US:

US bank shares are set to drop because loans made for commercial real estate will sour and lenders will need to raise more capital to cover credit losses, according to Mike Mayo, an analyst at CLSA Ltd. Mayo added that regional banks will perform the worst among US lenders because they have the biggest exposure to loans for commercial real estate. (BBG)

In other news, banks are managing to liquidate hundreds of billions of dollars worth of CDOs given that in recent weeks more investors have been buying the underlying assets at deep discounts (thus permitting liquidation). (FT)

Bank of America has said it will pay the government USD 425mln to cancel an unused guarantee of Merrill Lynch Co.’s assets and cut reliance on federal support. (BBG)

Asia:

Japanese markets closed for national holiday.

Overnight the Asian Development Bank highlighted that regional economies will expand at a faster-than-expected pace this year. However, they warned that withdrawing expansionary policies too early may lead to a double-dip decline in Asia. It still sees a V-shaped Asia recovery but notes external demand remains weak and sees China’s GDP growth at 8.2% in 2009, 8.9% in 2010. (RTRS)

In other news, China industry ministry said that Chinese companies still lack incentives to invest; adding that Chinese industry is at a critical phase of rebounding. Ministry further said that Chinese stimulus policies must be maintained and China pledges more measures to help small businesses. (BBG)

GLOBAL:

The framework for sustainable economic growth that the Group of 20 leaders are poised to agree on Friday will lack a powerful enforcement mechanism, officials conceded yesterday. (FT)

In geopolitical news, Iranian President Ahmadinejad said that no enemy dare to attack Iran and wants US out of the middle-east. (BBG) Also news has been emerging that Iran has made new generation of centrifuges. (RTRS)

Bonds

European Government Bonds:

EGB’s traded lower on the back of strength in equities as well as comments from the Asian Development Bank that regional economies will expand at a faster-than-expected pace this year, fuelling sentiment that global economic growth is emerging faster and stronger than previously anticipated.

ECB’s Weber said that current level of interest rate is appropriate; adding that at this stage it is too early to exit the currently extremely loose monetary policy. Weber also said that lower potential growth rate of output could mean inflation risks emerge earlier. He also mentioned that as the recovery becomes assured, withdrawal of monetary stimulus will move to the forefront of the monetary policy agenda. (RTRS)

In other news, German finance minister Steinbrueck said that Germany still faces “enormous” systemic risks, especially among its state-owned banks or ‘landesbanken’. (Les Echos) The French finance minister Lagarde said that crisis will be over when economy creates jobs; adding that markets suggest worst is over. He also said that market rebound may make G20 accord a challenge. (BBG)

Supply today from the Euro-Zone:

* Dutch DSL Tap auction for EUR 25mln vs. Exp. EUR 0.3-0.7bln, 5.5% 15-Jul-10

* Dutch DSL Tap auction for EUR 500mln vs. Exp. EUR 0.3-0.7bln, 4% 15-Jul-16

* Dutch DSL Tap auction for EUR 400mln vs. Exp. EUR 0.3-0.7bln, 5.5% 15-Jan-28 (BBG)

* Italian extraordinary BTP Tap auction for EUR 2bln 5% 01-Mar-25, Bid/Cover 2.03 vs. Prev. 1.6 (BBG)

Gilts:

Gilts traded lower following strength in European and Asian equities and comments from the Asian Development Bank. In other news, UK Prime Minister Gordon Brown said the global economy has yet to feel the biggest impact of government-led spending programs to stimulate demand and reiterated concerns about removing them too early. (BBG) The gilt market now looks ahead to the second of the week’s reverse auctions targeting the March 2036 to December 2055 maturities.

Equities

UK and European bourses have traded higher this morning attributed mainly to a reversal in the USD index which has seen commodities across the board trade higher. The move has resulted in an out performance for the basic material and oil and gas sectors. Comments from the Asian Development Bank were also noted.

FX

USD index has been on a downward trend since the European open paring the gains seen yesterday. As a result high beta currencies gained ground on the back of USD weakness. EUR/USD hits a one-year high, whereas NZD/USD hits a 13-month high. The strength in NZD is also due to the fact that the nation’s current-account deficit shrank to the narrowest in more than four years. USD/CHF also hit a 14-month low.

