Market Update - 25 Sept 2012

• Another quiet night as we saw equities fall and bonds are back in demand, and Asia continue to be on the back foot as fears of China’s severe slowdown is gripping everyone

• Oil fell 0.9% in the US and copper lost 1.3% while 10yr treasury yields fell 4bps to 1.709%. Risk currencies also fell with the Euro falling to a 2 week low at 1.2931 last.

• Data from Germany was a focal point early and it showed the business climate there falling for a 5^th straight month to 101.4 from 102.3 last month. Drilling down shows that the outlook for manufacturing and construction going forward is weakening and is consistent with a tough final quarter for zie Germans.

• We know all about the rest of Europe, so that leaves America; the Chicago Fed National Activity Index last night fell to -.87 from -.13, the lowest since 2009 and again consistent with other indicators pointing to slowing. The Dallas Fed general activity index held up better but still negative at -0.9 from -1.6..

• The S&P recovered from its lows to close down just 0.2% while the Euro STOXX fell 0.75% after more wrangling over banking supervision. Since QE3 we’ve seen cyclical stocks underperform and defensive stocks do very well, oil, gas, financials and materials were soft again with healthcare and utilities strong.

• We also heard from a EU diplomat that a taskforce is working on a plan to quadruple the size of the ESM to €2 trillion by creating guarantees to encourage private investors to contribute. This smacks of desperation and highlights the point I raised yesterday that the ESM may face a funding problem as they scramble to gather 00’s of billions from the already bloated European sovereign bond market.

• Apple only sold 5 millions iPhone 5’s over the weekend, missing some analyst estimates. Apple fell 1.5%.