DJ EUROPEAN MORNING BRIEFING: Stocks Under More Pressure

US SUMMARY: Another Late Selloff In Shares

DJIA 10792.58 loss 99.34 dn 0.9%
NASDAQ 2091.32 loss 43.74 dn 2.1%
S&P 500 1236.40 loss 15.90 dn 1.3%
Dow Future 10798.00 gain 4.00 up 0.0%
NASDAQ Future 1525.50 gain 2.00 up 0.1%
S&P Future 1238.00 gain 1.50 up 0.1%
Euro-USD 1.2576 loss 0.0012 dn 0.1%
10-Yr US Treasury: 4.98% unchanged
(Futures values, Treasury, EUR/USD Data as of 0450 GMT)
Wall Street extended its month-long retreat Monday as inflation fears kept investors on edge following hefty losses last week, the worst so far in 2006. A late-day selloff dragged the Dow Jones industrials down nearly 100 points and put the Nasdaq composite index at a seven-month low. Treasury prices were steady, while the dollar gained.

STOCKS: Downbeat inflation comments from Federal Reserve Bank of Cleveland President Sandra Pianalto on Monday was another reminder for an already uneasy market.

But recent signs of slowing economic growth now has Wall Street worried that too many rate hikes could send the economy sliding. Trading was expected to be skittish this week ahead of wholesale and consumer price data, which might bring clues about whether the Fed will boost rates again at its June 28-29 meeting.

"There are certainly some positives in the economy to point to, but until we get some more clarity on the battle between inflation and economic growth, the markets are likely to remain volatile," said Michael Sheldon, chief market strategist at Spencer Clarke LLC.

While the market could rebound from a correction, it also means that a bear market - in which stocks decline 20 percent or more - also is a possibility. Neither the Dow nor the S&P 500 are near the 10 percent losses needed for a correction.

And whether stocks will continue their slide depends largely on the Fed's opinion of upcoming inflation data, said Joseph Battipaglia, chief investment officer at Ryan, Beck & Co.

"What everyone has to focus on is where profits will come from in the future," Battipaglia said. "Natural expansion of the economy will allow profit to expand modestly. On the other hand, if rate hikes continue and a recession is looming, then earnings will fall off and stocks will become expensive."

Crude futures dropped amid relief that the first major tropical storm of the year was expected to miss U.S. Gulf Coast refineries. A barrel of light crude fell $1.27 to $70.36 on the New York Mercantile Exchange.

FOREX: The dollar looks firm Tuesday, holding gains versus its rivals Monday, with market participants focused on the May inflation data due this week.

The dollar shrugged off speeches by Federal Reserve officials, including Cleveland Fed President Sandra Pianalto and Governors Mark Olson and Susan Bies. Their speeches omitted any hint of when the Fed might stop tightening.

Tuesday's PPI figure is expected to show a 0.4% increase in producer prices for the month of May, from a 0.9% increase in April. The CPI index is expected to show a 0.4% increase in the headline consumer price index, from April's 0.6% uptick. The core CPI - the more closely-watched measure - is expected to rise 0.2% versus the 0.3% gain in April.

BONDS: Treasurys ended the day little changed in price Monday, as investors were reluctant to place large bets ahead of the key inflation reports due out Tuesday and Wednesday.

But many analysts felt that even a weak rise in the core CPI would hardly dissuade the Fed from raising the fed funds rate at the next FOMC meeting later this month.

In trading Monday, fed funds futures reflected an 84% chance of a quarter-percentage point rate increase at the June 28-29 FOMC meeting.

ASIAN SUMMARY: Shares Tumble Across The Region

USD-Yen 114.53 gain 0.16 up 0.1%
AUD-USD 0.7421 loss 0.0040 dn 0.6%
Nikkei 225 14430.92 loss 402.00 dn 2.7%
Hang Seng 15342.88 loss 278.50 dn 1.8%
S&P/ASX 200 4833.00 loss 93.00 dn 1.9%
Taiwan Index 6352.69 loss 90.21 dn 1.4%
S.Korea Kospi 1205.69 loss 34.15 dn 2.8%
JGB Yield 1.8000% down 0.0300
(All values as of 0450 GMT)
STOCKS: Share markets across Asia were lower Tuesday, with Japan's Nikkei Average giving back the previous session's modest gains as investors remained nervous in the wake of sharp declines in New York.

Bank of Japan Governor Toshihiko Fukui said Tuesday that it's unclear how global stock market price declines may affect monetary policy, and that he couldn't link the end of its super-easy policy with share price weakness.

