Europe Facing Much Slower Growth

Slower growth weighing on Europe. The Bank of England cut its GDP forecast and said inflation might hit 5 percent, well above the target rate.

Despite the inflation worries, the bet is still tilted toward the BoE cutting rates before they raise them. As a result, the Sterling is rapidly losing ground to the dollar. Japan's Q2 GDP contracted by 0.6 percent, though it was in line with expectations.

Retail sales were about in-line with expectations. Futures have weakened a bit in the last hour as crude has climbed a bit higher, and the dollar has come off its highs.


1) The Mortgage Bankers Association reported mortgage applications to purchase homes remained sluggish, as mortgage rates climbed to 6.57 percent, up from 6.41 percent the previous week.

Looking for that elusive bottom in housing. Toll Brothersreports preliminary Q3 revenues of $796 million vs. an estimate of $746 million. OK, that $796 m was down 34 percent from the same period last year, but it was above expectations. Signed contracts fell 27 percent, but the cancellation rate is showing some improvement (19.4 percent vs. 28.4 percent last quarter).

2) Deere was a bit light on top and bottom line, but more importantly guidance was below expectations. Material costs were higher than expected, and there was continuing North American construction and consumer weakness. Still, agricultural equipment demand remains strong. Down 8 percent pre-open.

3) Several retailers have given disappointing guidance this morning:

--Macy'sbeat if unusual items were excluded,but the guidance for the full year of $1.70-$1.85 was below their prior guidance of $1.85-$2.15.

--Liz Claiborne reported adjusted diluted EPS from continuing operations of $0.09, above expectations of break even, but again guidance for Q3 was below expectations: $0.37-42, est. $0.58 estimate. down 4 percent pre-open.

4) As reported yesterday, CVSbuying Longs Drugs for $71.50 a share in cash ($2.9 b), a 32 percent premium to the close yesterday.

Questions? Comments?