In other news, Canada’s Harper said if recession is over it’s only in a technical sense but job losses will continue. He also said that as long as Canada faces job market challenges, one cannot truly say that recession is over. Harper added that recovery, while it exists, is extremely fragile. (RTRS)

Commodities

WTI crude futures rose for the first time in four days as European equities moved higher at the open and the USD index helped underpin gains as it pared back yesterday’s upward move, down -0.85% at its low.

In OPEC news, Saudi oil minister Naimi sees no need now for the cartel to cut crude output next year as it is too early to say definitively. Further adding that the world economy seems to be recovering with growth driving the oil market. Also says that should oil prices stay at USD 70-80 a barrel, investment in future energy supply should ensure no future shortages.

• US ICSC Chain Stores (Sep 22) W/W -2.0% vs. Prev. 0.0% (RTRS)
  US ICSC Chain Stores (Sep 22) Y/Y 0.6% vs. Prev. 1.6% (RTRS)ICSC research expects September chain store sales, excluding Wal-Mart, to fall 2%.
• FDIC may borrow money from top banks. (NY Times)Senior officials say they considering a plan under which the FDIC would borrow money from the nation’s healthiest banks in order to rescue the country’s’ failing banks.
• Banks are managing to liquidate hundreds of billions of dollars worth of CDOs given that in recent weeks more investors have been buying the underlying assets at deep discounts (thus permitting liquidation). (FT)
• Today the NIKKEI is shut for bank holiday and at 1333 BST (0733 CDT) European Indices were trading at: FTSE 100 +0.85%, DAX +1.21%, CAC 40 +0.79%. (BBG)

DJI

Earnings

N/A

Other News

McDonalds – Subway is opening stores at a frantic pace, while McDonald’s slows down its growth to focus on store profitability. Subway may soon eclipse McDonald’s in store-count, but the golden arches continues to reign supreme when it comes to revenue. (NY Post)

S&P 500

Earnings

ConAgra – Co. Q1 EPS USD 0.38 vs. Exp. USD 0.34, Q1 revenue USD 2.96bln vs. Exp. USD 3.09bln. Boosts forecast and sees FY2010 EPS USD 1.70 vs. Exp. USD 1.66. (BBG/RTRS)

Other News

S&P 500 Index – BMO raises target by 50 points to 1,125 and raises 2009 earnings forecast by USD 0.50 to USD 56.50. (RTRS)

US Banks – US bank shares are set to drop because loans made for commercial real estate will sour and lenders will need to raise more capital to cover credit losses, according to Mike Mayo, an analyst for CLSA. (BBG)

Bank of America – The biggest US bank, said it will pay the government USD 425mln to cancel an unused guarantee of Merrill Lynch’s assets and cut reliance on federal support after two bailouts. (BBG)

AIG – Co. is showing signs of stabilizing, but it is too early to tell whether the co can restructure its businesses and repay taxpayers, a government watchdog concluded. (WSJ)

Pfizer – Co. said that new, longer-term data from the Intergroup Exemestane Study showing that women who switched to aromasin after taking tamoxifen for two to three years experiences a significant in the risk of disease-free survival events, compared to women who continued on tamoxifen for a full five years of treatment. (BBG) Also in the news, co. and Wyeth announced that they have entered into an agreement with Boehringer Ingelheim to divest certain animal health assets in connection with the regulatory approval process associated with Pfizer’s pending acquisition of Wyeth. (BBG)

US Insurers – Seeking to replenish capital depleted by souring real-estate investments, many insurers have cut back on sales and raised prices on life insurance, much as banks have reduced lending and raised fees to customers to rebuild their cash cushions. The insurers, under pressure to fill a USD 9bln hole in their balance sheets, also are taking a tougher line on risk factors such as high blood pressure and obesity, in effect another way to boost prices, industry executives and advisers say. (WSJ)

