U.S. stocks will open lower Tuesday as the selloffs in stocks continue. With no economic data to help, investors are reducing their exposure to stocks. S&P 500 Index futures are currently down 0.6 percent ahead of the open. There is no economic data out today that will really move the market. Nevertheless, U.S. trade balance figures for May are expected (12:30 GMT) to come out at USD -44.1 billion widening from USD -43.7 billion in April. European politicians will find a short-term solution, earnings season will deliver Despite recent events, we maintain our view that the most likely scenario is that European politicians will find a temporarily solution to the problems and kick the can down the road, which should blow some optimism into the markets. Also, we maintain the view that the earnings season will deliver EPS that are 5-8 percent better than currently expected and we expect companies to maintain their outlook for 2011. In fact, we have just had BMW out revising up their sales and earnings outlook for 2011 as the company continues to see increasing demand automobiles. High uncertainty in Europe prevails, U.K. inflation falls slightly In Europe, the Euro STOXX 50 Index futures are currently down 1.9 percent driven declines in Total (-2.4%), Banco Santander (-2.6%) and Telefonica (-2.3%). European stock markets have recovered from outright panic selloffs in early trading where the Euro STOXX 50 Index was down 3.7 percent at one point at the Italian FTSE MIB Index more than 4 percent (now down 0.6 percent). The market was primarily driven by price volatility, that is the market reacts to its own volatility, pushing bond yields up and stocks down as many investors choose to reposition. Since early trading, 10 year bond yields in Italy and Spain have come down again and are now trading below 6 percent. This really illustrates the current volatile nature of the markets. In the U.K., consumer prices in June came in lower than expected at 4.2 percent giving Bank of England some helpful support for maintaining their low interest rates. This is in line with our view that headline inflation will remain somewhat flat for the rest of the year.
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