Goldman Sachs cut its ratings on U.S. investment banks Citigroup, Inc to "neutral'' from "attractive" and added Citigroup to its "conviction sell'' list.

Goldman Sachs downgraded the shares of the largest automaker General Motors Corporation and adding to the mix, Edmunds.com cut its 2008 auto-sales forecast.

Merrill Lynch & Co., the third-biggest U.S. securities firm is likely to post losses related to writing down the value of mortgage-related assets, according to Sanford C. Bernstein & Co.

Lennar Corporation, one of the nation's largest homebuilders reported that its profit loss narrowed in the second quarter as the company reported fewer writedowns. But CEO Stuart Miller said that further deterioration in the homebuilding industry will "likely become reality absent Federal government action."

"The data (industrial orders) is likely to reinforce the ECB's belief that the euro zone's economy is fundamentally sound and that it can press ahead with raising its key interest rate from 4 percent to 4.25 percent at its 3 July meeting to try to ensure that current elevated inflationary levels and pressures are not sustained over the medium term."

The stock market remains in a funk during afternoon trading, unable to compose a rally thus far this session. The broadbased S&P 500 has taken another step lower, reaching a new session low.
The financial sector is down 3.3%. Each of its primary industry groups is sporting a loss; thrifts and mortgage players (-5.5%) are showing the most severe decline.
Interest in U.S. Treasury Notes has picked up. The yield on the 10-year Note is currently 4.02%, reflecting an advance of 20 ticks.

The dollar declined to the weakest level against the euro in more than two weeks as investors reduced speculation that the Federal Reserve will increase borrowing costs in August.
The U.S. currency fell against the yen as stock markets tumbled on concern a slowing economy will hurt the earnings of banks and consumer companies. The pound rose to a seven-week high against the dollar after Bank of England Governor Mervyn King said policy makers will do what's needed to stem inflation.
``People are starting to wonder whether the Fed has the guts to raise rates in the first place,'' said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. ``The dollar could test $1.60 in the next month.''
The price of crude oil for August delivery rose more than $3 a barrel to $138.33 on the New York Mercantile Exchange after the head of Libya's national oil company said it may cut production. Investors buy commodities as a hedge against the falling dollar as accelerating inflation erodes the value of the U.S. currency.
Stronger Pound
The pound strengthened after King said inflation in the U.K. will probably exceed 4 percent in the coming months. Sterling increased as much as 0.7 percent to $1.9895, the highest since May 2, after the BOE governor told lawmakers in London that ``although inflation is rising now, we will insure that it falls back to the 2 percent target.''
The U.S. currency fell versus the euro yesterday as the Fed left the target lending rate at 2 percent and said in a statement at the end of its two-day meeting that ``uncertainty'' about the inflation outlook remains high.
The chance that the Fed will increase the target rate for overnight lending between banks at its next meeting on Aug. 5 has fallen to 22 percent, from 36 percent yesterday and 44 percent a week ago, according to futures on the Chicago Board of Trade. The balance of bets is on no rate change.
Trichet on Inflation
European Central Bank President Jean-Claude Trichet reiterated yesterday in speech before the European Parliament in Brussels that policy makers may increase the 4 percent main refinancing rate by a quarter-percentage point on July 3 to contain inflation.
``The euro is generally benefiting from expectations the ECB will raise rates next week,'' said Marcus Hettinger, a currency strategist in Zurich at Credit Suisse Group, Switzerland's second-biggest bank. ``The ECB is focused on inflation, and that's supporting the euro. It's not the real economic data that's driving the euro.''

The stock market is trading just above its session low after encountering resistance at 1300. At its current level, the stock market is on track to conclude June with a 7.5% loss.
Only the consumer staples sector (-0.8%) is trading with a loss below 1.0%. The sector's relative leaders include General Mills (+0.35) and Dow component Coca-Cola (-0.04). Not one of the economic sectors are posting a month-to-date gain.
Treasuries are receiving some attention amid the sour mood in equities. The 10-year Note is up 13 ticks and yielding 4.05%.

