Market Update - 5 Sept 2012

US Manufacturing is flat lining according to the ISM manufacturing PMI, which fell to 49.6 from 49.8, making for a 3rd straight monthly contraction. Drilling down, the figures look very bleak indeed: new orders, including those for export dropped, while inventories rose and the employment stat fell.

In Europe the PPI also showed healthy bounce (ermmmmm……) as oil and other commodities     rose, however again the implications for monetary policy are not so good.

USDMYR had a dip late yesterday evening with Ringgit appreciating with suspect from offshore buying, but range is still stuck at 3.1000-3.1500

The ECB’s sitting German member Joerg Asmussen declared the fractured nature of the Euro Zone (vis a vis sovereign yield) was unacceptable and that the ECB was within its mandate to buy Spanish debt because it was necessary to save the single currency.

Maraino Rajoy will travel to Berlin for talks with Angela Merkel today where they will discuss potential terms of a fully blown bailout, while confidence grew that the ECB will outline plans to purchase Spanish debt on the secondary market out to 3yrs.

The odds have increased that the Spanish will be forced into a full blown bailout and it’s a question of how quietly they come. If Rajoy holds out then we can expect more tension in the markets which will eventuate in Spain requesting aid, which will be Merkel’s argument to the Spanish leader.

The Euro pulled back from a technical level at 1.2630 and is down at 1.2565 last and stocks across the board were weaker with the Euro Stoxx 50 down 1.08%, the DOW down 0.42% and the S&P off 0.12%. Bigger losses were averted thanks to Apple (+1.45%), whose shares led tech stocks higher into the close, materials stocks were hit the hardest. Oil fell 0.87% while safe haven     bonds were a touch softer.