Pre-market futures suggest a flat opening as traders look for concrete signs of an economic recovery, amid fears of increased government interventions and a crushed economic rebound.

Commodities and financial shares led the decliners yesterday, but healthcare stocks rose after Democratic leaders began working on a healthcare overhaul that would make it mandatory for all Americans to have health insurance coverage.  Shares traded in a narrow range, swinging between gains and losses.  Among S&P industry groups, financials led the declining issues with a 2.2% fall.  Oil and basic materials both recorded a 1.6% fall.  Stocks of consumer services companies gained 1.1%, with drug retailers rising 2.3%.

Among financial sector issues, Bank of America (NYSE:BAC) fell 3.4%, Citigroup (NYSE:C) plunged 5.2% and Wells Fargo (NYSE:WFC) recording a 5.4% decline.  JP Morgan (NYSE:JPM), Goldman Sachs (NYSE:GS), State Street (NYSE:STT) and Morgan Stanley (NYSE:MS) repaid funds borrowed under the government's TARP program.  The Obama Administration's proposed plan for a major financial system overhaul to counter the "cascade of mistakes and missed opportunities of the past decade," however, could not boost sentiments, even as $68 billion of TARP funds were repaid on Wednesday.  S&P, on its part, cited less favorable conditions industry-wide and greater volatility in financial markets for its decision to lower ratings on banks. Banks mentioned included Regions Financial (NYSE:RF), Wells Fargo (NYSE:WFC), Capitol One Financial (NYSE:COF) and PNC (NYSE:PNC).

Technology stocks, nevertheless, showed some resistance, riding high on a number of analyst upgrades and a better-than-expected forecast from Adobe Systems (NASDAQ:ADBE). Merrill/BoA upended its rating on Texas Instruments (NYSE:TXN) from "underperform" to its US I Focus List with a $27 target, noting its expected margin expansion even as the firm faces only modest cyclical recovery prospects. Qualcomm (NASDAQ:QCOM) rose after Goldman Sachs (NYSE:GS) added the firm to its conviction buy list, citing a raised global handset forecast along with an undervalued royalty business.

Chevron (NYSE:CVX) shares declined 1.5% after weekly crude stockpiles showed a larger-than-expected decline of 3.87 million barrels.

Among corporate releases slated for today are JM Smucker (NYSE:SJM) and Discover Financial Services (NYSE:DFS); Research in Motion (NASDAQ:RIMM) is expected to report results after today's close. Treasury Secretary Geithner is scheduled to testify in a House committee hearing on financial regulation. Jefferies' Healthcare Conference continues for its third and final session.

General Motors' shares were delisted by the New York Stock Exchange and were dropped from the Dow Jones Industrial Average. Dow Jones said General Motors and Citigroup (NYSE:C) will be officially dropped from the average on June 8 and will be replaced by Cisco Systems (NASDAQ:CSCO) and Travelers Companies (NYSE:TRV). Cisco Systems jumped 5.4% to $19.50 and Travelers Cos., the biggest U.S. property insurer by market value, added 3.1% to $41.91.  Dow Jones said Citigroup (NYSE:C) is being dropped from the average amid "a substantial restructuring which will see the government with a large and ongoing stake."

The Commerce Department said US construction spending rose unexpectedly in April, with total spending rising 0.8%, to a seasonally adjusted annual rate of $968.67 billion compared to March.  Wall Street had expected a 0.9% decline.  Prudential Financial (NYSE:PRU), meanwhile, refused to access government's program for additional funds, and announced plans to raise $1.25 billion through a common stock offering. SunTrust (NYSE:STI) which needs $2.2 billion in additional capital outlined by last month's stress tests, announced plans to raise $1.4 billion in a common stock offering.   

Government bonds fell again Monday, driving yields back near last week's highs with the yield on the benchmark 10-year note rising to 3.68% from 3.46% late Friday.  The Reuters/Jefferies CRB Index of 19 raw materials increased for a sixth day, adding 3.1%.  Exxon Mobil Corp. (NYSE:XOM) added 3.5% to $71.76 and Chevron Corp. (NYSE:CVX) jumped 3.8% to $69.21 as crude prices went beyond $68 per barrel.

Treasury Secretary Timothy Geithner arrived in China to reassure the country that its holdings of U.S. debt are safe even as government borrowing rises.

Following the overseas gains, US stock futures suggest Wall Street is headed for a higher open.  Dow Jones industrial average futures rose 1.2% to 8,586. Standard & Poor's 500 index futures jumped 1.4% to 930.50, while Nasdaq 100 index futures gained 1.1% to 1,451.50.       

On Friday, a late-session rally pushed U.S. stocks to their biggest three-month run since 2007, as commodities recorded their highest monthly advance since 2007 and energy stocks rose, helped by a spike in oil prices.  The S&P 500 index, which recorded its steepest weekly loss since March during the prior week, rose 3.6% during the holiday-shortened week.  Sustained expectations that the economy is turning a corner have pushed global benchmarks higher and resulted in increased buying activity.  The Dow Jones Industrial Average jumped 223.01 points, 2.7% to 8500.33, capping an upbeat week for Wall Street.  Since hitting their 12-year lows in early March the indices have jumped nearly 30% on the DJIA, 36% on the S&P, and almost 40% on the NASDAQ.

All ten S&P industry groups recorded gains on Friday.  Since the beginning of the year, basic material shares have recorded the sharpest gains, up 23.8%, followed by a 20.5% jump in technology stocks. The Reuters/Jefferies CRB Index of 19 raw materials increased over 14% in May for its biggest monthly rise in 35 years.  U.S. Steel Corp. (NYSE:X) jumped 16% to $34.08 and Freeport-McMoRan Copper & Gold Inc., (NYSE:FCX) surged 13% to $54.43., leading gains among raw- materials companies.  Oil prices climbed above $66 to a six-month high.  Year-to-date, five sectors remain in negative territory, including: utilities, off 8.4%, telecom, down 6.7%, financials, off 4.1%, and industrials and health care, down 2.1%.

Shares of General Motors (NYSE:GM) plunged 48% to $0.75, the lowest since great depression, as the automaker appeared set to file for Chapter 11 bankruptcy protection. Some media reports suggested the company will sell most of its assets to a new entity. Late Sunday, a federal bankruptcy court cleared Chrysler to come out of bankruptcy and sell most of its assets to Italian car maker Fiat. 

Treasury Secretary Geithner travels to China for two-day talks with Chinese leaders, even as the weakness in US dollar keeps the focus on US economic health relative to its global partners. Traders, nevertheless, are expected to remain glued to developments on that front. Geithner, on his part, has tried to remain optimistic, noting, "The global recession seems to be losing some force; and "The financial system is starting to heal." Last week's OPEC meeting also revealed its members optimistic on the outlook for the economy and crude prices with Saudi oil minister Naimi asserted the world economy can withstand $75-$80 per barrel oil.

However, an increased appetite for risk has sent commodity prices higher, heightening fears of inflation. According to Barclay Capital's (NYSE:BCS) quarterly FX investor sentiment survey only 17.5% of the 605 central bankers, asset managers, hedge funds and international corporate clients interviewed expect the rally to continue, with six out of ten believing the rally is a bear market trap, and 69% describing a recovery as most likely to prove either u-shaped or w-shaped.

However, the analyst also said that the company could surpass expectations for this year. FLR has a good record for beating Wall Street's quarterly earnings expectations, having put together an average surprise of almost 13% over the past 4 quarters.

