Market Update - 17 Oct 2012

• And its risk on out there folks, better than expected earnings, benign inflation in the US and European officials predicting a Spanish bailout in November. The S&P rallied into the close after Goldman Sachs, J&J, Coca Cola reporting in line or above expectations (although Intel and IBM reported poorly after the bell). The Dow had its biggest 1 day rise since QEternity day, up 128pts or 0.95% and the S&P rose over 1%. Yields in the US, UK and Germany all rose 6-7bps while peripheral yields held steady. Oil rose 0.29% to $92.12, gold rebounded 0.58% to $1747.

• We still seem to be trading on the news I mentioned yesterday of officials pointing to a November bailout request by Spain, whose stock market rose 3.5% overnight leading the Eurostoxx 50 higher by 2.5%.

• USDMYR opened below the strong support of 3.0500, currently trading at 3.0400/3.0450, it will again be crucial to see if USDMYR can indeed break the support firmly and head lower this week. Expected trading range to day to be 3.0300-3.0600.

• Elsewhere in Europe Greece and Spain held successful debt auctions but tweets from Zero Hedge (unconfirmed) suggested that talks between Greece and the Troika were going badly. The Euro rose a big figure to 1.3055 last as the dollar fell vs all but the Yen, against which it rose 20pts.

• The US curve has steepened overnight as the market sets up for today’s second presidential debate and absorbs the fact that recent data has been better than expected. Following Romney’s strong performance two weeks ago, the market is considering the possibility of him building on that momentum, although tonight’s town hall format is more unpredictable and supposedly favours Obama. Right from the start of the session it was all virtually put structures being looked at, weaker longs are being forced out, back month Eurodollars are lowest they been since last month.

• US CPI came in as expected, rising 0.6% MoM and excluding gas and food rose only 0.1%. So despite murmurs of inflationary pressures the data is still benign, which should steady the Feds nerve.

• The ZEW survey of economic sentiment in Germnay rose from -18.2 to -11.5, the biggest rise since the beginning of the year following LTRO 1, while car sales fell 11% across Europe but the ZEW pan Europe figure held steady