It’s been difficult to pull together an overriding theme from overnight trading with markets around the world heading in different directions. Instead it seems that traders have been responding to developments out of different countries on a case by case basis. For example, Chinese flash manufacturing PMI came in below expectations indicating that while its economy appears to have stopped falling, it doesn’t appear to be recovering either. This dragged on the Hang Seng, S&P/ASX, AUD and NZD overnight. Copper held steady but a recent breakdown may have already priced in this news. On the other hand, indications from Japan that the BoJ could add stimulus as needed sparked a rally in the Nikkei but weighed on JPY; common action in an environment of monetary easing. European Markets have been mixed with the MIB and IBEX higher while the FTSE, DAX and CAC are trading lower. In currencies, the defensive CHF is leading the field with EUR regaining some of the ground it lost yesterday to GBP. US markets are bouncing back a bit but have not retraced all of yesterday’s losses. Although they should have been superceeded by more recent dovish speeches from Dr. Yellen and Dr. Bernanke, the more hawkish tone on tapering from yesterday’s FOMC minutes reignited some December tapering speculation. It seems the one common theme from all of the Fed comments of late is this. Tapering is coming, with March or April more likely unless data really improves in the next few weeks. The day to day action driven by tapering speculation and sharp moves over the timing of tapering can be seen as a sign that having consistently advanced for over a year, stock markets are exhausted but being propped up by QE inflows. Because of this, we could see trading remain choppy on the data of the day, creating short term opportunities for some time to come. Perhaps the most telling action continues to be in precious metals where gold and silver remain below $1,250 and $20.00 respectively, confirming yesterday’s breakdowns. The ongoing weakness in precious metals can be seen as a reflection of several factors converging including low inflation prospects, decreasing financial and political meltdown risks, and the feeling that although the timing is uncertain, tapering and tightening appear to be con the way for many countries sooner or later. Economic News Significant economic announcements released yesterday afternoon and overnight include: US jobless claims 323K vs street 335K US producer prices 0.3% as expected Brazil unemployment rate 5.2% vs street 5.4% US flash manuf PMI 54.3 vs street 52.3 street 52.3 China flash PMI 50.4 vs street 50.8 France flash manufacturing PMI 47.8 vs street 49.5 France flash service PMI 48.8 vs street 51.0 Germany flash manuf PMI 52.5 vs street 52.0 Germany flash service PMI 54.5 vs street 53.0 Eurozone flash manuf PMI 51.5 as expected Eurozone flash service PMI 50.9 vs street 51.9 UK public borrowing £6.4B vs street £5.1B Japan interest rate/QE no change as expected, BOJ indicated inflation is starting to track toward its 2% target and that it has room to add more stimulus if needed. Singapore GDP 5.8% vs street 5.3% Economic reports due later today include: 10:00 am EDT US Philadelphia Fed street 15.0 vs previous 19.8 10:30 am EDT US natural gas street (38BCF)

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