Over the last several sessions, signs of distribution had started to emerge, most notably in the growing negative divergence between the Dow Industrials (the Generals) and the NASDAQ 100 (the troops). Today support for the exhausted market uptrend finally caved in as indices around the world broke down simultaneously, kicking off a broad based correction. Although weaker than expected flash PMI from the US and China have been getting the blame, this was merely the last straw. With the US Fed starting to taper the QE money inflows that had been relentlessly driving markets higher for over a year and the UK economy getting closer to the point where the Bank of England may need to take action too, the writing has been on the wall for some time. The main theme of the current earnings season has been one of traders looking for reasons to take profits against the news was also a big hint that expectations had fully priced in the results and a change in momentum was pending. Even against this overall tide, a few companies that really outperformed have been warmly received with Netflix the top gainer among big caps off its results. US indices, led lower by the Dow have continued to weaken through the day with only minor rebound attempts. This downward momentum could carry into early Asia Pacific trading today particularly with no major news scheduled for today and the weekend looming. Dollars have also had a rough ride overnight. The China PMI contraction ripped the rug out from under AUD and it stayed at the bottom of the pack until USD took over that position in the afternoon. CAD was unable to capitalize on USD weakness with traders still more concerned about the increasingly dovish Bank of Canada. NZD fell a smaller amount as the potential for an RBNZ rate hike provided some support. USD has increasingly underperformed through the day on the weak data but traders should note that with US PMI still above 50 the result is unlikely to delay tapering so we could see another reversal next week. Capital leaving US stocks and other risk markets has been heading back toward defensive stances. Gold broke out of a base today while silver, CHF and JPY also staged significant gains. Some of the money also went into European currencies like EUR and GBP where this week’s economic news has been more positive. Commodities have been mixed today WTI has capitalized on USD weakness and rallied for a second straight day while natural gas broke out to another 52-week high on forecasts of more cold weather through next week, increasing the seasonal demand outlook. Copper broke down showing once again how sensitive it is to the Chinese economy. Corporate News Activist shareholder Carl Icahn announced he has purchased another $500 million worth of Apple shares raising his stake to $3.6 Billion. He continues to call for a larger share buyback. Microsoft $0.78 vs street $0.69, sales $24.5B vs street $23.6B Starbucks $0.71 vs street $0 69 Open Text $1.58 bvs street $1.50, announced 2 for 1 stock split Economic News Significant announcements released overnight include: US jobless claims 326K vs street 330K US existing home sales 4.8M vs street 4.9M US leading indicators 0.1 %street 0.2% US natural gas (107 BCF) vs street (103 BCF) US crude oil inventories 0.9 mmbbls vs street 1.1 mmbbbls US gasoline inventories 2.1 mmbbls vs street 1.7 mmbbls and previous 6.18mmbbls Canada retail sales 0.6% vs street 0.3% US flash manuf PMI 53.7 vs street 55.0 China flash PMI 49.6 vs previous 50.5 France flash manuf PMI 48.8 vs street 47.5 France flash service PMI 48.6 vs street 48.0 Germany flash manuf PMI 56.3 vs street 54.7 Germany flash service PMI 53.6 vs street 54.0 Eurozone flash manuf PMI 53.9 vs street 53.0 Eurozone flash service PMI 51.9 vs street 51.4 Upcoming significant announcements include: 1:00 pm AEDT NZ credit card spending previous 6.9% 4:00 pm AEDT Singapore industrial production street (1.4%) 9:00 am GMT Italy retail sales street (1.6%) 8:30 am EST Canada consumer prices street 1.3% vs previous 0.9% 8:30 am EST Canada core CPI street 1.3% vs previous 1.1%

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