Freeport McMoran – Co. announces conversions and redemptions of its 5 ½% convertible perpetual preferred stock. Says 830,529 of the outstanding shares converted into 17.9mln shares of FCX common stock. (RTRS)

Lowe’s – Co. reaffirms forecast and sees FY2010 EPS at USD 1.24-1.34 vs. Exp. USD 1.34, sees FY2010 sales up 3-4% and sees FY2010 comp sales up 1%. (BBG)

Kraft Foods – Cadbury’s chief executive acknowledged a combination with co. makes “some strategic sense” while his co separately asked the U.K. takeover regulator to put Kraft on notice that the suitor must formalize its bid soon. The request by Cadbury seemed designed to put pressure on Kraft to raise its USD 16.7bln bid for the British confectionery group two weeks after making public its takeover proposal. (WSJ)

Boston Scientific – Co. says Promus, Taxus stents continue good performance in trial. (BBG)

Target Corp – Co.’s August net charge-offs 14.39%. (BBG)

Ford – Co. to announce plan for 3rd China car manufacturing plant on Friday, capacity at least 150,000 units/year, according to sources. (RTRS)

Companies paying dividend: Halliburton (USD 0.09000)

Companies going ex-dividend: Safeway Inc (USD 0.10000)

NASDAQ 100

Earnings

N/A

Other News

Google – Adviser to top EU court says co. has not infringed rights in case against LVMH. (RTRS)

Dell – Co. is not likely to face antitrust issued with Perot buy. (WSJ)

Oracle – Co.’s CEO Larry Ellison said Sun Microsystems is losing USD 100mln per month while EU regulators examine Oracle’s takeover of the hardware supplier. (FT) Also in the news, co. will not sell Sun Microsystems’ MySQL unit. (San Jose Mercury News)

Yahoo – Co. is seeking as much as USD 500mln for a small business hosting unit. (RTRS)

Amgen – Co.’s bone-strengthening treatment denosumab worked better than Novartis’s Zometa in preventing fractures and other complications of breast cancer that has spread to the bone, a study found. (BBG)

BROKER MOVES

Upgrades

Google – Co. price target raised to USD 560 from USD 480 at Canaccord Adams, rating buy. Cannacord Adams recommends investors add to positions in co. ahead of Q4 results.

Goldman Sachs – Co. price target raised to USD 205 from USD 175 at FBR Capital, rating outperform. FBR raises co. FY2009 share view to USD 16.21 from USD 14.68 and raises co. FY2010 share view to USD 18.00 from USD 16.00.

Bank of America – Co. price target raised to USD 25 from USD 19 at Rochdale.

Hewlett-Packard – Co. raised to outperform from neutral at Credit Suisse.

Alcoa – Co. price target raised to USD 16 from USD 13 at Goldman Sachs. Goldman Sachs also narrows co. Q3 loss per share view to USD 0.10 from USD 0.16.

FedEx – Co. price target raised to USD 75 from USD 55 at Nomura, rating neutral.

US Steel – Co. upgraded to neutral from underperform at Bank of America.

MasterCard – Co. price target raised to USD 250 from USD 230 at Duncan Williams.

Dish Networks – Co. raised to outperform from market perform at Wells Fargo Securities.

Macy’s – Co. raised to buy from hold at Citigroup.

eBay – Co. price target raised to USD 28 from USD 24 at Jefferies.

Expedia – Co. price target raised to USD 30 from USD 25 at Soleil.

Downgrades

Dell – Co. cut to neutral from outperform at Credit Suisse.

OTHER NEWS

Baltic Dry bulk index falls 3.1% to 2,246 1312 BST (0712 CDT) in London, marking the 8th straight decline. (BBG) USD Index down 0.69% and CRB Index up 0.35% at 1331 BST (0731 CDT)

Overnight the Asian Development Bank highlighted that regional economies will expand at a faster-than-expected pace this year. However, they warned that withdrawing expansionary policies too early may lead to a double-dip decline in Asia. It still sees a V-shaped Asia recovery but notes external demand remains weak and sees China’s GDP growth at 8.2% in 2009, 8.9% in 2010. (RTRS)