European Banks Weak

European banks like Barclays , ING , and Credit Suisse and Deutsche Bank are trading down 2- to 5 percent pre-US open as Europe is weak in general.

Portugal raised $1.2 billion in a 3-month debt auction, a day after having their debt cut by 4 notches to debt by Moody's. The bad news is they paid a steep price: 4.96 percent. The Portugese stock market is down 2.6 percent this morning.

The other downgrade talk everyone missed yesterday, surprisingly, was also from Moody's, who warned that they may downgrade Chinese banks because of high exposure to government debt.

Long before the current crop of worries on Chinese IPOs, it was several Chinese bank IPO in 2009 and 2010 that generated the same questions. When these banks began going public I was asked repeatedly about their exposure to bad loans. Then and now, I had no idea whether stated losses or exposure levels were accurate. That didn't stop investors from piling in.

A coincidence? Speaking of China...according to Reuters, they are tightening the approval process for IPOs for industries that might have a high risk of financial irregularities, like restaurants and chain stores.

Singpapore state-run investment firm Temasek sold stakes in Bank of china and China Construction Bank on Tuesday; I doubt this was a coincidence.


1) China raised rates for the third time this year. The benchmark rate for a one-year loan is now 6.56 percent. There was some debate about whether they would do this, given the slightly slowing economy, but taming inflation is clearly the top priority, and with good reason: China's leaders fear social unrest above all, and high food inflation and reluctance to wage wages is a source of great tension.

The ECB will also likely raise rates tomorrow, also for the third time.

2) Dollar watchers take note: Caterpillar sold $355 million in yuan-denominated was the biggest deal by a multinational company using renimbi. This means companies are gaining confidence in China's currency. The dollar's dominance is slowly eroding.

3) Walgreens reported better-than-expected June sales. Comps rose 4.8 percent, with general merchandise (up 4.7 percent) and pharmacy (up 4.9 percent) comps both strong on higher traffic and average transaction receipts.

4) Speaking of solid retail sales, the International Council of Shopping Centers reported comps rose 1.5 percent in the latest week. The second straight week of gains were helped by warmer and drier weather around the country. The Council also raised its June sales estimates for the industry to 2.5-3.5 percent.

Many of the big retailers will report their June comps tomorrow morning, with sales from discounters expected to lead the way.

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