Last night, the US budget deal cleared its biggest potential hurdle, passing in the House of Representatives by a 332-94 margin. The Senate is widely expected to pass the bill in a vote next week. This pretty much removes the political barriers to tapering back QE and puts the focus on next week’s FOMC to see if they will deliver or hold off until March. January remains unlikely as that is the leadership transition meeting. Despite the growing possibility of tapering, markets around the world have been closing out the week with rebounds. Markets that have been depressed this week including gold, stock indices everywhere and even AUD have been rebounding while markets that have been stronger like crude oil, GBP and NZD have dropped back a bit. This action suggests that after several days of moving in one direction, markets have become a bit overextended, and we are seeing today a common trading reversal, or dead cat bounce. Essentially, it looks like shorter term traders in indices are taking profits and covering short positions ahead of the weekend. The rebounds in indices have been small relative to recent declines which suggests this may be more of a rest stop within a larger downtrend than the start of renewed bullishness. Monday brings global Flash PMI numbers which could spark some activity but as we move into next week, FOMC speculation and then reaction appears likely to dominate trading once again. Economic News Significant economic announcements released yesterday afternoon and overnight include: US producer prices 0 7% vs street 0.8% vs previous 0.3% Spain consumer prices 0.2% as expected UK construction output 5.3% vs street 1.3% Japan industrial production 5.4% vs previous 4.7% NZ consumer confidence 129.4 vs previous 128.4 NZ manufacturing PMI 56.7 vs previous 55.7 Singapore unemployment rate 1.8% unchanged Singapore retail sales (9.4%) vs street (5.9%) Economic reports due later today include: There are no major reports due for north America later today 8:45 pm EST Sunday China flash manufacturing PMI

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