Forex

* US stocks managed to close higher in Friday's trade as the price of oil fell further and all key economic data releases out of the US came out better than expected.
* Crude oil is trading near a seven-week low, with the contract for September delivery hovering just above $123 per barrel, as both the OPEC and China are raising output.
* Today's most important data is the German Länder CPI for July, which will provide an important lead to Euroland Flash CPI due out later this week. In the US, Fed Board Member Mishkin will be speaking tonight.

Markets Overnight

The main US equity indices managed to close with small gains in Friday's trade, with the S&P500 index up 0.4% and the Dow Jones index up 0.2% on the day. Although information technology and energy stocks helped the S&P500 index to pair Thursday's decline, energy stocks still suffered the biggest loss out of the ten industry groups in the index.

Friday's economic data releases out of the US were generally supportive for equity markets, as all key numbers surprised on the upside. Firstly, durable goods orders showed a solid gain in June, indicating that the corporate non-financial sector remains in decent shape. Secondly, the University of Michigan confidence indicator for June rebounded nicely as both current conditions and expectations improved. Importantly, the report also showed that 5-yr inflation expectations declined to 3.2% from 3.4%, which could reduce concern among FOMC members about inflation risk. Finally, new home sales fared better than expected in June, and home sales in prior months were revised up by a net amount of +50K.

US Treasuries sold off in Friday's trade, following decent gains the day before as yields on both two-year and ten-year notes rose more than 10bp. We have seen some improvement overnight, though, and yields have come down slightly.

On the energy market, oil is trading close to a seven-week low, with the contract for September delivery hovering just above $123 per barrel, as both the OPEC and China are raising output. The price of oil dropped more than $5 per barrel last week and has come down close to 24 dollars from its record high a few weeks ago.

In Asia, equity markets are trading slightly higher at the time of writing, as especially commodity producers have advanced. Financials have seen some pressure, though, after Australia's fourth-largest bank (the ANZ) forecast the biggest drop in profits since 1992, which caused the price of its shares to drop more than ten percent.

On the FX market, there have only been small movements overnight. EUR/USD is trading in the 1.566-1.576 range, and USD/JPY is hovering at roughly 108. In Scandinavia, EUR/NOK is trading at around 8.08, while EUR/SEK has drifted slightly lower, trading at around 9.46.
Global Daily

This week will start off relatively quiet, with the flow of data intensifying as the weekend approaches. Today's most important data is German Länder CPI for July, which will arrive this morning and will provide an important lead to the Euroland Flash CPI numbers due out later this week. In the evening, attention will turn to the US, where Federal Reserve Board Member Mishkin (voter, dove) is speaking. If Mishkin comments on the economic outlook or monetary policy, his assessment will probably be much more in line with Bernanke's Congressional testimony than the hawkish speeches delivered by some of the regional Fed Governors over the past few weeks. This could help to calm market fears of an early Fed hike.

This week's main events will be the Euroland Flash CPI on Thursday, when US Q2 GDP is scheduled as well. On Friday, the dataflow peaks with July non-farm payrolls and ISM manufacturing. Our estimate does not differ significantly from the consensus view, although it is slightly lower. In any case, this week's forward-looking US data should serve as a reminder that growth prospects remain relatively gloomy. Furthermore, the downward trend in commodity prices over the past couple of weeks seems to persist. This combo could add some downside to bond yields - particularly the short end in Europe - if global risk appetite fails to improve much this week. Fundamentally, we still favour steeper curves and lower bond yields in both Euroland and the US on a 3- 6 months' horizon.