Market Update 26 Sept 2012

• The gloom continued overnight despite Europe putting in a reasonable session against the odds. The Spanish parliament was surrounded by riot police as protesters gathered in Madrid and Catalan leader Mas called early elections for November 25^th, presumably to seek a mandate for secession from Spain.

• Snippets of data in Europe were in line with expectations but still weak while S&P revised their growth forecasts for Euro Zone growth to -0.8% from -0.7% in 2012 and to 0% from 0.3% in 2013. So no growth until 2014.... Angela Merkel declared Europe would need “stamina” to see the crisis through. Indeed.

• USDMYR opened higher again at 3.0800 as market turns risk off and most Asian equity markets kick started the day down, range of 3.0500-3.1000 still holds strong and expect buy on dips to prevail in current market conditions

• US data released was all strong with consumer confidence rising to 70.3 from 60.6 (close to post GFC highs) the Richmond Fed manufacturing index bouncing nicely and house prices still growing steadily.

• Things were bubbling along nicely until Charles Plosser (FOMC non-voting super hawk) came out with plenty to say about QE3: he said that it would not help employment, it risks longer term inflation, makes the exit strategy incredibly risky and damages the credibility of the Fed.

• That was the nail in coffin for risk assets and everything went down for the remainder of the session, Caterpillar didn’t help by cutting earnings forecast for 2013 citing weak global growth. The S&P fell 1.05% (cyclical stocks battered), gold fell $15 to $1760, oil fell 1.2% to $90.84 (lowest close since early August) while treasury yields fell 4bps to 1.67%.

• More from the Japan/China island saga with Toyota cutting production headed for China as 10’s of thousands of Japanese cancelling flights and governments issue travel warnings.