Equity Update

The rally initiated on Monday continues and the broader market is looking upward this morning.

Earnings are beginning to do their part and the Middle East is developing into a non-story.
Then there's the macroeconomic picture. Clearly, the market has decided that despite major warning signals, especially with regards to the US housing market, asset prices will stabilize and perhaps even advance from here. We never ignore the price action, i.e. what the market is telling us, but we're obviously surprised by this week's advance in both Europe and the US. That said, seeing a rally that really isn't supported by macro data nor earnings and with risks of re-escalation of tensions in the Middle East, be carefull of going all out long in this sort of market.

In the short-term, however, look for DAX to test 5728, FTSE 5879 and Stoxx50 3670.

On tap this morning, we have German IFO at 8.00 GMT with Fed's Beige Book coming out at 18.00 GMT.

Corporate News:

Merck may rise after it said net income jumped to 528.5 million euros ($664.2) from 248 million euros a year earlier, the company said in a statement on its Web site today. This almost matched the 529 million-euro median estimate of 10 analysts surveyed by Bloomberg. Sales rose 4.1 percent to 1.52 billion euros.

Casino, France's fifth-largest supermarket operator, said after European markets closed yesterday that second-quarter sales climbed 16 percent to 6.12 billion euros ($7.7 billion), helped by gains in Latin America and the U.S. International sales jumped 61 percent to 1.8 billion euros.

JCDecaux SA may decline. The world's second-largest outdoor advertising company said second-quarter sales rose 11 percent to 503.6 million euros, less than the 505.5 million-euro median estimate in a Bloomberg survey of nine analysts.