Intraday Market Thoughts Archives

Trading may have been quiet on Friday but the week ahead is chalk full of major events. Minor consolidation was the theme Friday as USD and JPY led while CHF and EUR lagged. The CFTC Commitment of Traders showed expanding yen longs.

The most noteworthy economic news on Friday was a disappointing bond auction that pushed Italian 10-year yields above 6% for the first time since the euros inception. Reports suggested the ECB was forced to buy bonds in the secondary market to stem the selloff.

Although stocks (and to some extent the euro) have endorsed the EFSF leverage the all-important bond market is already showing signs of distrust.

Another worrisome near-term risk comes from the once-venerated MF Global as reports suggest the company wont survive the weekend. A takeover is a high probability but a bankruptcy cant be ruled out.

Despite these worries, the euro only gave back a tiny portions of its gains from Thursday and overall sentiment was neutral. The S&P 500 closed flat on the day.

The negative reports were balanced by a revision to the final October U Mich consumer sentiment survey to 60.9 from 57.5. A smaller bump to 58.0 was expected. The consumption data in the PCE report was in line with estimates at +0.6%.

On the week, the Australian dollar was the top performer followed by NZD. The USD lagged followed by JPY.

The quiet final day of the week may have reflected the intensity of the first four days and the busy schedule in the week ahead. Central bank decisions from the Fed, ECB and RBA will be accompanied by non-farm payrolls, the ISMs, German jobs and retail sales, Canadian GDP and several other major releases.

Commitment of Traders

Fridays CFTC report was surprising in that all the changes in positioning were 3K or less. The lone exception was JPY longs, which nearly doubled to 55K. The yen edged away from session lows after the data was released, perhaps sensing that Japan may be looking to punish speculators. The takeaway from the small changes elsewhere (the data only covers up until the close on Tuesday) suggests that traders were lacking commitment through the European discussions. The positive result left the -77K net short position in EUR extremely vulnerable and the rally reflected that.

According to Bloomberg Survey of 54 Economists:

2 of 54 economists see 50 bp cut from ECB. UBS is 1 of them. Here are the details on the rest of the survey:

Expecting -50 bps

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UBS, Oddo

Expecting - 25 bps

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BoA/ML, IHS Global Insight, Morgan Stanley, Westpac

AL

Markets Consolidate Gains; Core PCE Price Index Is Next

French consumer spending declines; Swiss KOF drops; talks regarding Chinese investment into EFSF continue. Market turns to US core PCE price index (Fed's preferred inflation gauge), personal spending and income and final UoM consumer confidence. Key daily & weekly euro charts are included in the latest Premium Intermarket Insights explain why and where we're long EURUSD. None of the See below.

Markets are consolidating yesterday's massive moves with a slight USD positive tone. However, market optimism should persist so risk on trend should resume. Major European equity indices are in the negative territory but only by about 0.2%.

French consumer spending declined in September -0.5% from +0.2% which is -1.3% on annual basis. The decline is blamed on fall in sales of clothes and energy consumption. Consumer spending is the main contributor to GDP in the second largest Eurozone economy so markets will scrutinize deteriorating data in light of last week's warning by Moody's that France could lose its AAA rating in the next three months. French downgrade would, without a doubt, give a severe blow to Eurozone's effort to stabilize markets and end the debt crisis.

Swiss KOF Economic leading indicator continued to worsen in October as it printed 0.8 from previous 1.21. This is the worst result since August 2009 and sixth back to back decline which points to a weaker growth in the months ahead. Further deterioration could reignite speculation that the SNB will move the EURCHF floor from 1.20 higher, perhaps to 1.30.

All 7 trades remain in progress in the latest Intermarket Insights (EURUSD, EURJPY, EURGBP, gold and silver). For direct access ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=534 NONsubscribers can join here: http://ashraflaidi.com/products/sub01/

News coming out of China proved that China is contemplating EFSF investment but it is not a done deal yet. Chinese Vice finance minister Zhu said that details are still needed before deciding but confirmed continued talks.

The NY session starts at 8:30 am ET with core PCE price index that is seen slightly higher at 1.7% from 1.6% y/y. September personal income and spending are due at the same time. Income is expected to increase 0.3% after -0.1% contraction in August and Spending is seen higher at 0.6% from 0.2%.

9:55 am will bring revised University of Michigan consumer confidence that is anticipated slightly higher at 58 from 57.5.

Europe rallies but growth remains a concern as France consumer unexpectedly, Italian bond yields set for key test, Japanese growth continues to slide, UK consumer confidence hits 32 month lows, US personal spending set to rise.

