Friday’s explosive rally in stocks has faded into the start of November as weaker than expected manufacturing PMI results from China, Germany and Italy reminded the street that many economies around the world continue to struggle. Even countries that posted improved PMI and/or beat the street like the UK and Australia have seen their markets pull back with traders taking profits against recent rallies. Although Friday was a strong day for global stocks on the Bank of Japan’s surprise increase to monetary stimulus, the realization appears to be setting in once again that once the liquidity effect fades, new stimulus is still a sign of weakness, not strength. In addition, the new BoJ stimulus is really not that much when you think about it. An increase of 20 trillion JPY to the monetary base sounds like a lot but at a conversion rate of USDJPY 114.00, its US$175.4B per year, or $14.6B per month. This means the new BoJ stimulus essentially only replaces the last $15B taper from the Fed, none of the previous $65B in taperings over the last year. So looking at the market action off the news, it comes as no surprise that the increase in stimulus has propelled the Nikkei to a new high. For all the hoopla on Friday, Some US indices just managed to touch new highs, but the broader Russell 2000 did not, a sign of bad breadth, while indices in Europe, the UK, China and Australia remain well short of their summer highs. It’s been a great relief rally but at this point traders may start to ask what is it going to take to push markets any higher, and because of this, we appear to be getting some profit taking today. Meanwhile, in currency markets, USD continues to rally today. The Fed now in neutral and preparing to raise interest rates sometime next year leaves the Fed in a hawkish position relative to the Bank of Japan and ECB which are still ramping up QE stimulus. The USD index broke out to a new 52-week high last week on the BoJ news and continues to climb. AUD is also under pressure today ahead of tonight’s RBA decision where no change to rates is expected, but the central bank may try to talk the dollar down again while NZD has also been falling in sympathy. Crude oil continues to stabilize today with Brent holding $85.00 and WTI holding $80.00. This plus proximity to the relatively strong US have helped CAD to keep pace with the climbing USD while SEK and GBP (near $1.6000) are also among the top performers. EUR is trying to stabilize near $1.2500. NOK is trailing a bit despite positive manufacturing PMI in Norway. Gold appears to be stabilizing near $1,170 after finding some support near $1,160. Trading could be active through the day today with manufacturing PMI reports for the US and Canada due later this morning, and with several central bank meetings, more PMI US midterm elections, lots more earnings reports and North American employment peppered throughout the week we could see a very active start to November with a lot of potential opportunities for trading. Economic News Economic reports released overnight and this morning include: Manufacturing PMI reports include: China official 50.8 vs street 51.1 China HSBC 50.4 as expected China non-manufact 53.8 vs street 54.0 Australia 49.4 vs previous 46.5 India 51.6 vs street 51.0 UK 53.2 vs street 51.4 Germany 51.4 vs street 51.8 France 48.5 vs street 47.3 Spain 52.6 vs street 52.2 Italy 49.1 vs street 50.6 Sweden 52.1 vs street 52.5 Norway 50.7 vs street 48.9 Greece 48.8 vs previous 48.4 Brazil 49.1 vs previous 49.3 Other significant reports include: Australia commodity prices (16.9%) vs (16.8%) Australia house prices 1.0% vs previous 0.1% Australia inflation 2.3% vs previous 2.2% Australia building approvals (13.4%) vs street (0.9%) Economic reports due later today include: 9:30 am EST Canada manufacturing PMI previous 53.5 9:45 am EST US Market manuf PMI street 56.2 10:00 am EST US ISM manuf PMI street 56.1 10:00 am EST US construction spending street 0.7% 12:50 pm EST Bank of Canada Governor Poloz speaking