7/8/8

The Dow Jones gained 40.3 points to close at 11,656.07, the S&P 500 rose 4.3 points to finish at 1,289.18. The Nasdaq jumped 28.54 points to end at 2,378.37.

Freddie Mac disappointed with second quarter figures that were lower than analysts expectations. Furthermore, it slashed its dividend and said it was doubling the money set aside for bad loans. Shares in the company plummeted more than 19%, while sister company Fannie Mae -which reports on Friday - dropped nearly 15%.

Cisco Systems, which reported after the bell on Tuesday, gained 5.6% giving the tech sector a boost. The company reported better than expected quarterly sales and earnings. However, the company did also lower its fiscal first quarter growth forecast. Microsoft was also higher following a news report that it may buy back as much as $20 billion of its stock to lift its share price. Shares closed 3.1% higher.

Miners were higher following the news that Xstrata is bidding $10 billion for platinum producer Lonmin. Freeport McMoran jumped 11% as a result.

US light crude oil for September delivery fell $0.59 to settle at $118.58 a barrel. The price had been even lower after government data showed that oil supplies rose much more than expected last week.

COMEX gold for October delivery slipped $3 to close at $875.60 an ounce.

Treasury prices went lower, raising the yield on the 10 year note to 4.05% from 4.02%.

The Nikkei finished 129.90 points lower at 13,124.99 this morning. Daikin Industries Ltd, the world's second biggest maker of air conditioners, plunged the most in 16 years after cutting its profit target. Fuji Heavy Industries Ltd rose for a second day as the yen feel against the dollar to the weakest in seven months.

The Hang Seng is currently 110.16 points higher at 22,059.91. Li & Fung Ltd, which sells goods to Wal-Mart, is enjoying its biggest gains for a week. China Petroleum & Chemical Corp is also having its best day for a week after oil prices fell to a three month low. On the downside, Cathay Pacific Airways Ltd retreats the most in a month after reporting its first loss in five years.

The FTSE 100 is currently 19.5 points lower at 5,466.6 as Friends Provident and Barclays fall following their first-half numbers with investors already cautious ahead of the Bank of England interest rate decision. However, International Power tops the faller board after reporting first half profit that was in line with expectations but a weak outlook for its second half.

Economics
UK Bank of England rate announcement (Aug) 12.00 bst

The BoE alluded to the possibility of an interest rate hike this month in the minutes of the July meeting. But, since then, financial market jitters have intensified again, retail sales fell back from the large upside surprise seen in May and commodity prices have eased. The HSBC Inflation Report Preview, providing more details of the likely outcome of the quarterly forecasting round, will be available on Friday 1st August.

EMU ECB rate announcement (Aug) 12.45 bst

The ECB is expected to keep interest rates on hold at 4.25 percent at its August meeting. The ECB has changed the use of key expressions with increasing regularity, but the first paragraph of the introductory statement is still the most important part of the press conference that follows the rate announcement. The term "monitor very closely" is expected to stay, and HSBC believes that money and credit growth is likely to be described as "very rigorous", but his latter point is worthy of discussion. M3 growth came down to 9.5 percent in June, but the easing in private loan growth was pulled down by a one off effect relating to loan portfolio sales by banks. This means the "real"  underlying private sector loan growth rate was around 10.1 percent, instead of the reported 9.8 percent. There is still a risk that the ECB drops the "very". This shouldn’t be read too dovishly though, as "very vigorous", only entered ECB language in December 2007. Its also worth keeping an eye on the ECB's assessment of the price stability outlook over the medium term: do we still have "increasing upside risks", or just upside risks? Recall, the ECB sharpened its tone on inflation risks in June ("increased further"), from "risks prevail" in May.

Otherwise, the ECB is likely to underline again that economic fundamentals are sound, but some acknowledgement has to made of the slump in cyclical indicators during July. It appears the ECB will shift the expectation of a growth rebound to Q4 from Q3. The ECB is likely to repeat that it believes its current rate stance will help achieve price stability in the medium term. However, HSBC believe the ECB has to avoid sounding too dovish, and could therefore clarify that it is ready to fight inflation further if necessary.

US Initial jobless claims (week 2 Aug) 15.00 bst

Pending home sales could rise 1 percent after falling 4.7 percent in May. This would keep the year on year pace at -33 percent, roughly comparable to existing home sales which are down 31 percent year on year. In recent months, both series have shown a notable improvement coming from the West.

US Consumer credit (Jun) 20.00 bst

Consumer credit continues to rise steadily, up by USD47bn so far this year. A smaller increased of USD4bn in June is expected, as auto sales slowed despite aggressive discounts and financing deals.

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