The consensus estimate for this year is down to $3.76 from $3.84 over the past 2 months.

FLR is currently a Zacks #3 Rank ("Hold") company.

The U.S. equity markets will be closed on Monday, Jan 19, in observance of Martin Luther King, Jr. Day. The markets will be open on Tuesday, Jan 20, though volume could be light because of the inauguration.

This will be the first busy week of fourth-quarter earnings season, with 149 companies scheduled to report. Large-cap stocks will dominate the news with 53 S&P 500 members releasing results. Dow components will include General Electric Company (GE), International Business Machines (IBM), Johnson & Johnson (JNJ), Microsoft (MSFT) and United Technologies Corporation (UTX).

The economic calendar is very light.

• Wednesday: Weekly crude inventories
• Thursday: December housing starts, December building permits, weekly initial jobless claims

No Fed officials are scheduled to give speeches. The Fed will hold a 2-day meeting starting on Jan 27.

Companies That Could Issue Positive Earnings Surprises

NetScout Systems, Inc. (NTCT) recently raised its fiscal third-quarter guidance. Citing strong demand from wireless carriers and growth in other markets, the company now anticipates having earned between 16 cents and 18 cents per share. Half of the 4 covering analysts raised their forecasts in response, pushing the consensus earnings estimate 5 cents higher to 16 cents per share. The most accurate estimate is far more bullish at 22 cents per share. NTCT has topped expectations for 4 consecutive quarters. NetScout is scheduled to report on Thursday, Jan 22, after the close of trading.

Companies That Could Issue Negative Earnings Surprises

Profit forecasts for Burlington Northern Santa Fe Corporation (BNI) have been falling lately, with 6 brokerage analysts reducing their fourth-quarter projections during the last 30 days. Though the railroad company does have a history of topping expectations, a recent warning from a competitor could end the streak. The consensus earnings estimate calls for fourth-quarter profits of $1.78 per share. The most accurate estimate is more bearish at $1.75 per share. Burlington Northern Santa Fe Corporation is scheduled to report on Wednesday, Jan 21, before the start of trading.

General Electric Company (GE) reaffirmed its fourth-quarter EPS guidance of 50 to 52 cents per share in mid-December. Since that time, 5 brokerage analysts have cut their quarterly projections. The negative revisions caused the consensus earnings estimate to fall to 44 cents per share. The most accurate estimate is more bearish at 42 cents per share. The conglomerate has missed once in the past 3 quarters. General Electric Company is scheduled to report on Friday, Jan 23, before the start of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Jan 19 - 23¹. Prices are as of Thursday's, Dec 18, market close.