Goldman Sachs downgrades General Motors and Citibank, accelerating Wall Street's decline.
Stocks sank Thursday morning after Goldman Sachs downgraded two key Dow components and two tech leaders disappointed investors.
The Dow Jones industrial average was down about 240 points, or 2%. The broader Standard & Poor's 500 index fell 2% and the tech-heavy Nasdaq composite declined 2.5%.
Shares of General Motors plunged after the market opened Thursday, sending the largest U.S. automaker's stock to its lowest level in more than 30 years, after Goldman issued a "sell" recommendation. GM shares dropped 11%. Goldman downgrades other banks. Goldman cut its ratings on U.S. investment banks to "neutral'' from "attractive" because of continued deterioration of the banking industry and the prospect of a lengthy recovery. It also added Citigroup to its "conviction sell'' list. Goldman shares were down 3%, while Citi was 6% lower.
Shares of Lehman Brothers, Merrill Lynch , Morgan Stanley and Jefferies Group all lost ground.
Light, sweet crude for August delivery rose as high as $138.95 a barrel on Thursday morning in electronic trading on the New York Mercantile Exchange after the dollar failed to respond to Wednesday's Federal Reserve decision to hold interest rates steady. It was up $4.12 to $138.67.
Oracle breezed past analysts' expectations in its fiscal fourth quarter late Wednesday, but gave more conservative guidance. Oracle shares were down 3%.
Research in Motion missed its target and guided down its profit forecast for the quarter. Shares of the BlackBerry maker were down more than 12%.
The Commerce Department's final reading on first-quarter gross domestic product, the broadest measure of the nation's economic activity, was revised up to a 1% annual rate from the previous reading of 0.9%.
Sales of existing homes rose slightly more than expected in May as home buyers responded to plummeting home prices, according to an the National Association of Realtors. The number of existing homes sold rose 2% to a seasonally adjusted annual rate of 4.99 million units.
Sales were 16% below the 5.93 million-unit pace in May 2007, the report showed. Thursday's report marked only the second time in 10 months that sales have increased.
The Labor Department reported that 384,000 workers filed for unemployment benefits last week, unchanged from the week before.
Treasury prices gained, lowering the yield on the benchmark 10-year note to 4.07% from 4.10% late Wednesday. Bond prices and yields move in opposite directions.

WTI Nymex crude oil spiked to $138.92 high, just before easing back to $137.20 as natural gas futures fall $4.00 from session high. Traders say the move higher was attributed to earlier comments from OPEC President Khelil - sees oil at $150-$170/barrel during the summer.

"This (380k) level of claims is consistent with a weakening labor market. We expect non-farm payrolls to fall 50,000 in June while the unemployment rate only slips a tenth to 5.4%."

Stocks attempted to pare losses, but have fallen to fresh morning lows. The financial sector is currently the worst performer among the ten major economic sectors. It is currently down 2.9%. Year-to-date, the financial sector is down 27.2%.
On a related note, Discover Financial Services (-0.15) announced earnings results for its latest quarter that topped the consensus earnings per share estimate, generating $0.42 per share. Shares of Discover Financial Services are trading above earlier lows.

Futures continue to suggest a lower start to trade (S&P futures -16.2, Nasdaq futures -42.0). The final reading for first quarter GDP growth was revised upward to 1.0%, which is on par with what economists were expecting. Personal consumption expenditures were revised upward to 1.1%. The GDP price index came in at 2.7%, which is above both expectations and the inital reading. Separately, jobless claims for the week ending June 21 exceeded expectations, totaling 384,000, and were unchanged from the prior week. Continuing claims were reported at 3.139 million; economists projected claims of 3.105 million, while the prior reading was revised slightly lower to 3.057 million continuing claims.
On the earnings front, homebuilder Lennar reported a loss that was worse than analysts forecast for the most recent quarter. Separately, Rite Aid also missed the consensus earnings estimate and reported a loss for the quarter.
According to reports, a Goldman Sachs analyst believes Citigroup may incur addtitional write-downs and raise capital in the second quarter. Along with Citi, Goldman cited Merrill Lynch as another financial institution that may need to raise capital. Goldman has added shares of Citigroup to its Conviction Sell List, according to reports. Outside of the financial sector, Goldman has cut estimates for General Motors and added the company to its Americas Sell List, according to reports.

