Market Update - 9 Sept 2012

• Low volumes overnight as the US bond market was closed but we had risk off trading nonetheless, with treasury futures taking back almost all of their losses from Friday and equity markets in the red.

• US stocks were weighed down by Apple, which fell 2.2%, as the S&P fell 0.35% and the Euro Stoxx fell 1.39%. UK and German yields fell 4-5bps. Oil was flat while gold slipped smalls.

• USDMYR remains stuck at 3.0650 but more and more speculation of election next month have been on market’s mind. I see no real breakout for the pair with buy on dips supporting the pair and with IMF seeing increased headwinds for Asian economy I reckon there might be a slight upside bias at the moment.

• The only data was German with IP falling 0.5% in Sept vs survey of -0.6%, nothing new there, while trade held up well with exports particularly healthy, up 2.4% MoM.

• We have a lot of institutional activity this week and the World bank kicked things off overnight by downgrading their forecast for China to 7.7% this year from 8.2% in May, saying the risk of a “hard landing” was low but still there. They also said growth in the APAC wider region would bounce back strongly in 2013, led by China, Indonesia, Malaysia and Thailand. Tonight the IMF release their growth forecasts although a leak last week showed they cut their 2012 estimate to 3.3% from 3.4% and 2013 estimate from 3.9% to 3.6%.

• The OECD painted a bleak picture for Europe and the US but said that growth indicators in China looked to be stabilizing, they also had the UK being the standout performer in Europe over the coming period.

• The ESM is officially open for business (even though there’s no cash in it...) as the board met for the first time overnight with Klaus Regling telling newspapers that he was concerned some countries do not have the political will to stay their course.

• Germany’s Bundesbank lashed out at the IMF for calling on the ECB to take bolder action, Dombret and Weidmann both spoke out with the latter running his usual lines, “there is a risk of overloading the central bank”.

• Greece will put 7,000 policemen to work in Athens in anticipation of heavy riots as Angela Merkel arrives tonight.