Company	Ticker	Zacks Consensus Estimate	Year Ago Actual	Last Qtr Surprise	Report Date	Report Time	Price
First Defiance	FDEF	$0.30	$0.50	(34.8%)	1/19/2009	AMC	$8.00
Fuller(Hb) Co	FUL	$0.24	$0.53	0.0%	1/19/2009	N/A	$14.19
Logitech Intl	LOGI	$0.44	$0.71	(15.8%)	1/19/2009	AMC	$13.75
Macatawa Bank	MCBC	($0.15)	($0.16)	37.5%	1/19/2009	AMC	$2.50
S&T Bancorp Inc	STBA	$0.57	$0.54	(9.5%)	1/19/2009	BTO	$30.51
Candela Corp	CLZR	($0.17)	($0.13)	(350.0%)	1/20/2009	AMC	$0.48
Capital Bank	CBKN	$0.14	$0.13	(10.0%)	1/20/2009	N/A	$6.50
Commerce Bancsh	CBSH	$0.62	$0.74	(8.5%)	1/20/2009	BTO	$37.82
Cree Inc	CREE	$0.10	$0.08	0.0%	1/20/2009	AMC	$16.98
Csx Corp	CSX	$0.90	$0.85	(2.2%)	1/20/2009	AMC	$30.18
Fastenal	FAST	$0.41	$0.38	4.0%	1/20/2009	BTO	$33.20
Forest Labs A	FRX	$0.76	$0.96	15.9%	1/20/2009	BTO	$26.00
Fulton Finl	FULT	($0.55)	$0.22	(8.7%)	1/20/2009	AMC	$8.05
Hancock Hldg Co	HBHC	$0.57	$0.60	(24.2%)	1/20/2009	AMC	$35.85
Iberiabank Corp	IBKC	$0.72	$0.81	(2.5%)	1/20/2009	AMC	$41.22
Intl Bus Mach	IBM	$3.03	$2.80	0.5%	1/20/2009	AMC	$84.12
Jefferies Gp-Nw	JEF	($2.38)	($0.17)	(216.7%)	1/20/2009	BTO	$12.67
Johnson & Johns	JNJ	$0.92	$0.88	5.4%	1/20/2009	BTO	$57.62
New Oriental Ed	EDU	$0.07	$0.10	7.3%	1/20/2009	BTO	$54.47
Omnova Solution	OMN	$0.09	$0.09	33.3%	1/20/2009	BTO	$0.66
Pacific Contl	PCBK	$0.27	$0.28	(7.4%)	1/20/2009	AMC	$12.32
Packaging Corp	PKG	$0.26	$0.46	(7.3%)	1/20/2009	AMC	$13.37
Parker Hannifin	PH	$0.85	$1.23	7.1%	1/20/2009	BTO	$39.77
Petmed Express	PETS	$0.20	$0.18	25.0%	1/20/2009	BTO	$16.43
Raymond Jas Fin	RJF	$0.35	$0.47	5.4%	1/20/2009	AMC	$16.26
Regions Finl Cp	RF	($0.02)	$0.24	(46.4%)	1/20/2009	BTO	$6.10
State St Corp	STT	$1.16	$1.38	3.3%	1/20/2009	BTO	$38.00
Suncor Energy	SU	$0.39	$0.66	0.0%	1/20/2009	BTO	$21.11
Supertex Inc	SUPX	$0.20	$0.26	6.1%	1/20/2009	AMC	$21.65
Td Ameritrade	AMTD	$0.31	$0.40	(3.3%)	1/20/2009	BTO	$12.63
Tessco Tech Inc	TESS	$0.33	$0.29	N/A	1/20/2009	AMC	$10.35
West Cst Bcp/Or	WCBO	($0.09)	($0.49)	140.0%	1/20/2009	N/A	$4.39
Westell Tech-A	WSTL	($0.05)	($0.04)	22.2%	1/20/2009	AMC	$0.28
Woodward Govnr	WGOV	$0.38	$0.36	0.0%	1/20/2009	AMC	$21.06
Abbott Labs	ABT	$1.06	$0.93	2.6%	1/21/2009	BTO	$49.22
Actions Semicon	ACTS	$0.05	$0.23	(10.0%)	1/21/2009	AMC	$1.40
Adtran Inc	ADTN	$0.28	$0.27	0.0%	1/21/2009	BTO	$14.84
Air Prods & Che	APD	$0.98	$1.16	0.8%	1/21/2009	BTO	$56.07
Allegheny Tech	ATI	$0.89	$1.45	5.1%	1/21/2009	BTO	$25.55
Amdocs Ltd	DOX	$0.50	$0.50	(14.3%)	1/21/2009	AMC	$19.42
Amr Corp	AMR	($0.65)	($0.74)	4.8%	1/21/2009	BTO	$10.98
Blackrock Inc	BLK	$1.13	$2.52	(16.6%)	1/21/2009	BTO	$116.67
Burlngtn Nsf Cp	BNI	$1.78	$1.46	12.4%	1/21/2009	BTO	$63.37
Celadon Group	CLDN	$0.07	$0.08	8.3%	1/21/2009	AMC	$8.10
Charlotte Russe	CHIC	$0.11	$0.56	(93.3%)	1/21/2009	AMC	$4.74
Cnh Global Nv	CNH	$0.69	$0.50	36.3%	1/21/2009	AMC	$14.86
Coach Inc	COH	$0.67	$0.69	0.0%	1/21/2009	BTO	$16.81
F5 Networks Inc	FFIV	$0.26	$0.21	28.6%	1/21/2009	AMC	$23.20
Hudson City Bcp	HCBK	$0.27	$0.16	0.0%	1/21/2009	BTO	$13.16
Igate Corp	IGTE	$0.14	$0.09	15.4%	1/21/2009	BTO	$6.50
Kinder Morg Eng	KMP	$0.54	$0.53	(18.6%)	1/21/2009	AMC	$47.57
Labranche & Co	LAB	$0.17	$0.04	0.0%	1/21/2009	BTO	$5.68
Mcmoran Explor	MMR	($0.32)	$0.31	21.5%	1/21/2009	BTO	$8.79
Mts Systems	MTSC	$0.49	$0.47	26.9%	1/21/2009	AMC	$25.96
Noble Corp	NE	$1.50	$1.35	5.1%	1/21/2009	AMC	$21.44
Northern Trust	NTRS	$0.96	$0.97	(31.8%)	1/21/2009	BTO	$48.28
Nve Corp	NVEC	$0.40	$0.36	17.1%	1/21/2009	AMC	$23.66
Polycom Inc	PLCM	$0.32	$0.28	0.0%	1/21/2009	AMC	$14.02
Popular Inc	BPOP	($0.37)	($0.23)	39.7%	1/21/2009	BTO	$4.89
Precision Castp	PCP	$1.70	$1.73	(1.6%)	1/21/2009	BTO	$54.68
Progressive Cor	PGR	$0.35	$0.34	(412.1%)	1/21/2009	N/A	$13.99
Sanmina-Sci Cp	SANM	$0.01	$0.02	0.0%	1/21/2009	AMC	$0.38
Seagate Tech	STX	($0.03)	$0.76	13.0%	1/21/2009	AMC	$4.33
Somanetics Corp	SMTS	$0.23	$0.19	15.0%	1/21/2009	BTO	$16.31
Ual Corp	UAUA	($4.03)	($0.47)	17.8%	1/21/2009	BTO	$11.14
Us Bancorp	USB	$0.27	$0.66	(37.3%)	1/21/2009	BTO	$19.02
Utd Techs Corp	UTX	$1.23	$1.08	3.0%	1/21/2009	BTO	$49.69
Wipro Ltd-Adr	WIT	$0.14	$0.14	0.0%	1/21/2009	N/A	$7.19
Adv Micro Dev	AMD	($0.53)	($0.17)	132.5%	1/22/2009	AMC	$2.26
Amcore Finl Inc	AMFI	($0.30)	$0.33	(777.8%)	1/22/2009	BTO	$3.35
Amer River Bsh	AMRB	$0.33	$0.36	2.9%	1/22/2009	BTO	$9.90
Amerisourcebrgn	ABC	$0.69	$0.62	4.3%	1/22/2009	BTO	$36.85
Assoc Banc Corp	ASBC	$0.32	$0.55	2.8%	1/22/2009	N/A	$16.12
Au Optroncs-Adr	AUO	($0.53)	$1.24	47.4%	1/22/2009	BTO	$7.20
Avnet	AVT	$0.66	$0.89	(5.6%)	1/22/2009	BTO	$17.91
Avx Corp	AVX	$0.09	$0.22	0.0%	1/22/2009	BTO	$7.71
Bancorpsouth	BXS	$0.31	$0.39	(20.9%)	1/22/2009	AMC	$18.81
Bank Of Ny Mell	BK	$0.68	$0.67	43.6%	1/22/2009	BTO	$23.27
Baxter Intl	BAX	$0.89	$0.76	7.3%	1/22/2009	BTO	$53.56
Bb&T Corp	BBT	$0.53	$0.75	(3.0%)	1/22/2009	BTO	$20.99
Brinker Intl	EAT	$0.19	$0.31	0.0%	1/22/2009	BTO	$9.42
Cabot Microelec	CCMP	$0.06	$0.51	(21.7%)	1/22/2009	BTO	$22.33
Capital One Fin	COF	$0.39	$0.90	6.2%	1/22/2009	AMC	$25.47
Cdn Natl Ry Co	CNI	$0.85	$0.91	6.2%	1/22/2009	AMC	$34.45
Cit Group Inc	CIT	($0.39)	($0.69)	(11.8%)	1/22/2009	BTO	$3.24
City National	CYN	$0.62	$0.96	(11.0%)	1/22/2009	AMC	$37.08
Cobiz Finl Inc	COBZ	$0.16	$0.23	0.0%	1/22/2009	AMC	$7.89
Columbus Mckinn	CMCO	$0.41	$0.53	(11.3%)	1/22/2009	BTO	$13.04
Comerica Inc	CMA	$0.26	$0.77	57.1%	1/22/2009	BTO	$14.60
Commnty Bk Sys	CBU	$0.37	$0.39	0.0%	1/22/2009	AMC	$21.37
Cubist Pharm	CBST	$0.51	$0.16	29.4%	1/22/2009	AMC	$22.66
Cypress Semicon	CY	($0.31)	$0.10	(312.5%)	1/22/2009	BTO	$4.75
Deluxe Corp	DLX	$0.68	$0.77	(6.9%)	1/22/2009	BTO	$13.12
Digi Intl Inc	DGII	$0.03	$0.14	55.6%	1/22/2009	AMC	$7.47
Exelon Corp	EXC	$1.06	$1.02	(6.1%)	1/22/2009	BTO	$53.04
Ezcorp Inc Cl A	EZPW	$0.35	$0.29	0.0%	1/22/2009	AMC	$14.19
Federated Invst	FII	$0.51	$0.52	1.8%	1/22/2009	AMC	$18.26
Fifth Third Bk	FITB	$0.03	$0.07	(119.1%)	1/22/2009	BTO	$5.38
First Comw Finl	FCF	$0.16	$0.16	(22.2%)	1/22/2009	BTO	$10.17
First Finl Hldg	FFCH	$0.42	$0.36	8.0%	1/22/2009	BTO	$18.70
Franklin Resour	BEN	$0.86	$2.12	(12.2%)	1/22/2009	BTO	$52.97
Google Inc-Cl A	GOOG	$4.23	$3.79	3.9%	1/22/2009	AMC	$298.99
Huntington Banc	HBAN	$0.20	($0.65)	27.3%	1/22/2009	BTO	$4.29
Imation Corp	IMN	$0.13	$0.64	0.0%	1/22/2009	BTO	$12.96
Interactive Brk	IBKR	$0.54	$0.46	6.6%	1/22/2009	AMC	$18.08
Intl Game Tech	IGT	$0.27	$0.36	(9.7%)	1/22/2009	BTO	$12.45
Intuitive Surg	ISRG	$1.31	$1.24	13.4%	1/22/2009	AMC	$100.68
Itt Educational	ESI	$1.44	$1.20	11.3%	1/22/2009	BTO	$111.81
Janus Cap Grp	JNS	$0.05	$0.33	(7.7%)	1/22/2009	BTO	$6.74
Kelly Svcs A	KELYA	$0.12	$0.54	(74.1%)	1/22/2009	BTO	$11.92
Keycorp New	KEY	($0.02)	$0.06	(162.5%)	1/22/2009	BTO	$6.22
Knight Cap Gp	NITE	$0.37	$0.50	66.7%	1/22/2009	BTO	$15.85
Lockheed Martin	LMT	$1.89	$1.89	1.0%	1/22/2009	BTO	$79.48
Lsi Industries	LYTS	$0.02	$0.22	200.0%	1/22/2009	BTO	$6.89
M&T Bank Corp	MTB	$1.14	$1.52	(4.7%)	1/22/2009	BTO	$42.59
Matthews Intl-A	MATW	$0.48	$0.50	1.5%	1/22/2009	AMC	$34.55
Memc Elec Matrl	WFR	$0.62	$1.05	(9.8%)	1/22/2009	AMC	$14.11
Meredith Corp	MDP	$0.43	$0.73	2.5%	1/22/2009	BTO	$17.76
Microsoft Corp	MSFT	$0.49	$0.50	2.1%	1/22/2009	AMC	$19.24
Monro Muffler	MNRO	$0.28	$0.27	5.6%	1/22/2009	BTO	$24.14
Netscout Systms	NTCT	$0.16	$0.04	23.5%	1/22/2009	AMC	$13.77
Nokia Cp-Adr A	NOK	$0.39	$0.69	(15.4%)	1/22/2009	BTO	$14.05
Oceanfirst Finl	OCFC	$0.32	$0.26	(11.1%)	1/22/2009	AMC	$14.97
Old Rep Intl	ORI	($0.25)	($0.05)	(25.0%)	1/22/2009	BTO	$11.55
Peoples Utd Fin	PBCT	$0.13	$0.16	0.0%	1/22/2009	AMC	$16.65
Potash Sask	POT	$2.37	$1.16	10.7%	1/22/2009	BTO	$69.86
Sherwin William	SHW	$0.53	$0.88	18.1%	1/22/2009	BTO	$56.34
Smith (Ao) Corp	AOS	$0.24	$0.81	25.0%	1/22/2009	BTO	$31.61
Southwest Air	LUV	$0.07	$0.12	50.0%	1/22/2009	BTO	$8.28
Suntrust Bks	STI	$0.18	$0.02	(22.2%)	1/22/2009	BTO	$20.89
Synaptics Inc	SYNA	$0.50	$0.33	34.5%	1/22/2009	AMC	$20.60
Synovus Finl Cp	SNV	($0.44)	$0.28	(162.5%)	1/22/2009	AMC	$5.66
Taiwan Semi-Adr	TSM	$0.09	$0.20	0.0%	1/22/2009	BTO	$7.37
Tcf Finl Corp	TCB	$0.24	$0.50	(20.0%)	1/22/2009	BTO	$10.61
Technitrol Inc	TNL	$0.09	$0.52	(14.3%)	1/22/2009	AMC	$3.21
Twin Disc	TWIN	$0.25	$0.37	(52.2%)	1/22/2009	N/A	$6.70
Ucbh Hldgs Inc	UCBH	($0.08)	$0.19	(200.0%)	1/22/2009	AMC	$3.83
Union Pac Corp	UNP	$1.28	$0.93	6.2%	1/22/2009	BTO	$41.23
Unitedhealth Gp	UNH	$0.78	$0.92	0.0%	1/22/2009	BTO	$24.89
Valley Natl Bcp	VLY	$0.28	$0.22	(25.0%)	1/22/2009	BTO	$15.87
China Bak Batry	CBAK	$0.01	($0.02)	42.9%	1/23/2009	N/A	$1.68
Dime Comm Bncsh	DCOM	$0.25	$0.17	0.0%	1/23/2009	BTO	$12.45
Gatx Corp	GMT	$0.59	$0.62	35.7%	1/23/2009	BTO	$28.59
Genl Electric	GE	$0.44	$0.68	0.0%	1/23/2009	BTO	$13.77
Harley-Davidson	HOG	$0.58	$0.78	(10.1%)	1/23/2009	BTO	$13.95
Mb Financl Inc	MBFI	$0.27	$0.44	(11.6%)	1/23/2009	BTO	$21.34
Schlumberger Lt	SLB	$1.10	$1.11	2.4%	1/23/2009	BTO	$40.18
Webster Finl Cp	WBS	$0.18	$0.10	(37.0%)	1/23/2009	BTO	$9.80
Xerox Corp	XRX	$0.34	$0.41	0.00%	1/23/2009	BTO	$7.82