The dollar dropped as traders cut bets the Fed will raise its target lending rate by a quarter-percentage point in September. U.S. policy makers said yesterday in the statement announcing their rate decision that ``uncertainty'' about the inflation outlook remains high.

The euro stayed higher after a government report showed consumer confidence in France, the second-largest of the 15 economies that share the single currency, fell to a record low in June, adding to evidence growth in the region is waning.
``The euro is generally benefiting from expectations the ECB will raise rates next week,'' said Marcus Hettinger, a currency strategist in Zurich at Credit Suisse Group, Switzerland's second- biggest bank. ``The ECB is focused on inflation and that's supporting the euro. It's not the real economic data that's driving the euro.''
The yen fell to a record against the euro on speculation the European Central Bank will boost interest rates and as Japanese workers prepare to spend their summer bonuses on overseas assets offering higher yields.

EUR/USD: posted low around $1.5624 before bounsed back to $1.5680. Later the rate extended rally to $1.5740. Offers remain in place on approach to $1.5750. Bids rest between $1.5630/20. Traders also suggest that demand stretches down to $1.5600, more at $1.5580.

GBP/USD: kept positive mood and reached $1.9870 ahead of American session opening.
USD/JPY:traded within Y107.80-Y108.15 range before general US dollar pressure took the rate down to Y107.45. Bids Y107.40, Y107.10/00, offers Y108.20

Euro-dollar offers remain in place on the approach to $1.5720, more on approach to $1.5750 with large stops above this latter level. Bids remain in place between $1.5630/20. Traders also suggest that demand stretches down to $1.5600, more at $1.5580 with main downside stops placed on a break below.

Sees oil at $150-170 pb during summer. Does not think oil will reach $200pb. Market speculation 'a certainty', question is extent of its impact on oil market. There are problems of supply, demand, stocks but these do not fully explain price rise.

Greg Salvaggio, vice president of capital markets at the currency-trading company Tempus Consulting - "There are obvioulsy buyers coming into the market now, with people looking to grab the euro at cheaper levels there."

The euro stayed higher after a government report showed consumer confidence in France, the second-largest of the 15 economies that share the single currency, fell to a record low in June, adding to evidence growth in the region is waning.
``The euro is generally benefiting from expectations the ECB will raise rates next week,'' said Marcus Hettinger, a currency strategist in Zurich at Credit Suisse Group, Switzerland's second- biggest bank. ``The ECB is focused on inflation and that's supporting the euro. It's not the real economic data that's driving the euro.''
The dollar dropped as traders cut bets the Fed will raise its target lending rate by a quarter-percentage point in September. U.S. policy makers said yesterday in the statement announcing their rate decision that ``uncertainty'' about the inflation outlook remains high.
The yen fell to a record against the euro on speculation the European Central Bank will boost interest rates and as Japanese workers prepare to spend their summer bonuses on overseas assets offering higher yields.
Japan's currency slid for a third day as ECB President Jean- Claude Trichet said on CNN there may be a ``small increase'' in rates, while the Bank of Japan will likely keep borrowing costs on hold. The dollar traded near the weakest level in more than two weeks against the European common currency as investors raised bets the Federal Reserve will hold off lifting rates.
``The yen is going to continue to fall because the Bank of Japan has made it clear it isn't going to raise rates anytime soon,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp.
The yen may decline to 174 per euro and 110 to the dollar in the next three months, Mellor said.

Nicole Elliott, senior technical analyst at Mizuho Corporate Bank - "Pushing up above the top of a thin Ichimoku ‘cloud’ and would have done even better if other currencies had pulled their weight. If not today then probably before month-end we favour a re-test of the 1.5800 area."

Resistance 3: Y108.60
Resistance 2: Y108.20
Resistance 1: Y108.00
Current price: Y107.70
Support 1: Y107.20
Support 2: Y106.50
Support 3: Y106.20

Comments: Below Y107.20, support is around Y106.50. Below correction may reach Y106.20. Above Y108.00, further resistance comes at yesterday's peak of Y108.20. Rise above may extend Y108.50/60.

