Market Update - 4 Oct 2012

• Most markets moved within a tight range overnight and lacked direction as things in Europe drag on and US data helps keep a sliver of optimism.

• USDMYR opened pretty much unchanged at 3.0600 and 3.0500 seems a firm support for now, expect range trading for the pair this week, but next week with a flurry of datas we could see some movements.

• Stocks were mixed with the DOW up 0.09%, the S&P 0.36% higher and the Euro Stoxx down 0.04%. UST yields held at 1.61% while peripheral yield spreads pushed out marginally.

• Eurozone services PMI’s were weak, as expected, with Germany slipping into contractionary territory, but as with the manufacturing figures on Monday the markets cheered the fact that they aren’t falling too quickly. The Euro bounced while stock markets vacillated as retail sales in the region also came in slightly stronger.

• Data in the US was better, with the ADP payrolls showing a gain of 160k jobs, better than the 140k survey but lower than the 189k added last month (itself revised lower).

• Meanwhile the ISM non-manufacturing PMI had a healthy bounce, rising to 55.1 from 53.7 and added to a 3 month uptrend and underscored the relatively upbeat nature of the US consumer. Orders and prices were up but again the employment component fell.

• Oil was clobbered, falling 4.1% as the DOE released stats showing US production reached a 15 year high and demand fell 0.3% in September. Other commodities were mixed.

• The Troika is disputing with Greece over its forecast for growth next year, they reckon the contraction will be -5% vs the -3.8% the Greek finance ministry called the other day. Officials are hoping an agreement can be reached by Monday when EU fin mins meet in Luxembourg, but insiders say the 2 parties are “far apart” at present. The ECB also said it had not ruled out extending the maturity on its holdings of Greek debt (which are considerable).

• Portugal successfully swapped €3.76bn of 1 year paper for 3 year paper and announced a raft of tax hikes overnight, causing the 10yr yield to fall 16.5bps to 8.5%. Cuts were shelved earlier in the year due to mass protests, and a general strike was announced soon after last night’s announcements.

• Awful scenes in Syria overnight as bombs exploded in the warring city of Allepo killing at least 31 people, it’s not clear exactly who was responsible for the attacks but one terrorist group linked to Al Qaeda claimed it was them . Rebel forces earlier in the month took the northern border post of Tal al-Abyad, which was fired at by regime mortars, one shell missing its target and landing over the border in Turkey killing a woman and her 3 children.

• Turkey lodged a complaint with NATO immediately and responded by firing tank shells into Syria. An emergency NATO meeting has been scheduled in Brussels. The move is seen as an attempt to draw Turkey into the war while the US delays a vote in the security council as the elections loom.