BMO = Before The Market Open, AMC = After Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

"NTCT" Free Stock Analysis: Buy? Sell? Hold?
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"IBM" Free Stock Analysis: Buy? Sell? Hold?
"GE" Free Stock Analysis: Buy? Sell? Hold?
"MSFT" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Since this whole credit crunch began, investors pretty much everywhere have been hit. It doesn’t matter what sector a company is in, its share price is less now than what it was in July. But there are a couple of sectors that have really outperformed the rest of the market. And I mean “outperformed to the downside”. In other words, they’ve fallen further and…

``We do expect the Indian business cycle to be the first to bottom in Asia. And, it should, in theory, be first to emerge,'' Sharmila Whelan, senior economist at CLSA, said ``The worst will be over by mid-2009 and by 2010 you should be able to see the next investment-led business cycle taking root.''

Ironically, the current global situation is also making India's measured pace of economic reform look wiser than before. At a time when Western countries are frantically nationalising banking assets, the Indian government's reluctance to sell more than 49% in its state-owned banks—which control some 70% of banking assets—now seems reassuring. In addition, India has not yet introduced full capital-account convertibility, which protects its currency, while its careful control of foreign borrowings by domestic companies limits dependence on the global financial system. Regulators have also periodically introduced curbs to slow the formation of potential asset bubbles, such as higher provisioning and prudential requirements on real-estate lending.
The Economist

“For India we have marked our forecast down to 6.3% of 2009 calendar year. That is considerably below what we consider to be India’s potential growth,” IMF deputy director for Asia Pacific region, Kalpana Kochhar said. “There is a specific meaning to “potential” - it is the rate at which you can grow without causing inflation. And for India we estimate that to be 7.5% to 8%. Our forecast of 6.3% would put it quite a bit below the potential,”.

"The outlook for the manufacturing sector appears to be bleaker in the backdrop of tough local and global economic conditions," said ABN AMRO Bank N.V. senior economist Gaurav Kapur.

Output, total new orders and new export orders all contracted at the fastest rates in the survey history in October. With the exception of India, which again bucked the global trend, all of the national manufacturing surveys posted declines in output and new orders. The impact of the downshift in global market conditions also had a far-reaching effect on international trade volumes. Although new export orders fell at a slower rate than total new business, all of the national manufacturing sectors covered by the survey (including India) saw a reduction in new export orders.

"October manufacturing PMI data reinforce the stark retrenchment that the sector is currently facing, with production, total new business and new export orders all falling at record rates. The latest Output Index reading is consistent with a fall in global IP of almost 8%. The only positive from the surveys was a decline in input prices for the first time since August 2003."
David Hensley, Director of Global Economics Coordination at JPMorgan

``The global financial and economic headwinds adversely affected foreign demand for Indian manufactured goods,'' said Gaurav Kapur, an economist at ABN Amro Bank in Mumbai. ``The growth of total incoming new work to the Indian manufacturing economy lost considerable momentum.''