Resistance 3: Chf1.0540
Resistance 2: Chf1.0500
Resistance 1: Chf1.0470
Current price: Chf1.0300
Support 1: Chf1.0320
Support 2: Chf1.0220
Support 3: Chf0.0150

Comments: The nearest support at June 12 low at Chf1.0300, than comes Chf1.0220 and June low Chf1.0150. Resistance comes at yesterday's session high on Chf1.0470, break above will open a way to Chf1.0500. Further level comes on Chf1.0540.

Resistance 3: $1.9900
Resistance 2: $1.9850
Resistance 1: $1.9800
Current price: $1.9786
Support 1: $1.9720
Support 2: $1.9680
Support 3: $1.9630

Comments: Cable piersed resistance at $1.9740/50, and approached – near Jun 09 high on $1.9800. The break above to open the way for test of $1.9850. The nearest support is $1.9720 (today low) with a break under will open the way to $1.9680 and $1.9630.

Resistance 3:$1.5820
Resistance 2: $1.5760
Resistance 1: $1.5680
Current price: $1.5673
Support 1: $1.5630
Support 2: $1.5540
Support 3: $1.5460

Comments: The pare tested $1.5630 level (now support). The nearest resistance comes at $1.5680, then – at $1.5760. Stronger level is around $1.5820. The closest support at $1.5630. The stronger one comes at on $1.5540 with a break under will open the way to $1.5460 (this week low).

- Domestic demand needed to slow, net exports rise
- Sterling drop has been a step change
- Impossible to say what will happen to FX

- Would not be sensible to bring CPI to 2.0% in next 6 months
- Bringing CPI to target near term would see recession
- Singlae minded objective of PPC to bring CPI to 2.0%

The dollar traded near the lowest in more than two weeks against the euro after the Federal Reserve gave no indication it will raise borrowing costs following yesterday's decision to keep rates at 2 percent.The yen fell to a record low against the euro as the European Central Bank prepares to raise interest rates and Japanese workers look to use their summer bonuses to buy overseas assets offering higher yields.
ECB President Jean-Claude Trichet told the European Parliament in Brussels yesterday he's leaving open the option of raising interest rates again to contain accelerating inflation.
``The ECB will raise rates in July for sure,'' said Takahide Nagasaki, senior currency strategist in Tokyo at Daiwa Securities SMBC Co., a unit of Japan's second-largest brokerage. ``In Japan, it's still hard to do so. The widening interest-rate gap will push down the yen against the euro to 170.''

EUR/USD: posted low around $1.5624 before bounsed back to $1.5680.
GBP/USD: got support at $1.9720 and reached $1.9795 ahead of European session.
USD/JPY: traded within Y107.80-Y108.15 range.

EUR
Bids: $1.5620.
Offers: $1.5700, $1.5720 и $1.5750.

JPY
Bids: Y107.30, Y107.10/00, Y106.90/80.
Offers: Y108.30, Y108.40, Y108.60.

GBP
Bids: $1.9700
Offers: $1.9800, $1.9820, $1.9850.

AUSSIE
Bids: $0.9570, $0.9490
Offers: $0.9600

- ECB hike may have big impact on inflation expectations
- Stagflation expectations are exaggerated
- Slight recovery of EMU GDP at turn 2008/09
- EMU inflation to slow at end of 2008

FTSE and DAX down 28, the CAC down 26 and the Eurostoxx 50 down 20.

The benchmark Nikkei 225 was lower by 7.60 points, or 0.05%, at 13822.32. The broader-based TOPIX 1.29 points lower at 1344.79.

Resistance 3: Y108.60
Resistance 2: Y108.20
Resistance 1: Y108.00
Current price: Y107.90
Support 1: Y107.20
Support 2: Y106.50
Support 3: Y106.20

Comments: Above Y108.00, further resistance comes at yesterday's peak of Y108.20. Rise above may extend Y108.50/60. Below Y107.20, support is around Y106.50. Below correction may reach Y106.20.

