by analysts. Alcoa Inc., Caterpillar Inc. and Home Depot Inc. fell more than 2.5% after the National Association of Realtors said sales of previously owned homes decreased 2.2% in May. Halliburton Co. dropped 3.9% as the Obama administration said it will appeal a judge’s decision to lift the White House’s deep-water drilling ban. FedEx Corp. slid 3% as transportation stocks retreated the most of 24 S&P 500 groups. The S&P 500 fell 1.6% to 1,095.31 as of 4 p.m. in New York. The benchmark gauge fell below its average price over the last 200 days, a bearish signal to technical analysts. The Dow Jones Industrial Average declined 148.89 points, or 1.4%, to 10,293.52. “It’s just a sloppy environment,” said Stephen Wood, who helps manage about US$179 billion as chief market strategist for Russell Investments in New York. “The housing recovery is very fragile. Then, there’s the Gulf situation decreasing earnings visibility. You’re going to get a lot of volatility.” The VIX, as the Chicago Board Options Exchange Volatility Index is known, surged 8.7% to 27.05, the biggest gain since June 4. The measure, which tends to rise when investors are paying more for protection from losses in the S&P 500, surpassed 40 in May for the first time in almost 13 months. Equities reversed gains in the first half hour of trading today after the National Association of Realtors said purchases of existing houses, which are tabulated when a contract closes, decreased to a 5.66 million annual rate. Existing home sales were forecast to rise to a 6.12 million rate, according to the median forecast of 74 economists in a Bloomberg News survey. “There’s fear of a double dip in housing,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees US$55 billion. “We’re waiting for other economic figures and the Fed’s statement this week.” Federal Reserve policy makers will issue a statement about the outlook for interest rates and the economy tomorrow at around 2:15 p.m. Washington time following a two-day meeting. A gauge of 12 homebuilders in S&P indexes dropped 2.3%, as Pulte Group Inc. and D.R. Horton Inc. declined at least 3%. Home Depot, the largest home-improvement retailer, lost 2.6% to US$30.61. Alcoa slid 3.7% to US$11.29. Caterpillar slumped 3% to US$64.11.

 

Europe’s Overnight Market Commentary

European shares rose on Friday for the eighth consecutive day, its longest winning streak in 11 months, boosted by banks as European leaders agreed to publish details of "stress tests" on the financial health of the sector. However, a "quadruple witching" expiration of June stock futures and options and index futures and options increased trading volatility as traders squared their positions before the close. Banks were in demand, with analysts suggesting the stress test to be published in July would boost investor trust in European banks. A senior euro zone source said the tests would simulate a slowdown in growth and stress on sovereign holdings. Societe Generale, Credit Agricole and UBS gained 1.7 to 6.1%. The pan-European FTSEurofirst 300 index of top shares closed up 0.3% at 1,044.52 points and was its highest close since May 13. The index rose around 2.5% for the week, its fourth consecutive week of gains. The index has added 6.6% in the past eight sessions but is still down 0.1% for 2010, having suffered in April and May when fears of a debt contagion in the euro zone gripped investors. "A positive day, but there is still a lot of resistance on the top side," said Phil Roberts, technical analyst at Barclays Capital. "It has come a long way without a correction so next week the market may struggle." "But in the bigger picture if it continues to consolidate above the 200-day moving average we could see further gains." Meanwhile, Spanish bank Banco Santander rose 3.5% after it confirmed it had made an offer for hundreds of British branches of Royal Bank of Scotland. RBS was up 0.6%. Carmakers were in demand, with Porsche up 1.3%. The company said falling debt and steady sport scar sales will lead to a narrower loss in fiscal 2010. German luxury carmakers BMW and Daimler rose 2.5% and 1.9% respectively, after Credit Suisse raised its price targets for both companies. On the downside, drug makers featured among the worst performers. Sanofi-Aventis fell 3% after analysts and traders cited talk of cancer risks relating to its Lantus diabetes drug. Meanwhile BP retreated from earlier gains and fell 0.6% after Moody's cut its credit rating by three notches on Friday, the oil major's third downgrade in a week.

---

Hanuman Investments Pty Limited trading as Hanuman Private Wealth - AFSL No. 313416

Please consider the environment before printing this document.

NOTICE TO RECIPIENTS: The information contained in and accompanying this communication may be confidential, subject to legal privilege, or otherwise protected from disclosure, and is intended solely for the use of the intended recipient(s). If you are not the intended recipient of this communication, please delete and destroy all copies in your possession, notify the sender that you have received this communication in error, and note that any review or dissemination of, or the taking of any action in reliance on, this communication is expressly prohibited. E-mail messages may contain computer viruses or other defects, may not be accurately replicated on other systems, or may be intercepted, deleted or interfered with without the knowledge of the sender or the intended recipient. To the extent permitted by law Hanuman Private Wealth makes no warranties, and expressly disclaims any liability, in relation to the contents of this message. Hanuman Private Wealth reserves the right to intercept and monitor the content of e-mail messages to and from its systems.