``We do expect the Indian business cycle to be the first to bottom in Asia. And, it should, in theory, be first to emerge,'' Sharmila Whelan, senior economist at CLSA, said ``The worst will be over by mid-2009 and by 2010 you should be able to see the next investment-led business cycle taking root.''

“For India we have marked our forecast down to 6.3% of 2009 calendar year. That is considerably below what we consider to be India’s potential growth,” IMF deputy director for Asia Pacific region, Kalpana Kochhar said. “There is a specific meaning to “potential” - it is the rate at which you can grow without causing inflation. And for India we estimate that to be 7.5% to 8%. Our forecast of 6.3% would put it quite a bit below the potential,”.

"The outlook for the manufacturing sector appears to be bleaker in the backdrop of tough local and global economic conditions," said ABN AMRO Bank N.V. senior economist Gaurav Kapur.

Output, total new orders and new export orders all contracted at the fastest rates in the survey history in October. With the exception of India, which again bucked the global trend, all of the national manufacturing surveys posted declines in output and new orders. The impact of the downshift in global market conditions also had a far-reaching effect on international trade volumes. Although new export orders fell at a slower rate than total new business, all of the national manufacturing sectors covered by the survey (including India) saw a reduction in new export orders.

"October manufacturing PMI data reinforce the stark retrenchment that the sector is currently facing, with production, total new business and new export orders all falling at record rates. The latest Output Index reading is consistent with a fall in global IP of almost 8%. The only positive from the surveys was a decline in input prices for the first time since August 2003."
David Hensley, Director of Global Economics Coordination at JPMorgan

``The global financial and economic headwinds adversely affected foreign demand for Indian manufactured goods,'' said Gaurav Kapur, an economist at ABN Amro Bank in Mumbai. ``The growth of total incoming new work to the Indian manufacturing economy lost considerable momentum.''

Platinum bottomed below $800 in Hong Kong, but then it too was steeply higher through the day, ending at its own intraday high of $843/oz., up $31. Overnight, platinum has edged higher.

Silver blasted from $9.70 in Hong Kong past $10.50 at the noon hour, dropped back to $10.10 at the end of the Comex, then regained some ground on the Globex to close at $10.17/oz., up…

“October is at last ending - the worst month in commodity history,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, told Bloomberg. “Investors are expecting lower growth for the longer term and that is putting prices under pressure.”

The news came one day after the revelation that the U.S. economy shrank 0.3% in the third quarter, and on the very same day that the government announced consumer spending tumbled 0.3% in September - meaning the world’s largest economy is struggling…

Platinum bottomed near $770 in late Hong Kong trading, but moved gradually higher through most of the rest of the day, ending at $819/oz., down $7. For the week, platinum gained 3%.

Silver also hit its low late in Hong Kong, and it too pushed steadily higher, making it back into positive territory to close at $9.86/oz., up 13 cents. For the week, silver tacked on 5.2%. (Click here for charts)

While silver…

The U.S. dollar fell by its largest percentage in 13 years yesterday.

Et voila, the trend we believe is your friend returned with some impressive steam:

The Reuters/Jefferies CRB Index popped 5.9% — diddly squat compared with equity moves lately, but still the biggest daily gain for the index since its inception, in 1956.

Alas, despite the rise, the CRB is still down 24% this year.

Still, the Fed…

– “The once unthinkable prospect of zero interest rates moved closer to reality yesterday,” says The Times. “Interest rates going to zero in our heroic struggle to become Japan,” says Henry Blodget on Clusterstock.

– Even Japan is racing to become the next Japan. Today, Japan announced it’s joining the global bailout bonanza. Prime minister Taro Aso says he will pump $275 billion of public funds into world’s second-largest economy. This will go toward expanded…

Platinum sank as low as $740 in the European market, rose to $785 at the close of the Comex, and then eased a bit to end at $781/oz., down $13. Overnight, platinum is trending higher.

Silver had a rough day, dropping as low as $8.70 in the far East, pushed back above $9.20 on the Comex, but lost ground on the Globex, closing at $9.05/oz., down 32 cents. Overnight, silver has fallen off. (Click…

Nickel fell until mid-morning, before rallying back a little bit to close at $4.2018/lb., down better than 26 1/3 cents. Zinc had a pleasantly good day, rising fairly steadily to finish at $0.5101/lb., up more than 3½ cents. Aluminum also pushed higher, adding more than a penny and three-quarters, to $0.8918/lb., while lead moved up modestly, tacking on less than a penny, to $0.558/lb.

Once again copper failed to gain much traction, although it came well off its lows for the day (and a fresh 3-year low), as fear continues to…

Zinc was also steadily down, ending at $0.7208/lb., down nearly 3¾ cents. Aluminum was weak, falling below the $1 mark, to $0.9924/lb., down more than 4 cents, while lead got pummeled, to $0.7239/lb., down 5 cents.

Copper plummeted to a 19-month low below $2.50 as concerns about falling demand in a global recessionary environment stampeded traders into further liquidations in the red metal.

Copper finished its worst quarter on record on September 30, losing 26%.

“There's a lot of concern about future demand, given the slowing pace of economic activity and as the credit crisis spreads globally,” said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. “The prospects for copper aren't looking good.”

The selloff remains general. Commodities as a whole have fallen as investor confidence plunges and traders exit leveraged bets. The Reuters/Jefferies CRB Index of 19 futures contracts has fallen 25% in the three months ended September 30, its worst quarter since at least 1956, and dropped 10% last week, the most in more than 50 years.

“The evidence of a risk-averse attitude is clearly out there,” said John Wilson, chief market technician for Morgan Keegan, of Memphis, Tennessee. “We've seen people pulling out of these markets in huge numbers. That's the face of fear. We could be heading for some major low in the markets. At this point, people don't want to hold commodities.”

Accordingly, UBS lowered its copper forecast to $2.50 for 2009, down 38%.

Source:  Industrial metals savaged -  Copper has worst quarter on record

Investors remained wary of emerging-market debt as evidence mounted that most of the major major economies - the U.S., the UK, Japan and the Eurozone - are sliding into recession. This realisation has triggered a major exit from commodities, which are a significant source of export revenue for a large number of developing nations. In particular bonds extended losses on the perception that the $700 billion U.S. bank bailout would not work miracles and thus many developed economies will be struggling to digest the impact of the credit blow-out for some time to come.


Until credibility is restored, we will not see people investing in the numbers that emerging economies like India and Brazil badly need to see. But at the same time, we might ask ourselves, at theis moment in time if they don't invest in India and Brazil, then where are they going to invest? The problem is that in the present global environment people are not simply not willing to take assume what is perceived as "risky" without being paid a large - and from the emerging economy point of view - damaging premium. Of course, the situation is also confused since people are no longer clear what constitutes "risky" and what doesn't - the German government, for example, yesterday found itself forced to offer a blanket guarantee of all domestic bank deposits to head off any risk of flight from German bank accounts.

One result of all this nervousness is that the cost of protecting developing nations' bonds against default has been steadily rising. Five-year credit-default swaps based on Argentina's debt climbed 44 basis points to 12.55 percentage points last week, the highest since at least June 2005. That means it costs $1.255 million to protect $10 million of the country's debt from default. Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.


Emerging Market Stocks

Emerging-market stocks also fell substantially last week, experiencing their the biggest weekly decline in seven years, led by the banks and energy companies. The MSCI Emerging Markets Index dropped 2.3 percent on Friday to 741.73, following a 3.4 percent decline on Thursday. The index lost 10 percent on theweek, the most since the September 2001 terrorist attacks.


