The Shanghai Index rose 2.9 percent, and most European bourses are up 1 to 2 percent as China has allowed the yuan to rise against the dollar for the first time since 2008. It hasn't been much—the yuan has risen roughly 0.5 percent overnight—but it is the biggest one day move since 2005. The G20 (a group of finance ministers and central bank governors) will meet this weekend in Canada; there are hopes this will ease some of the political tension between China and the U.S. and Europe.
Commodities are also rallying, notably copper, up 4.6 percent, as are commodity stocks like BHP Billiton, AK Steel , and Alcoa , all up 2 to 4 percent, as are strong commodity-based currencies like the Australian dollar.
The big trading event this week will be the yearly rebalancing of the Russell indices, which will occur at the close on Friday. I will be speaking with ITG CEO Bob Gasser at 9:40 AM this morning about the rebalancing. There will be several large changes this year, the largest being the addition of Berkshire Hathaway, indexers will need to add about $5 billion—about 14 days volume.
1) Lots of economic reports this week, with particular attention to the May new and existing home sales.
Fade market optimism on impact of China's move.
2) Metal production continues to show signs of a bounce back:
a) The World Steel Association reported robust steel production in May. Global steel production last month was up 29 percent from a year ago. Production was strong in several countries: U.S. up 74 percent, China up 21 percent, Japan up 40 percent, Brazil up 51 percent, Germany up 88 percent. Furthermore, capacity utilization last month jumped 15 percentage points from May 2009 to 82 percent.
b) The International Aluminum Institute revealed aluminum production in China jumped 44 percent in May from a year ago.
3) Corn Products announced it is purchasing National Starch from Dutch chemical producer Akzo Nobel for $1.3 billion in cash. The acquisition will deepen Corn Products' operations as a producer of food ingredients from corn starch to food sweeteners. The deal is expected to close by the end of the third quarter.
4) California Pizza Kitchen substantially lowered its Q2 guidance on poor sales at its restaurants. Same-store sales are now seen down 6 percent to down 7 percent (vs. prior guidance of down 0.5 percent to down 2.5 percent). As a result, earnings are expected to be in the range of $0.10-$0.15 down from an earlier forecast of $0.24-$0.26 and below estimates of $0.26.
5) Walt Disney Company is up 1.5 percent after its "Toy Story 3" took in $109 million at U.S. box offices during its opening weekend. It was the third best opening for a film in 2010. By comparison, the highly-anticipated Dreamworks film "Shrek Forever After" only brought in $71 during its opening weekend.
The opening weekend grosses for "Toy Story 3" were the largest ever for a film created by Disney's Pixar unit.
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