Market Update - 11 October 2012

· It was another risk off session overnight as the “global growth fears” headline refuses to budge. The outlook on Chinese demand by Alcoa (-4%) this year and next hurt industrials and materials stocks, sending the S&P (-0.62%) to its 4^th straight day of losses. 

· Chevron fell close to 5% after issuing a profit warning, dragging the DOW (-0.95%) down with it. Stocks in Europe were down 0.63% and peripheral spreads held steady as Merkel’s visit was highlighted by protests, but nothing out of the ordinary.

· USDMYR remained on the top half of the trading range at 3.0830 as risk off seems to be the theme to trade on today, the negative earnings results for Q3 isn’t helping so far, coupled with weakening Chinese outlook. Possibility of USDMYR testing 3.0900 as we head towards the weekends with some interest to long some Dollars.

· US 10 year auction went well, yield 1.70%, bid to cover 3.26, indirects took 41.4%. Notes had been soft into the auction but took off afterwards, shedding 6bps in yield to go out at 1.68%.

· The FED released its Beige Book this morning and the conclusion was the economy is expanding modestly (VS moderate to modest pace prior). They saw a widespread improvement in the housing market, steady to stronger loan demand and some districts saw steadily declined delinquency rates. Employment conditions were little changed while retail was being hurt by fiscal cliff fears and the energy sector remained strong with oil production hitting records in a record in North Dakota. Price pressures were generally contained.

· The Fed’s non-voting hawk Kocherlakota spoke overnight and said easy money should stay until employment is below 5%, which could take 4 years, noting that if inflation breached 2.25% tightening would be considered.

· French and Italian IP confounded expectations by both showing a gain in September, while US wholesale inventories failed to keep pace with sales growth, indicating a lack of belief in future demand.

· Chinese car sales also came in lower than forecast, no doubt the whopping fall in Japanese manufacturers sales volumes played a significant part.

· Also the merger of BAE and EADS fell through after political deadlock between Britain,Franceand German