Turkey's benchmark index fell the most in three weeks, losing 4.2 percent to 34,553 in the first trading day since Sept. 29. Russia's Micex Index slumped 5.3 percent, extending its annual loss to 51 percent. India's Sensex index slid 4.1 percent to 12,526.32. Reliance Industries Ltd., India's biggest company by market value, slumped 7.6 percent, to its lowest in a year.

Inflation Falls

But while India's financial system has been taking a beating, Indian inflation, almost un-noticed -slipped back to a 13-week low in late September, giving the central bank some breathing space to keep interest rates unchanged and lossen the liquidity strings when it next meets at the end of this month. Wholesale prices rose 11.99 percent in the week to Sept. 20 from a year earlier after gaining 12.14 percent in the previous week, the commerce ministry said in a statement in New Delhi on Thursday.



Reserve Bank of India Governor Duvvuri Subbarao is under pressure to boost money supply as a local stock sell-off triggered by the global credit crunch has drained funds from the banking system, increasing borrowing costs. Subbarao will undoubtedly seek to steer a middle course, since, given that inflation is still double the central bank's target he will not want to seem to be "soft", while on the other hand he will want to be prudent and will try to head off an excessively rapid credit tightening on the back of the global crunch. In addition, the peak of global inflation has now undoubtedly past, and we are now likely to see growing deflationary (rather than inflationary) headwinds as capacity levels exceed demand across the whole global economy and commodity prices tumble, as Claus Vistesen explains in this excellent and timely post.

The Indian central bank had been busy tightening, and had raised the cash reserve ratio, or the proportion of deposits that lenders maintain with it as reserves, by 400 basis points to 9 percent during the period between December 2006 and July 2008 in an ongoing battle to contain inflation. The bank will make the outcome of its next meeting in Mumbai known on Oct. 24, but we can be pretty sure that the "bias" will now have shifted towards loosening liquidity conditions rather than tightening them, as the priorities have changed, and the big priority now is to avoid any systemic bank problems, to keep the cost of borrowing for Indian companies down, and to prevent consumer credit slowing too dramatically.

The Indian banking system has been under increasing strain in recent days, and one symptom of this is that the rate at which Indian banks lend to each other reached an 18-month high of 17.5 percent on Oct. 1. Indian banks borrowed an average 413 billion rupees a day from the central bank in September, almost twice the amount in August, further indicating a shortage of funds in the banking system.


Commodities Down

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, tumbled 9.9 percent last week, the most since at least 1956.

Crude oil has lost 12 percent during the week, the most since 2004. The contract for November delivery traded at $94.47 a barrel, up 0.5 percent, as of 12:11 p.m. London time. Copper fell as much as 3.1 percent to $5,670 a ton on the London Metal Exchange, the lowest since February 2007 and was down 12% on the week.

Such downward movement in commodity prices has a double-edged impact on emerging economies. On the one hand inflation, which has in large part been driven up by rising commodity prices, will reduce significantly, but on the other hand many emerging economies are dependent on revenue from commodity sales to finance growth and development. Really this is a situation which will sort the "men" from the "boys", since those emerging economies which are really going to emerge will be in a position to switch the driving force of growth from commodity and agricultural dependence to industrialisation and domestic investment and consumer demand. It is my firm belief that India is now decidedly inside the group which is in the process of making this transition.


Stocks Down

Indian stocks fell during the week, with the benchmark Sensex stock index declining to its lowest in 18 months. The Bombay Stock Exchange's Sensitive Index, dropped 529.35, or 4.1 percent, to 12,526.32, its lowest since April 2, 2007. The index posted its second weekly decline, falling 4.4 percent. The S&P CNX Nifty Index on the National Stock Exchange fell 3.4 percent to 3,818.30. The BSE 200 Index declined 3.8 percent to 1,515.29. Nifty futures for October delivery fell 2.9 percent to 3,853.


Overseas investors bought a net 845 billion rupees ($18 million) of Indian stocks on Sept. 30, trimming their net outflow this year from equities to $9.1 billion, the nation's stock market regulator said.


Forex Reserves

India's foreign exchange reserves fell marginally by USD 153 million to USD 291.819billion for the week ended September 26 from USD 291.972 billion in the previous week. Reserves had jumped by USD 2.511 billion in the previous week. Foreign currency assets (FCA), during the week, dropped to USD 282.652 billion from USD 282.811 billion a week ago, according to data issued by the RBI on Friday.

Rupee

India's rupee slumped to the lowest since 2003, adding to speculation investors will take continue taking money out of the currency. The currency completed its eighth weekly loss, the longest drop since December 2005. The rupee was down 1 percent on the day to 47.085 per dollar, the lowest since June 2003, as of the 5 p.m. close in Mumbai on Friday. The currency lost 1.15 percent this week.

September Global Manufacturing PMI Shows Sharp Contraction

September seems to have been the ultimate "mensis horribilis" for industrial output internationally - and thus it is only natural to assume that Indian industry was also adversly affected - with global manufacturing activity contracting for the fourth consecutive month, and output falling to its weakest level in over seven years according to the JP Morgan Global Manufacturing PMI, which at 44.2 hit its strongest rate of contraction since November 2001, down from 48.6 in August (Please see the end of this post for some information about countries included and the JP Morgan methodology).


According to the JP Morgan report the retrenchment of the manufacturing sector mainly reflected marked deteriorations in the trends for production, new orders and employment. The declines in output and new work received were the second most severe in the survey history, while staffing levels fell at the fastest pace for over six-and-a-half years. The Global Manufacturing Output Index registered 42.7 in September, well below the 48.5 posted for August.

The sharpest decline in production was recorded for Spain, followed by the US, Japan and then the UK. Although the Eurozone Output Index sank to its second-lowest reading in the survey history, it was above the global average for the first time in four months. Within the euro area, France and Spain saw output fall at survey record rates, while in Italy and Ireland the contractions were the second and third most marked in their respective series. Germany, which until recently was the main growth engine of the Eurozone, saw production fall for the second month running and to the greatest extent for six years. Manufacturing activity in Japan fell to the lowest in over 6- years with the Nomura/JMMA Japan Purchasing Managers Index declining to a seasonally adjusted 44.3 in September from 46.9 in August.

At 40.8 in September, the Global Manufacturing New Orders Index posted a reading well below the neutral 50.0 mark. JP Morgan noted that the trends in new work received were especially weak in Spain, the UK, France and the US, with the all bar the latter seeing new orders fall at a series record pace (for the US it was the strongest drop since January 2001). The downturn of the sector led to further job losses in September, with the rate of reduction in employment the fastest since February 2002. Conditions in the Spanish, the UK and the US manufacturing labour markets were especially weak.

Russian manufacturing shrank for a second month in September, and in so doing registered its first back-to-back contraction since November 1998, as companies cut jobs and growth in new orders slowed, according to the latest VTB Bank Europe Purchasing Managers Report. The PMI came in at a seasonally adjusted 49.8, compared with 49.4 in August. The August reading was the lowest figure in three and a half years, according to the bank statement. On such indexes a figure above 50 indicates growth while one below 50 indicates a contraction.

Manufacturing in China contracted for a second month in August, underscoring the risk of a slump in the world's fourth-biggest economy. The Purchasing Managers' Index was a seasonally adjusted 48.4, unchanged from July, the China Federation of Logistics and Purchasing said today in an e-mailed statement.




