Market Update - 7 November 2012

• Was hoping to wake up and all the votes would be in but it’s gonna take longer than expected. So headline watching today as news trickles out about the US election results, just remember the 2000 election took weeks to resolve after it was too close to call.

• USDMYR also trading with a slight risk on as the elections and weeks of uncertainty is coming to a close, if no dispute or nothing unexpected happens. USDMYR likely to trade in the tight range of 3.0400-3.0800

• Markets overnight traded in a fashion consistent with an Obama victory (Intrade have a 70% of Obama winning) although it is still too early to tell; The US dollar was weaker except vs the Yen where it seems months of dithering over how to weaken the currency may finally be starting to work for policy makers there, next BOJ event 20/11 but they may not wait that long .

• Gold put on 1.8% or $30 to close $1714.32 while other commodities tracked higher with copper up 1.1% and oil rose 3% to $88.29.

• The S&P and the DOW close higher by about 1%, led by oil & gas stocks and financials after it became clear yesterday that Basel 3 implementation would be delayed by at least 6 months.

• We had services PMI figures out of Europe and they did nothing to dispel my fears that Q4 is going to be tough across the board; Spain and Italy beat expectations but are mired in contractionary territory while the German and French indices are both sat at their lowest levels since the depth of the GFC (and France is not far of that low either). Anyway, the equity markets clung to the stronger peripheral figures and were helped by a €20b tax break package announced by the French PM.

• German factory orders fell 3.3% mom versus a survey of -0.4% and -0.8% last month, ouch.

• The Eurostoxx rose 0.73% while the currency was slightly firmer while peripheral spreads narrowed slightly. Spain seems to have gone very quiet vis a bailout where if we don’t get an announcement at next week’s summit the markets will be straight back onto them while Greece takes the headlines for now with a pivotal vote in their parliament tonight (by the way the Greek 10yr yield fell 65bps on the secondary market overnight...).

• US treasuries were soft as money switched from notes (+5.6bps) to bunds (+1bp) and the spread there reached the 30pt technical level as fears about congressional intransigence vis the fiscal cliff if Obama should win hurt sentiment.

• The 5am US 3yr auction saw BTC 3.41 vs 3.97 last, Indirect Bidders took 25.1% vs 28.8% last, High Yield 0.392% vs 0.346% last. No immediate reaction, TYZ2 later drifts off 4 ticks over the hour but hardly looked tender related.

• The European Commission came out with Spanish growth & national deficit forecasts was under what Spain themselves are working off. The EC calls 2013 Spanish GDP -1.5% (vs Spains -0.5%) & a budget deficit of 6% (vs Spains 4.5%). Despite all this Spanish (& Italian) 10yr yields contracted 10pts on the night.

• The reverse in fortune for the UK continued as Industrial production fell 1.7% mom and manufacturing production was weaker than expected. The pound was steady and sitting just below 1.6000.