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Stock Market Preview for 07/11/2011

July 11, 2011

stock market previewU.S. stock index futures are sharply lower this morning on moderate trading volume. Asian markets were mostly weaker overnight, with the exception of mainland China.

Growth slowed in China while inflation surged to new highs, prompting concern that the government will pursue additional tightening measures. Australian markets fell as the Labor government introduced a news carbon tax regime that would tax 500 companies for emissions.

In Europe markets traded lower as European Union members met in an emergency session designed to avert a new development in the credit crisis. Contagion fears were evident in Italian markets, where regulators have required short sellers to report positions as of today. France, which had spear-headed efforts to force banks to roll-over Greek debt to new durations reportedly was backing away from this strategy.

For the first time, European Union officials acknowledged that Greece may have to default on select tranches of debt. The European Central Bank will also be conducting more stringent stress tests on its banks this week, with results to be released on Friday.

The new pressures in Europe are evident in currency trading this morning. The euro was last trading sharply lower against the U.S. dollar along with the Swedish krona and U.K. pound. The higher dollar is having a negative impact on commodity prices with energy, agricultural products, and industrial metals all lower. Gold gained, while silver suffered a fractional loss.

In stock-specific news, Arch Chemicals agreed to be acquired by Swiss firm Lonza in a deal valued at $1.4 billion. U.S. bank stocks were trading lower on heavy volume as a result of renewed stresses in the Eurozone.

Earnings season for the second quarter starts today when Alcoa reports its results after market close. Novellus will also report today.

Fastenal is on deck to issue results tomorrow. Marriott International and Yum Brands will release their results on Wednesday. There are two key reports on Thursday, from Google and JP Morgan. The week is back-end loaded with Citigroup, First Horizon National, Genuine Parts, and Mattel reporting.

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