Brazil's industrial output fell a seasonally-adjusted 1.3 percent in August, the largest monthly drop this year, bolstering expectations the central bank will ease monetary tightening in response to slowing economic growth. On an annual basis, output rose 2 percent, the slowest pace since March, according to data from the national statistics agency in Rio de Janeiro.

And the situation seems to have deteriorated further in August, since the headline seasonally adjusted Banco Real Purchasing Managers’ Index (PMI) registered a 25-month low of 50.4, down from 51.1 in August.

So basically this is where we get to learn what a global credit crunch means in terms of output and economic growth.

India's Industrial Output Weakens Too

India's industrial output growth bounced back again in July (the last month for which we have official data), reaching a five-month year on year expansion rate high of 7.1%. This follows a noted slowdown where output only rose by 5.4 percent gain in June, and 4.1% in May, according to data from the Central Statistical Organisation.


But if we come to look at the manufacturing PMI we will see that India's manufacturing output has also slowed somewhat, and expanded at its slowest pace in 14 months in September according to the ABN AMRO Bank purchasing managers' index. The PMI reading - which is based on a survey of 500 companies operating in India - fell to a seasonally adjusted 57.3 in September from 57.9 in August. This reading was the lowest since July 2007. Still 57.3 still suggests Indian industry continues to grow quite vigoursly, although the report did highlight the fact that the drop in the index was mainly the result of a decline in growth of new orders, and implied a deterioration in demand conditions, both locally as well as in export markets.


Current Account and Trade Deficit

The Rupee has also been dropping in reaction to India's deteriorating current account situation. The current account deficit rocketed to $10.7 billion in the three months from April to June, up from a $1.04 billion gap in the previous quarter,according to data from the Reserve Bank of India last week.

India's trade deficit almost doubled to a record in August as a surge in crude oil prices increased the import bill and overseas sales of goods slowed. The trade deficit widened to $13.9 billion from $7.2 billion a year earlier, according to data from the Ministry of Commerce and Industry. Imports grew 51 percent, the fastest gain in seven months, to $29.9 billion, while exports expanded 27 percent to $16 billion.

A near doubling of oil prices has boosted import costs, since India relies on overseas purchases for three-quarters of its energy needs. India paid an average $8 billion a month this year for oil imports, up from $5.5 billion in 2007, as crude oil costs surged to a record $147 a barrel on July 11. In India's case the 35 percent drop in oil prices we have seen since July has been partially offset by the decline in the rupee to a five-year low.

India's oil imports in August rose 77 percent to $10.9 billion as refiners paid more for crude oil purchased overseas. Non-oil imports gained 40 percent to $18.9 billion. Imports in the five months ended August 31 rose 38 percent to $130.3 billion from $94.6 billion a year ago. That took the trade deficit to $49.2 billion, compared with $34.5 billion in the same period a year earlier. Overseas sales of Indian goods in the five months to August 31 grew 35 percent to $81.2 billion, compared with $60.1 billion, the statement said.

India and Brazil Critical Weathervanes

What I have been arguing in this post is not that everything about India's economy is perfect - far from it, but neither is it the "perfect storm" disaster which current knee jerk reactions among international investors would seem to suggest. The problems which are hitting the Indian economy at the moment, from the rapid rise in inflation to the sudden withdrawal of sentiment have a common origin: the dynamics of the global economy, and it is to these we must now look if we are to be able to sort the wood from the trees about what happens next. Basically, when the dust settles, I think it will be apparent that there are few economies left sufficiently well standing (not Russia certainly, and probably not China, given the export dependence on the developed economies) and with sufficient energy to bounce back. Many may be sceptical that Brazil and India are going to lead the coming charge (this recession cannot, after all, last forever), but I ask you, if it isn't Brazil and India, who is it going to be?

JP Morgan Global Manufacturing PMI Methodology


The Global Report on Manufacturing is compiled by Markit Economics based on the results of surveys covering over 7,500 purchasing executives in 26 countries. Together these countries account for an estimated 83% of global manufacturing output. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease.

The countries included are listed below by size of global GDP share, and the figures in brackets are the % og global GDP in each case (World Bank Data).

United States (30.5), Eurozone (18.7), Japan (13.9), Germany (5.6), China (4.9),United Kingdom (4.5), France (4.0), Italy (3.2), Spain(1.9), Brazil (1.9),India (1.7), Australia (1.3), Netherlands (1.1), Russia (0.9), Switzerland (0.7), Turkey (0.7), Austria (0.6), Poland (0.5), Denmark (0.5), South Africa (0.4), Greece (0.4), Israel (0.3), Ireland (0.3), Singapore (0.3), Czech Republic (0.2), New Zealand (0.2), Hungary 0.2.

Investors distanced themselves from emerging-market debt as the evidence mounted that major economies - the U.S., the UK, Japan and the Eurozone - are sliding into recession and this triggered a major exit from commodities, which is a significant source of export revenue for a large number of developing nations. In particular bonds extended losses on the perception that the $700 billion U.S. bank bailout would not work miracles and thus many developed economies will be struggling to digest the impact of the credit blow-out for some time to come.


Until credibility is restored, we will not see people investing in the numbers that emerging economies like India and Brazil badly need to see. In the present environment people are not simply not willing to take assume what is perceived as "risky" without being paid a large - and from the emerging economy point of view - damaging premium. As a result the cost of protecting developing nations' bonds against default has been steadily rising. Five-year credit-default swaps based on Argentina's debt climbed 44 basis points to 12.55 percentage points last week, the highest since at least June 2005. That means it costs $1.255 million to protect $10 million of the country's debt from default. Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.


Emerging Market Stocks

Emerging-market stocks had the biggest weekly decline in seven years last weeks, led by banks and energy companies. The MSCI Emerging Markets Index dropped 2.3 percent on Friday to 741.73, following a 3.4 percent decline on Thursday. The index lost 10 percent on theweek, the most since the September 2001 terrorist attacks.


Turkey's benchmark index fell the most in three weeks, losing 4.2 percent to 34,553 in the first trading day since Sept. 29. Russia's Micex Index slumped 5.3 percent, extending its annual loss to 51 percent. India's Sensex index slid 4.1 percent to 12,526.32. Reliance Industries Ltd., India's biggest company by market value, slumped 7.6 percent, to its lowest in a year.

Inflation Falls

But while India's financial system has been taking a beating, Indian inflation, almost un-noticed -slipped back to a 13-week low in late September, giving the central bank some breathing space to keep interest rates unchanged and lossen the liquidity strings when it next meets at the end of this month. Wholesale prices rose 11.99 percent in the week to Sept. 20 from a year earlier after gaining 12.14 percent in the previous week, the commerce ministry said in a statement in New Delhi on Thursday.



Reserve Bank of India Governor Duvvuri Subbarao is under pressure to boost money supply as a local stock sell-off triggered by the global credit crunch has drained funds from the banking system, increasing borrowing costs. Subbarao will undoubtedly seek to steer a middle course, since given that inflation is still double the central bank's target he will not want to seem to be "soft", while on the other hand he will want to be prudent and will try to head off an excessively rapid credit tightening on the backs of the global crunch. In addition, the peak of global inflation has now undoubtedly past, and we are now likely to see growing deflationary headwinds as capacity levels exceed demand across the whole global economy, as Claus Vistesen explains in this excellent and timely post.

The central bank has raised the cash reserve ratio, or the proportion of deposits that lenders maintain with it as reserves, by 400 basis points to 9 percent since December 2006 to contain inflation. The bank will make the outcome of its next meeting in Mumbai known on Oct. 24.

