After mulling it over back and forth through the morning US traders decided that today’s mixed GDP report was positive overall and drive stocks higher through the day. The headline GDP number was very strong at 3.5% meaning that the expected summer slowdown from a red hot spring for business was not as severe as had been feared. Meanwhile, a decrease in core PCE inflation (a measure the Fed uses) gives the bank some breathing space on rate hikes. Through most of the morning, all of the gains in the Dow came from a big rally in Visa off a positive earnings report while it and MasterCard (who also posted strong earnings) were the top performers in the S&P. Over the day bullish breadth improved and by the end of the day over half of the Dow stocks were in the green. Sector performance, however remains troublesome, defensive health care and utilities were the top performing groups while the more cyclical technology and industrials underperformed, which suggests more caution than enthusiasm on the part of traders. Meanwhile, Starbucks may be the next company to fall on soft guidance following in the footsteps of Twitter and Facebook from earlier in the week. So heading into today’s Asia Pacific trading we have positive momentum (the US rally also helped European markets to trip early losses) but with some potential cracks. Today’s trading focuses on Japan. Yesterday’s big rally drove JPY down which boosted the Nikkei in turn, today Japan’s markets may be more impacted by news from home. The main basket of monthly economic indicators is due today plus a Bank of Japan meeting. While the central bank is expected to keep on course with its stimulus program, this time around, traders may compare Japan’s progress with the Fed’s QE3 program that just ended and the ECB’s bond buying program that just started. There also has been some questions over whether Japan is on track to meet its inflation and other targets and what may need to be done if they are falling short. Because of this, comments or statements from Governor Kuroda could have an impact on trading. (For a more in-depth preview of the BOJ meeting check out my colleague Jasper’s video through the link at the top of this email). It has been a choppy day for currency and commodity trading that saw USD shoot up on the GDP news then drift back to finish up slightly. The dollar retrenchment didn’t stop traders from fleeing precious metals in droves sending gold down over $20 toward $1,200 and silver down over 4.0% at one point. Crude oil also fell, with both WTI and Brent losing about 1% each. AUD and NZD have been regaining their footing and slowly whittling away at yesterday’s losses through the US session. RUB had a big rebound on speculation Russia and Ukraine may be close to a deal on natural gas. Markets have the potential to be active right through to the end of the week with a number of announcements scheduled including more European employment reports, Canada GDP and the US Chicago PMI report. These reports then set the stage for a big week next week which includes global Manufacturing PMI reports, US and Canada employment, meetings for the RBA, BoE and ECB, US midterm elections and more. Corporate News Starbucks $0.74 in line, guides next Q to $0.79-$0.81 below street $0.83, guides FY to $3.08-$3.13 below street $3.17 Western Union $0.44 vs street $0.38 First Quantum $0.23 vs street $0.26 Eldorado Gold $0.05 vs street $0.06 Canadian Oil Sands $0.18 vs street $0.43 Economic News Significant announcements released overnight include: US Q3 GDP 3.5% vs street 3.0% and previous 4.6% US Q3 consumer spending 1.8% vs street 1.9% and previous 2.5% US Q3 Core PCE inflation 1.3% vs street 1.4% and previous 2.0% US jobless claims 287K vs street 285K US natural gas 87 BCF vs street 85 BCF Brazil interest rate surprise 0.25% increase to 11.25% Germany unemployment change (22K) vs street 4K Germany unemployment rate 6.7% as expected Germany consumer prices 0.8% vs street 0.9% Spain GDP 1.6% as expected vs previous 1.2% Spain consumer prices (0.01%) vs street 0.0% UK nationwide house prices 9.0% vs street 8.5% Upcoming significant announcements include: 10:30 am AEDT Japan unemployment rate street 3.6% 10:30 am AEDT Japan consumer prices street 3.3% 1:00 pm AEDTish Japan monetary policy decision no changes expected to interest rate or QE, forecast changes possible 4:00 pm AEDT Japan housing starts street (17.2%) 4:00 pm AEDT Japan construction orders previous 8.6% 11:30 am AEDT Australia producer prices previous 2.3% 7:00 am GMT Germany retail sales street 1.2% 9:00 am GMT Norway unemployment rate street 2.6% 9:00 am GMT Italy unemployment rate street 12.4% 10:00 am GMT Greece retail sales previous 1,5% 10:00 am GMT Eurozone unemployment rate street 11.5% 10:00 am GMT Eurozone consumer prices street 0.4% 10:00 am GMT Eurozone core CPI street 0.8% 8:30 am EDT Canada August GDP street 2.3% vs previous 2.5% 8:30 am EDT US employment cost index street 0.5% vs previous 0.7% 8:30 am EDT US personal income street 0.3% 8:30 am EDT US personal spending street 0.1% 8:30 am EDT US PCE core inflation street 1.5% 9:45 am EDT US Chicago PMI street 60.0 9:55 am EDT US consumer confidence street 86.4 9:00 pm EDT Friday China manufacturing PMI street 51.2 9:30 am AEDT Mon Australia manufacturing PMI previous 46.5
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