Germans Pull the Rug Out

Last week’s market rally of 1.0% on the SPDR S&P 500 (SPY) benefited from German Chancellor Angela Merkel’s seemingly supportive position for European Central Bank (ECB) purchases of bonds of troubled euro-area members. However, Monday, Germany’s central bank, the Bundesbank, reiterated its stance against bond purchases. A German Finance Ministry Spokesperson, Martin Kotthaus, stated, “I am not aware of any such plans and haven’t heard anything.” The ECB stated via a der Spiegel, “It is absolutely misleading to report on decisions, which have not yet been taken and also on individual views, which have not yet been discussed by the ECB's Governing Council.” As a result of this news, the euro is lower today, stocks are mostly lower across Europe, and U.S. stocks are indicating lower.

International Markets

EUROPE	ASIA
EURO STOXX 50: -0.1%	S&P/ASX 200: -0.1%
FTSE 100: -0.4%	Nikkei 225: +0.1%
DAX: +0.05%	Hang Seng: -0.1%
CAC 40: -0.2%	Shanghai Shenzhen CSI 300: -0.5%
FTSE MIB: -0.3%	Korea KOSPI: Unch.

An ETF measuring European shares, the iShares S&P Europe 350 (NYSE: IEV), was down 0.6% in early trading Monday morning. The ProShares UltraShort Euro (NYSE: EUO) is up 0.25%, as the euro is off 0.17% against the US dollar. The PowerShares DB US Dollar Index Bullish (NYSE: UUP) is up 0.09%. The iPath S&P GSCI Crude Oil TR Index (NYSE: OIL) is lower by 0.5%, while the SPDR Gold Shares (NYSE: GLD) is down 0.09%.

In the U.S. the SPDR S&P 500 (NYSE: SPY) was fractionally lower before the bell rang on this news and expanding the loss in early trading. The SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (NYSE: QQQ) were each down fractionally as well.

US Economic Drivers
U.S. investors received one economic data point this morning. The Chicago Fed National Activity Index was reported improved to negative 0.13 for July, as June’s index was revised downward to -0.34 from -0.15. The gauge of broad economic activity, not just manufacturing, doesn’t match what we saw in the Leading Indicators Index (LEI), which indicated economic expansion in July. It does fit the improvement in the Consumer Sentiment Index for August reported Friday, though each measure still reflected a poor environment in an absolute state.

The 3-month moving average for this index fell to negative 0.21, from negative 0.18 after revision. Despite the release reporting improvement, the news should contribute to drive some of last week’s gains out of cyclical American shares including leaders General Electric (NYSE: GE), Ford (NYSE: F), Bank of America (NYSE: BAC) and others.

Corporate Drivers
Lowe’s (NYSE: LOW) shares are trading lower by 5% on the company’s earnings report. Lowe’s net income declined as it reported EPS of $0.68 from ongoing operations, two cents short of Wall Street’s view. The company also revised its EPS guidance downward, and to a point short of analysts’ consensus.

The day’s corporate events include highlighted EPS reports from Lowe’s (LOW), Urban Outfitters (Nasdaq: URBN), Camelot Information (NYSE: CIS), Charm Communications (Nasdaq: CHRM), Concord Medical (NYSE: CCM), dELiA*s (Nasdaq: DLIA), eLong (Nasdaq: LONG), Fabrinet (NYSE: FN), Fuwei Films (Nasdaq: FFHL), Hastings Entertainment (Nasdaq: HAST), Nordson (Nasdaq: NDSN), ShangPharma (NYSE: SHP), Tuesday Morning (Nasdaq: TUES), VisionChina Media (Nasdaq: VISN) and Zoom Technologies (Nasdaq: ZOOM).

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