The rate at which Indian banks lend to each other climbed to an 18-month high of 17.5 percent on Oct. 1 as investors hoarded cash. Indian banks borrowed an average 413 billion rupees a day from the central bank in September, almost twice the amount in August, further indicating a shortage of funds in the banking system.

Essentially the wholesale price index fell because of a decline in the prices of farm products such as cereals, fruits and vegetables. The index of primary articles, that includes food items, dropped 0.2 percent, while the indices of manufactured and fuel were unchanged in the week to Sept. 20, today's report said.

Commodities Down

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, tumbled 9.9 percent last week, the most since at least 1956.

Crude oil has lost 12 percent during the week, the most since 2004. The contract for November delivery traded at $94.47 a barrel, up 0.5 percent, as of 12:11 p.m. London time. Copper fell as much as 3.1 percent to $5,670 a ton on the London Metal Exchange, the lowest since February 2007 and was down 12% on the week.

Such downward movement in commodity prices have a double edged impact on emerging economies. On the one hand inflation, which has in large part been driven up by rising commodity prices, will reduce significantly, but on the other hand many emerging economies are dependent on revenue from commodity sales to finance growth and development.


Stocks Down

Indian stocks fell during the week, with the benchmark Sensex stock index declining to its lowest in 18 months. The Bombay Stock Exchange's Sensitive Index, dropped 529.35, or 4.1 percent, to 12,526.32, its lowest since April 2, 2007. The index posted its second weekly decline, falling 4.4 percent. The S&P CNX Nifty Index on the National Stock Exchange fell 3.4 percent to 3,818.30. The BSE 200 Index declined 3.8 percent to 1,515.29. Nifty futures for October delivery fell 2.9 percent to 3,853.


Overseas investors bought a net 845 billion rupees ($18 million) of Indian stocks on Sept. 30, trimming their net outflow this year from equities to $9.1 billion, the nation's stock market regulator said.


Forex Reserves

India's foreign exchange reserves fell marginally by USD 153 million to USD 291.819billion for the week ended September 26 from USD 291.972 billion in the previous week. Reserves had jumped by USD 2.511 billion in the previous week. Foreign currency assets (FCA), during the week, dropped to USD 282.652 billion from USD 282.811 billion a week ago, according to data issued by the RBI on Friday.

Rupee

India's rupee slumped to the lowest since 2003, adding to speculation investors will take continue taking money out of the currency. The currency completed its eighth weekly loss, the longest drop since December 2005. The rupee was down 1 percent on the day to 47.085 per dollar, the lowest since June 2003, as of the 5 p.m. close in Mumbai on Friday. The currency lost 1.15 percent this week.

September Global Manufacturing PMI Shows Sharp Contraction

September seems to have been the ultimate "mensis horribilis" for industrial output internationally, with global manufacturing activity contracting for the fourth consecutive month, and output falling to its weakest level in over seven years according to the JP Morgan Global Manufacturing PMI, which at 44.2 hit its strongest rate of contraction since November 2001, down from 48.6 in August (Please see the end of this post for some information about countries included and the JP Morgan methodology).


According to the JP Morgan report the retrenchment of the manufacturing sector mainly reflected marked deteriorations in the trends for production, new orders and employment. The declines in output and new work received were the second most severe in the survey history, while staffing levels fell at the fastest pace for over six-and-a-half years. The Global Manufacturing Output Index registered 42.7 in September, well below the 48.5 posted for August.

The sharpest decline in production was recorded for Spain, followed by the US, Japan and then the UK. Although the Eurozone Output Index sank to its second-lowest reading in the survey history, it was above the global average for the first time in four months. Within the euro area, France and Spain saw output fall at survey record rates, while in Italy and Ireland the contractions were the second and third most marked in their respective series. Germany, which until recently was the main growth engine of the Eurozone, saw production fall for the second month running and to the greatest extent for six years. Manufacturing activity in Japan fell to the lowest in over 6- years with the Nomura/JMMA Japan Purchasing Managers Index declining to a seasonally adjusted 44.3 in September from 46.9 in August.

At 40.8 in September, the Global Manufacturing New Orders Index posted a reading well below the neutral 50.0 mark. JP Morgan noted that the trends in new work received were especially weak in Spain, the UK, France and the US, with the all bar the latter seeing new orders fall at a series record pace (for the US it was the strongest drop since January 2001). The downturn of the sector led to further job losses in September, with the rate of reduction in employment the fastest since February 2002. Conditions in the Spanish, the UK and the US manufacturing labour markets were especially weak.

Russian manufacturing shrank for a second month in September, and in so doing registered its first back-to-back contraction since November 1998, as companies cut jobs and growth in new orders slowed, according to the latest VTB Bank Europe Purchasing Managers Report. The PMI came in at a seasonally adjusted 49.8, compared with 49.4 in August. The August reading was the lowest figure in three and a half years, according to the bank statement. On such indexes a figure above 50 indicates growth while one below 50 indicates a contraction.

Manufacturing in China contracted for a second month in August, underscoring the risk of a slump in the world's fourth-biggest economy. The Purchasing Managers' Index was a seasonally adjusted 48.4, unchanged from July, the China Federation of Logistics and Purchasing said today in an e-mailed statement.




Brazil's industrial output fell a seasonally-adjusted 1.3 percent in August, the largest monthly drop this year, bolstering expectations the central bank will ease monetary tightening in response to slowing economic growth. On an annual basis, output rose 2 percent, the slowest pace since March, according to data from the national statistics agency in Rio de Janeiro.




So basically this is where we get to learn what a global credit crunch means in terms of output and economic growth.




Current Account and Trade Deficit

The Rupee has also been dropping in reaction to India's deteriorating current account situation. The current account deficit increased to $10.7 billion in the second quarter of 2008 from a $1.04 billion gap in the previous quarter,according to data from the Reserve Bank of India last week.

India's trade deficit almost doubled to a record in August as a surge in crude oil prices increased the import bill and overseas sales of goods slowed. The trade deficit widened to $13.9 billion from $7.2 billion a year earlier, according to data from the Ministry of Commerce and Industry. Imports grew 51 percent, the fastest gain in seven months, to $29.9 billion, while exports expanded 27 percent to $16 billion.

A near doubling of oil prices has boosted import costs, since India relies on overseas purchases for three-quarters of its energy needs. India paid an average $8 billion a month this year for oil imports, up from $5.5 billion in 2007, as crude oil costs surged to a record $147 a barrel on July 11. In India, the 35 percent drop in oil prices since July has been partially offset by the decline in the rupee to a five-year low. India's oil imports in August rose 77 percent to $10.9 billion as refiners paid more for crude oil purchased overseas. Non-oil imports gained 40 percent to $18.9 billion. Imports in the five months ended August 31 rose 38 percent to $130.3 billion from $94.6 billion a year ago. That took the trade deficit to $49.2 billion, compared with $34.5 billion in the same period a year earlier.

Overseas sales of Indian goods in the five months to August 31 grew 35 percent to $81.2 billion, compared with $60.1 billion, the statement said.


Overseas sales of Indian goods in the five months to August 31 grew 35 percent to $81.2 billion, compared with $60.1 billion, the statement said.

India's current account deficit widened to a record in the three months to June as a surge in crude oil prices increased the nation's import bill. The shortfall, the amount by which imports exceed exports, remittances and other income from abroad, increased to $10.72 billion from a $1.04 billion gap in the previous quarter, the Reserve Bank of India said in a statement in Mumbai. Analysts expected a deficit of $11.52 billion.