Resistance 3: Chf1.0540
Resistance 2: Chf1.0500
Resistance 1: Chf1.0470
Current price: Chf1.0350
Support 1: Chf1.0320
Support 2: Chf1.0300
Support 3: Chf0.0260

Comments: The nearest support at today's lows Chf1.0340, then is June 12 low at Chf1.0300, than comes Chf1.0260. Resistance comes at yesterday's session high on Chf1.0470, break above will open a way to Chf1.0500. Further level comes on Chf1.0540.

Excluding crude oil and petroleum products, import prices rose 0.6% on the month and 2.0% on the year.

Resistance 3: $1.9850
Resistance 2: $1.9800
Resistance 1: $1.9750
Current price: $1.9736
Support 1: $1.9620
Support 2: $1.9580
Support 3: $1.9480

Comments: Minor resistance spotted at $1.9740/50, then – near Jun 09 on $1.9800, with a break above this level there is a room for testing $1.9850. The nearest support is $1.9620 (yesterday's low) with a break under will open the way to Monday low at $1.9580 and then – to $1.9480.

Resistance 3:$1.5820
Resistance 2: $1.5760
Resistance 1: $1.5680
Current price: $1.5667
Support 1: $1.5630
Support 2: $1.5540
Support 3: $1.5460

Comments: in the wake of FOMC the pare pierced $1.5630 level (now support). The nearest resistance comes at $1.5680, then – at $1.5760. Stronger level is around $1.5820. The closest support at $1.5630. The stronger one comes at on $1.5540 with a break under will open the way to $1.5460 (this week low).

The front-month Nymex WTI Aug '08 contract was last down 25 cents at $134.30.

High Low Close
EUR/USD 1.5685 1.5534 1.5664
USD/JPY 108.38 107.64 107.86
GBP/USD 1.9767 1.9655 1.9743
USD/CHF 1.0433 1.0340 1.0350

EUR/JPY 169.12 167.61 168.96
EUR/GBP 0.7944 0.7889 0.7931
GBP/JPY 213.26 212.13 212.96
GBP/CHF 2.0552 2.0403 2.0434

Change % Change Last
Nikkei 225 -19.64 -0.14% 13,829.92
Topix -3.11 -0.2% 1,346.08
DAX 30 +81.78 +1.25% 6,617.84
САС 40 +62.53 +1.40% 4,536.29
FTSE 100 +31.40 +0.56% 5,666.10
Dow +4.40 +0.04% 11,811.83
Nasdaq +32.98 +1.39% 2,401.26
S&P -3.71 +7.68 +0.58% 1,321.97
10yr Note +0.1000 +0.024% 4.115%
OIL NYMEX -2.45 -1.79% 134.55
Gold -9.30 -1.04% 882.30

06:00 Germany Import prices (May) - 0.9%
06:00 Germany Import prices (May) Y/Y - 5.7%
06:00 Germany Import prices excluding oil (May) Y/Y - 1.5%
06:45 France Consumer confidence (June) - -41
07:30 Italy Business confidence (June) - 89.6
12:30 USA Jobless claims (week to 21.06) 380K 381K
12:30 USA GDP (Q1) final Y/Y 1.0% 0.9%
12:30 USA PCE price index (Q1) final - 3.5%
12:30 USA PCE price index ex food, energy (Q1) final 2.1% 2.1%
14:00 USA Existing home sales (May), mln 4.99 4.89
17:00 France Unemployment (May) - -8.4K
20:30 USA M2 money supply (16.06), bln -
23:30 Japan Nationwide CPI (May) - -0.1%
23:30 Japan Nationwide CPI (May) Y/Y - 0.8%
23:30 Japan Nationwide CPI ex fresh food (May) Y/Y - 0.9%
23:30 Japan Tokyo-area CPI (June) - 0.5%
23:30 Japan Tokyo-area CPI (June) Y/Y - 0.9%
23:30 Japan Tokyo-area CPI ex fresh food (June) Y/Y - 0.9%
23:30 Japan Unemployment (May) 4.0% 4.0%
23:30 Japan Household spending (May) real Y/Y - -2.7%
23:50 Japan Retail sales (May) Y/Y - 0.1%
23:50 Japan Industrial output (May) preliminary - -0.2%
23:50 Japan Industrial output (May) preliminary Y/Y - 1.9%