Australian shares fell after base metals slid overnight. "It's a dangerous thing being too gung-ho into the inflation data in the U.S.," said Justing Gallagher, head of Sydney sales trading at ABN AMRO Morgans.

FOREX: The dollar recovered against the yen. That followed some selling on Fed Chairman Ben Bernanke's remarks that it's in China's interest to have a flexible forex market, says Mizuho Corporate Bank customer dealer Teruhisa Tsuji. Bernanke said nothing about Fed monetary policy. Traders are looking for more dollar gains.

BONDS: Prices of government debt rose as stocks fell. Investors from abroad bought 10- and 20-year Japanese government bonds, a trader said. Gains, however, were tempered by the prospect of eventual tightening by the Bank of Japan.

METALS: Gold was down around $7.50 at $599.95 as the dollar gathered strength and other metals, especially copper, fell. Interest rate worries are adding pressure.

OIL: July Nymex crude was down 36 cents at $70.00 a barrel, and traders expect a range of $68 to $72 for now.

EUROPEAN OUTLOOK: Stocks Set For More Losses

Euro-USD 1.2576 loss 0.0012 dn 0.1%
Stlg-USD 1.8405 loss 0.0030 dn 0.2%
USD-Franc 1.2342 gain 0.0003 up 0.02%
(All values as of 0450 GMT)
European shares remain under severe pressure, while prices of government debt are likely to gain even though the euro is struggling.

STOCKS: Inflation worries continues to consume European markets, which are likely to open sharply lower Tuesday ahead of U.S. inflation figures, including PPI Tuesday and CPI Wednesday.

U.K. spreadbettor CMC Markets is calling the FTSE down 41 points at 5580, the DAX down 46 at 5350 and the CAC down 43 at 4680.

The U.S. CPI data will be key to sentiment this week, with a 0.2% reading expected to be positive for the markets, while above 0.3% would be "panic" said European equity strategists at Dresdner Kleinwort Wasserstein.

These strategists noted that the worst-performing sectors since the equity selloff began in May have included industrial metals, construction and mining stocks.

"Short term, a bounce and a reversal of the last month's patterns must be expected - even if a June hike by the Federal Reserve looks set to occur regardless," said the Dresdner strategists.

They said that mining, oil equipment, capital goods stocks, general financials, industrial metals and semiconductors should jump, while food retailers, tobacco, utilities, pharmaceuticals and beverages would be knocked lower if this scenario occurs.

In corporate news, Bayer probably will have to improve its offer for German pharmaceutical and chemical concern Schering, now that spurned suitor Merck KGaA has snapped up a large Schering stake, analysts and shareholders said.

European stock markets ended lower on Monday, as continued inflation and interest-rate worries offset a bevy of mergers-and-acquisition activity and speculation.

FOREX: Traders look to push the dollar higher against the euro, with a euro target of around $1.2400. Gold's fall, along with other commodities showing weakness, are aiding the dollar.

BONDS: Government bond markets are expected to continue firm Tuesday. Investors are waiting for the release of the ZEW economic research institute's monthly gauge of German economic confidence Tuesday and U.S. inflation data Wednesday.

"It has pretty much been a follow through of last week with the ECB and equities as the main driver," said Orlando Green, a fixed-income strategist at Calyon in London.

Concerns about an acceleration in inflation and higher interest rates in the world's major economies have fueled bouts of heavy selling in stock markets in recent weeks. Faced with the bloodletting in equities, investors have tended to seek safety in the fixed-income market.

Looking ahead, analysts said the recent selloff in equity and emerging markets and the euro's appreciation would weigh on the ZEW's gauge of German economic confidence.

The think tank's economic expectations indicator, which is due at 0900 GMT Tuesday, is expected to fall for the fifth consecutive month to 45.0 in June from 50.0 in May, according to a Dow Jones Newswires survey of economists.

In the U.K., Bank of England Governor Mervyn King said global monetary policy has been too accommodative over the last three years despite one of the fastest economic growth rates in a generation. Inflation expectations in the U.K., as evidenced by both household surveys and implicit government bond yields, are rising, King said.

While this is not yet a "serious concern," King said the U.K.'s monetary policy committee will monitor inflation expectations closely.

European government bonds rose Monday, with bunds and gilts finding support from weaker equity prices and continued relief the European Central Bank stopped short of raising interest rates more than feared last week, analysts said.

(MORE TO FOLLOW) Dow Jones Newswires

June 13, 2006 01:45 ET (05:45 GMT)

Copyright (c) 2006 Dow Jones & Company, Inc.