The Japanese economy continues to be strangled by the effects of the stronger yen as industrial production for September slid sharply by for the first time in 6 months, sliding 4%, more than reversing the gains of July and August. Household spending also slid while consumer prices continued to weaken despite the easy monetary policy of the Bank of Japan. The strengthening yen continues to mitigate inflationary pressures in the Japanese economy.

In the UK Gfk consumer confidence fell further in October to -32 from -30 in the previous two months and to its lowest levels since February 2009 as consumers remained pessimistic about the future as rising inflation eats into incomes and retail sales continue to fall.

The latest daily and weekly charts are included in today's Intermarket insights as well as new trades in EURUSD, EURJPY, EURGBP, gold and silver. For direct access ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=534 NONsubscribers can join here: http://ashraflaidi.com/products/sub01/

If the price action yesterday is to be believed then Europe is fixed, however life is rarely that simple. While Europe may have deferred the day of reckoning significant risks remain, not least from the fact that the European economy is almost at a standstill.

The bank recapitalisation plan risks a fresh credit crunch, possibly dragging causing France to lose its triple A rating in the event where the govt has to step in to recapitalise the banks. With 2012 French GDP set to fall to 1% it could well be that Italy is the least of Europes problems, unless EU leaders have a strategy for growth.

Earlier this morning, French consumer spending fell 0.5% in the month ending in September from 0.2, vs expectations of a no change, while falling 1.3% on the year, following a 0.1% increase.

Italy looks to auction around 8.5bn in 2014, 2017, 2019 and 2022 bonds today in a key test for yields

Yesterdays GDP figures in the US could well keep the Fed monetary doves in their boxes until early next year. In any case todays latest PCE figures are expected to show that pricing pressures in the US economy are still rising slightly, and with the stock market rising, calls for further easing arent likely to gain much traction. Personal spending set to rise

By now you likely know that markets wholeheartedly endorsed the results from Europe. The S&P 500 climbed 3.4% and European bourses gain 5-6%. It may have been a game changing day but several questions have to be answered before we jump in with both feet.

1) How short was the market?

Certainly a portion of the moves in the market can be attributed to a short squeeze but its impossible to say exactly how much. We know that in last weeks CFTC report, EUR positioning was extremely short. In that sense, the surge seeing the largest gain in EUR/USD since July 1, 2010 makes sense. But it doesnt explain the huge rally in AUD, which was held in a net long position.

2) How will central banks react

We know that central banks around the world are concerned with the European sovereign crisis. If the weekend talks had ended in disaster there is little doubt that both the ECB and RBA would have cut rates next week. Markets are cheering the results of the talks but will central bankers be impressed? Thats the big question to be answered in the week ahead.

3) How was CHF was the top performer?

In a broad rally led by EUR and with European bank shares surging it doesnt make any sense for CHF to be outperforming EUR. Our best guess is that the SNB was unloading some of the billion of euros it has accumulated defending the 1.20 peg.

4) Are consumers really back?

The great mystery of Q32011 is the divergence between what consumers are saying and what theyre doing. Consumer confidence was at an extreme low in Q3 yet consumption in the GDP soared above estimates, adding 1.7 percentage points to growth

Digging deeper, spending on services was a major catalyst, rising at the fastest rate in six years. Healthcare spending added 0.6 pp and household and utilities increased 0.4 pp. Trips to the hospital and higher utility bills dont sound like the basis of an economic recovery.

5) Are companies investing in everything but workers?

The columns in the GDP report for investment in equipment and software and non-residential investment added 1.2 pp and 0.3 pp to GDP. Those numbers point to a boom, a roughly 15% increase in spending in these areas. But if companies are investing so much, why arent they hiring?

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EURUSD posts a 2.10% rise, the biggest daily gain since July 1, 2010, when both EURUSD and equity indices bottomed out following the bear market of spring-summer 2010. This week saw major confluence of bullish breakouts in EURUSD. LATEST PREMIUM Intermarket Insights are now up. For DIRECT ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=534 NONsubscribers can join here: http://ashraflaidi.com/products/sub01/

Signs that China could participate in EFSF; German CPI could surprise on the upside; UK CBI sales better than anticipated. Market turns to Q3 GDP, jobless claims and pending home sales.

Riskier assets continue to push higher on the back of yesterday's EU summit that produced some concrete steps towards the resolution of the EU debt crisis and thus satisfied market's expectations. European equity indices are in positive territory and the greenback continues to decline across the board.

