Monday Morning Market Update September 10, 2012

Australia’s building industry shrank in August at the fastest pace in 11 months, led by a slump in apartments and weaker engineering construction as resource industry demand wanes, a private gauge showed. The construction performance index fell to 32.2 last month from 32.6 in July. The AUD remained strong trading at 1.0368 on the weakness in the USD on hopes of stimulus

Last week in the US, President Barack Obama, a day after getting his highest approval rating in more than a year, was confronted by a worse-than-expected slowdown in the job market that threatened to undercut enthusiasm for his re-election.

Treasury yields rose for the first time in three weeks as European official’s detailed plans to curb the region’s debt crisis and investors braced for more stimuli from the Federal Reserve as the US economic recovery falters. Thirty-year bond yields climbed the most on concern the announcement of a third round of debt buying at next week’s Fed policy meeting may lead to an acceleration in inflation.

Although the weakness in the jobs data was hailed by traders and speculators as it was the final puzzle piece needed to secure support for additional QE by the FOMC at its meeting on September 12-13th. Odd makers are now making book at more than a 66% chance of stimulus from the Feds.

European stocks posted the largest weekly advance since June as European Central Bank President Mario Draghi outlined an unlimited bond-buying program to regain control of interest rates and stem the sovereign debt crisis. The new Outright Monetary Transaction program for buying bonds and sterilizing them through the ECB is being accepted positively by politicians and economists around the globe.

UK stocks advanced, extending a two-week high for the FTSE 100 Index, as industrial production surged by the most in 25 years. Last week was a positive week for UK eco data, with PPI and PMI reporting above forecast.

Asia’s benchmark stock index posted its first advance in three weeks as shares rallied by the most in nine months on Sept. 7, after the European Central Bank unveiled a bond-buying program and China boosted stimulus measures.

This morning the Japanese releases were negative showing a continued slow down, each month Japan releases all of its data at one time.

Chinese President Hu Jintao said a slowdown in exports is putting downward pressure on the world’s second-biggest economy, and he pledged to boost domestic demand and promote more balanced growth. Over the weekend China began its monthly data dump, with pretty lackluster results, overall showing that the government efforts to turn around the declines have not helped so far. There is more and more reason to believe that the Chinese government will follow the US with stimulus of its own.

The Chinese President noted that the economy faces “notable downward pressure,” signaling more stimulus may follow approvals for subway and road projects as the government kicks off a huge infrastructure program.

In the commodities markets gold rose by 0.17% after US Federal Reserve’s last meeting showed many members favored more stimuli unless the pace of the economic recovery picks up. Gold’s fall after seven-day advance is the longest such streak since June.  Some physical “buying” of gold from Europe this week drenched the bullion price, while the amounts have been “quite small” so far. Silver also increase by 0.82%.

Oil fell by 0.05% for the first time in three days in New York on concern eased that rising economic worries faltering demand of oil will be a passé, however a cause of concern’ as US Federal Reserve is all geared for a next round of easing.

Copper fell by 0.10% and traded near the lowest on hopes that Chinese Government will initiate some relief stimulus to provide some force to the Chinese economy in the near-term.

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