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GLOBAL Stocks Commodities Forex Quick Brief Oct 27th WSJ Report Rocks Markets

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Must Know Prior And Coming Week Likely Market Drivers for full details on likely market movers for the week ahead. Beware the wildcards we mention in this report that could surprise markets, which are increasingly vulnerable at their 5 month highs.


Overview: No clear bias to risk or safety assets as Asian stocks were lower but Europe and US stock futures are up. Reduced stimulus expectation lift both the GBP (after UK’s GDP beat) and the USD after a Wall Street Journal reports that US stimulus will be smaller (‘a few hundred billion vs. $1-2 trillion)and more gradual than previously thought. This WSJ report is the big news thus far today.


Risk assets have been rallying for weeks on the assumption of a larger and aggressive ‘shock and awe stimulus. Given that additional stimulus risks inflation and thus devaluing the USD, the dollar has been falling for weeks, boosting both commodities and related materials stocks as well as the primary USD currency counterparts like the EUR and JPY.


As we have noted repeatedly, market expectations for stimulus have been overdone, so we suspect the USD is due for a bounce (and thus the EUR and JPY for a pullback) and other risk assets may struggle for further gains. New of opposition to austerity measures in France, and also in pre-election Greece, may further pressure the EUR as markets are reminded that there has been no meaningful progress in solving the EU sovereign debt and banking crisis. Reports that both PIMCO head El-Erian and NYU’s Roubini predict Greek default in the coming years may add to EUR trouble.




STOCKS: US: Flat/higher


Big name announcements to come this week include:


Wednesday: Deutsche Bank (NYSE:DB), Procter & Gamble (NYSE:PG), SAP (NYSE:SAP) and Visa (NYSE:V)

Thursday: 3M (NYSE:MMM), Microsoft (NASDAQ:MSFT) and Motorola (MOT)

Friday: Newell Rubbermaid (NYSE:NWL) and Nasdaq (NDAQ)


US Bonds: Up-


Asia Stock Outlook: Lower –


Upcoming Greece elections have pushed the Greek PM to resist EU requests for further tightening and his opposition has been gaining strength. France continues to suffer unrest on austerity related pension reforms.


European Stock Outlook: Up–


Commodities Outlook Tuesday To Midday Wednesday GMT:


FOREX Daily Outlook Tuesday To Midday Wednesday GMT:



see full version for details for each major currency

No clear bias to risk or safety currencies as currency specific news continues to dominate fx markets for the second straight day. Strongest over the past 24 hours: GBP, USD, NZD in that order as the GBP and USD both benefit from reduced expectations for new stimulus programs from their respective central banks. Weakest over the past 24 hours: AUD, CHF, JPY after the AUD shows lower than expected inflation, thus reducing rate increase hopes, and the JPY weakens on USD, GBP strength. Crude, gold lower, softs higher over the past day but falling thus far Wednesday.European shares are opened lower following the negative Asian close but have mostly now pushed into positive territory after Deutsche Bank and others post good earnings results. The notable exception is UK’s FTSE, which is lower for the second day as traders ‘sell the news’ of good UK GDP, which reflected past stimulus, as traders fear coming austerity will bring slower growth. Most major indices close lower on caution next week’s Fed stimulus announcement, which per a Wall Street Journal report today, is likely to be less than expected. Hopes for stimulus led growth have driven global stocks higher in recent weeks. Signs of resistance to austerity measures in France and Greece may also be a factor. 10 Year Note closed lower Tuesday modestly lower as stock prices rose, with yield at 2.6360 up from 2.5540%, reflecting the rise in risk appetite.– stocks showed some resilience by holding at current levels despite weak overseas stock performance, poor Case-Shiller housing data, overall tepid earnings, and 2 separate reports predicting a Greece default in the coming years.