Snap-Shot 24 October 2011 - 08:44 CEST

Currency Tech

EURUSD  R 2: 1.4015 R 1: 1.3935 CURRENT: 1.3937 S 1: 1.3700  S 2: 1.3655 GBPUSD  R 2: 1.6105  R 1: 1.5990  CURRENT: 1.5994 S 1: 1.5754  S 2: 1.5680 USDJPY  R 2: 77.45  R 1: 77.05 CURRENT: 76.31 S 1: 75.85  S 2: 75.00 AUDUSD  R 2: 1.0475 R 1: 1.0440  CURRENT: 1.0422 S 1: 1.0205 S 2: 1.0100

Market Brief

Asian equity markets are strongly higher today after China’s October HSBC flash PMI jumped to 51.1 from the final readings of 49.9 in August and 49.3 in July. In turn, the Hang Seng is up 4.29% on the day, and the Shanghai composite rallied 2.03%. The positive tone to Asian trading has also been helped by momentum attributed to improving sentiment surrounding the EU debt crisis plan. While little significant news was released at Sundays EU summit, there is growing optimism that by Wednesday the markets will see a solid proposal. At the press conference after the summit EC president Barroso stated that hes confident that final decisions will be made in 72 hours. EURUSD remains well bid trading up to 1.3930 from 1.3840 while AUDUSD climbed to 1.0417 from 1.0320. Commodities also got caught up in the risk rally with gold grinding higher to $1,654 but the real story was copper which gapped up $80 on the Chinese open, going limit up on the SHFE (Shanghai Futures Exchange).  In regards to the EU summit, official comments suggest that questions on the EFSF remain uncertain. However, details on the bank recapitalization are getting clearer. A new figure for the estimate of the bank recapitalization was released at roughly €100bn, a figure more in line with what the markets has expected, then the €80 suggested by the EBA last week. This number still faces resistance as the capital support will come with the stipulation for state guarantees. That said, the effort fby European policy makers to address the primary point of contagion risk, is a broadly optimistic step forward. In regards to EFSF leverage via the ECB, news flow from the summit has all but ended this line of speculation. Comments from German seem to have killed this potential leverage strategy. So it seems that a German style plan to create EFSF leverage is more likely to be announced on Wednesday. And in a interesting shift it looks as if the IMF will take a broader role in the Europeans big solution. The EU summit statement said that the “the G20 should ensure the IMF has adequate resources to fulfill its systemic responsibilities and should explore possible contributions to the IMF from countries with a large external surplus.” There’s another relatively light data calendar today, with Germany “flash” PMI string, EU “flash” PMI string, EU Industrial Orders and Israel base rate announcement.