13 Jun 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Stocks Under More Pressure -2

CALENDAR: Tuesday, June 13: UK, US Prices; German ZEW

GMT Expected Previous
0600 GER May CPI,final 0.2%MM 0.4%MM
1.9%YY 2.0%YY
0800 ITA Q1 Labour Cost Index
0830 UK May RPI +0.4%MM +0.8%MM
+2.8%YY +2.6%YY
0830 UK May Consumer Price Indices +0.4%MM +0.6%MM
+2.2%YY +2.0%YY
0900 GER Jun ZEW Economic Sentiment 45.0 50.0
0900 EU Jun Euro-Zone ZEW Economic Sentiment 37.0 47.7
0900 EU 1Q Euro-Zone Current Account -5.0B -15.1B
1145 US Jun 10 ICSC Store Sales Index +0.1%
1230 US May PPI +0.4% +0.9%
1230 US May PPI, ex-food and energy +0.2% +0.1%
1230 US May Retail & Food Sales unch +0.5%
1230 US May Retail & Food Sales, ex-autos +0.5% +0.7%
1255 US Jun 10 Redbook Retail Sales Index +3.3%
1300 US Tsy Under Secy Quarles speaks on Tsy
policy initiatives in Washington
1400 US Apr Business Inventories +0.6% +0.7%
1500 US Fed Chmn Bernanke speaks on consumer
issues at a conference in Washington
2100 US Jun 11 ABC/Washington Post Consumer Confidence -17
Index

First Choice Holidays (FCD.LN): 1H Earnings
Average pretax loss before interest and items (DJ, 3 analysts): GBP80M
(GBP65.5M loss)
Note: The holiday firm has acquired companies that typically make losses in the 1H but then generate profits in the 2H, say analysts. Focus is on the outlook for additional acquisitions as well as the impact fuel prices may be having on profitability.

Royal Bank of Scotland Group (RBS.LN): Trading Update
Note: The performance of RBS' global banking and markets division will be key when the company publishes its 1H '06 trading statement, says Lehman analyst Alex Potter. The bank has a small equities franchise relative to peers, but exotics could be affected by market volatility. There could be potential weakness around unsecured lending in the UK.

OTHER SCHEDULED EVENTS:

Alti (7429.FR): 1H Analyst Meeting

Austin Reed Group (ARD.LN): AGM

Beneteau (3516.FR): 3Q Sales

Beneteau (3516.FR): 1H Earnings

Bodegas Riojanas (RIO.MC): AGM

Catering International & Services (6444.FR): AGM

CML Microsystems (CML.LN): FY Earnings

Compass Finance Group (CAF.LN): 1H Earnings

Electronic Data Processing (EDP.LN): 1H Earnings

ErSol Solar Energy (ES6.XE): AGM

Fraport (FRA.XE): May Passenger Data

Grainger Trust (GRI.LN): 1H Earnings

Group 4 Securicor (GFS.LN): Trading Update

Helphire Group (HHR.LN): 1H Earnings

HL Display (HL-B.SK): Trading Update

Iberia Lineas Aereas de Espana (IBLA.MC): May Traffic Data

Intek (ITK.MI): AGM

Jungheinrich (JUN3.XE): AGM

Netgem (415406.FR): AGM

Neurones (405025.FR): AGM

Nextrom (NEX.EB): AGM

Oxford Instruments (OXIG.LN): FY Earnings

Pfleiderer (PFD4.XE): AGM

Polar Capital Technology (PCT.LN): FY Earnings

Premier Farnell (PFL.LN): AGM

PSI Group (PSI.OS): AGM

Pursuit Dynamics (PDX.LN): 1H Earnings

Rubis (12125.FR): AGM

Ted Baker (TBK.LN): AGM

Ten Alps (TAL.LN): FY Earnings

Trio (TRIO.SK): AGM

UCB (UCB.BT): AGM

United Internet (UTDI.XE): AGM

VNU (38987.AE): AGM

William Ransom (RNSM.LN): 1H Earnings

Adval Tech Holding (ADVN.EB): FY 2005 Dividend Payment Date

Adval Tech Holding (ADVN.EB): FY 2005 Ex-Dividend Date

Groupe Open (405030.FR): FY 2005 Dividend Payment Date

Merrill Lynch British Smaller Companies (MBS.LN): FY 2005 Dividend Payment Date

Nutreco Holding (37540.AE): FY 2005 Dividend Payment Date


(END) Dow Jones Newswires