U.S. MARKET AVERAGES

Market averages are trading in split fashion as investors digest the May trade deficit report. The U.S. government report 2.7% decline in trade deficit largely on the decline in prices for oil import. The May trade deficit is though lower than April deficit but the annual deficit is still likely to top $700 billion. If oil prices spike in the 3rd quarter than the annual deficit may be even higher.

The U.S. government panel that reviews mergers of companies that involve foreign companies is expected to not review the proposed merger between Unocal and Chinese company CNOOC until the companies are closed to definitive deal.

Tech sector reversed the early gains and materials and health care sectors are trading lower. The dollar is holding onto the morning gains as lower trade deficit number provides support to the higher dollar. Weaker forecast for the 2005 earnings from Abbott and pre-release from HCA International is dragging the hospital and pharmaceutical stocks.

Apple Computer, YUM Brands and Advanced Micro are some of the few companies to release earnings at the end of the day.

Oil traders are watching the fate of world’s largest off-shore oil rig on the coast of Gulf of Mexico. The rig not in production but scheduled to produce significant amount of oil and gas is likely to be damaged permanently. The rig jointly owned by BP (75%) and ExxonMobil (25%) may not be repaired and reduce the production growth targets set by BP for the year 2006 and beyond.

ECONOMIC NEWS

The U.S. government reported that the trade deficit for the month of May declined from the previous month. Total May exports of $106.9 billion and imports of $162.2 billion resulted in a goods and services deficit of $55.3 billion, $1.6 billion less than the $56.9 billion in April, revised. May exports were $0.2 billion more than April exports of $106.7 billion. May imports were $1.4 billion less than April imports of $163.6 billion.

In May, the goods deficit decreased $1.6 billion from April to $60.8 billion, and the services surplus was virtually unchanged at $5.4 billion. Exports of goods decreased $0.1 billion to $74.5 billion, and imports of goods decreased $1.6 billion to $135.3 billion. Exports of services increased $0.2 billion to $32.4 billion, and imports of services increased $0.2 billion to $27.0 billion.

In May, the goods and services deficit was up $6.6 billion from May 2004. Exports were up $10.5 billion, or 10.9 percent, and imports were up $17.1 billion, or 11.8 percent.

The deficit for the Jan-May period jumped from $207 billion in 2003 to $236 billion in 204 to $284 billion on 2005.

The crude oil import for the month of May remained above 10 million barrels tracking the average import for the last two years for the similar months but average crude price per barrel jumped from $33.14 in 2004 to $43.08 per barrel. The 30% higher price of crude has not dampened the import of crude from a year ago. The crude price declined by 3% from April from that will reverse in June and July crude import data.


INTERNATIONAL MARKET NEWS

Markets in Europe advanced on gains made by oil majors as crude-oil resumed level over $60 a barrel and gains of automakers which reported monthly new-car sales increase. Germany’s DAX 30 added 0.4, France’s CAC 40 gained 0.7%, and London’s FTSE climbed 0.6%. The euro slipped 0.8% to $1.2124.

Asian benchmarks closed mixed as U.S. blue chips slipped and crude-oil climbed back to $61 a barrel on a new approaching summer storm. Japanese stocks ended down 0.3% as investors locked in profits awaiting corporate earnings reports in the U.S and Japan. South Korea’s Kospi gained 0.6% on strong demand for financial stocks. Hong Kong’s Hang Seng climbed 1.1% on solid gains for select blue chips. In Tokyo the dollar traded at 111.42 yen.

European shares advanced in mid-day dealings boosted by oil companies as crude-oil resumed higher levels of over $61 a barrel under the threat of the oncoming Tropical Storm Emily and gains posted by automakers. The German DAX 30 added 0.3%, the French CAC 40 rose 0.4%, and the U.K.’s FTSE 100 climbed 0.6%. In currency markets the euro and the pound lost ground against the dollar and quoted at $1.2183 and $1.7652 respectively.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil prices eased from $61 a barrel but held over $60 as the threat of oncoming storm receded because it changed its trajectory. August delivery for U.S crude-oil fell 10 cents to $60.52 a barrel. .London Brent was $58.85.

Gold futures dropped as a decline in U.S trade deficient provided support for the dollar. August delivery fell by $2.40 to $424.70 bid per troy ounce on the NYME. Silver for September delivery was down 1 cent at $7.075 per ounce. Copper prices climbed up again lifting September contract to $1.556 a pound, 1.7 cents up.