Also supporting the sentiment were comments by the Chinese foreign minister who said that China is willing to help protecting financial stability and global growth. Such comments increase the probability that French president Sarkozy who will talk with Chinese leader Hu Jintao today, will be successful in convincing China to participate in the EFSF.

German preliminary October CPI is seen unchanged from last month at 0.1% which translates to 2.5% on annual basis. However, early indications from states that have already published their results point to a possibility of a higher print as Saxony and Hesse regions reported CPI at three year highs. The cost of energy and food is blamed in these regions for the increase. Overall German inflation is due later today.

UK CBI reported sales in October printed -11% from -15% in September. The trend points to a further weakness but the GBP benefited slightly as the result was above expectations of -15%.

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The eagerly awaited Q3 GDP data is due at 8:30 am ET. The American economy is expected to grow 2.4% from previous 1.3%. In case of a significant disappointment, the existing market optimism could be reversed and risk aversion could come back.

Jobless claims that are due at the same time are seen at 400K from previous 403K.

Pending home sales due at 10:00 am ET are anticipated higher at 0.2% in September from -1.2% in August.

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EU leaders get an agreement, German CPI expected to fall back, UK CBI sales set to remain depressed, Bank of Japan rate decision, US Q3 GDP due next. New Premium trades are around.

So the EU summit concluded and we now have some numbers. Europe wide bank recapitalisations have to be done by mid 2012 with a requirement for a tier 1 capital ratio of 9%, which it is estimated will cost around 100bn.

The Greek haircut talks between banks on EU officials for PSI after being deadlocked have been agreed with a voluntary 50% haircut, to get Greeces debt down to a more manageable 120% of GDP by 2020, while the EFSF has approval to be leveraged up to around 1trn but final details wont be known until the end of November. The problem of Italy and future measures to boost growth remain unresolved.

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With all the drama surrounding the events in Brussels going on we still have the small matter of the European economy and the lack of growth and todays release of German CPI figures it will be hoped prompt the ECB next week to loosen monetary policy in an effort to try and re-energise growth, or at least take the pressure of Italian bond yields. Expectations are for flat CPI for October with the year on year figure slipping back to 2.5%.

Eurozone economic confidence figures across all sectors is also expected to remain depressed. Industrial confidence expected to slip further to -7, while economic confidence is expected to slip to 93 from 95.

In the UK yesterdays CBI business optimism and industrial orders plunged to the lowest levels since 2009 with business optimism hardest hit at -30. Totals retail sales arent likely to offer much comfort either with expectations of -16, highlighting the so-called chilling effect on the UK economy mentioned by PM Cameron earlier this week.

The Bank of Japan once again left interest rates unchanged as the yen once more made a new post World War 2 high against the US dollar yesterday, while expanding their asset purchase program by 5 trillion yen to try once again to push the yen lower.

In the US the latest Q3 GDP numbers are due out and this could well be a key number if it misses the quite high expectations the market has of it.

Key points from EU Summit : - Finance ministers to have EFSF leverage details by end-Nov - Leverage EFSF by 4 to 5 times, figures suggested as much EUR 1.5 trillion- Debt deal will have E30 billion official Private Sector Initiative package -- 50% haircut must be voluntary. - New news on bank recapitalization. NEW PREMIUM TRADES LATEST include EURUSD, EURJPY, USDCAD, ES & gold For DIRECT ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=533 NONsubcribers can join here: http://ashraflaidi.com/products/sub01/

Still no concrete details but European leaders moved forward on Wednesday but US economic data was positive. CAD was the top performer while AUD and JPY lagged. New Zealand held rates unchanged early in Asia-Pac with a hawkish stmt & and the BOJ decision is up next. Interim Premium Intermarket Insights, after Tuesday's 3/3 in EURUSD.

Markets continued to shift on every piece of news that trickled out of Europe. Positive indications about leveraging the EFSF and hiking bank capital ratios won the day as risk assets were generally higher even though EUR/USD was virtually unchanged.

The most concrete news was that EU agreed on bank recapitalization plan at a ratio of 9% by June 30, 2012. This dovetails with the long-rumoured 100B capital raise. A dispute remains, however, about what will be considered tier 1 capital.

The euro jumped on headlines suggesting the EFSF will be leveraged to around 1 trillion but none of the details have been decided and are unlikely to be finalized for a month. Two plans remain under consideration:

1) The EFSF would guarantee a first-loss provision on newly-issued debt in periphery countries

2) A fund backed by the EFSF will seek out investment (China is a heavily rumoured buyer) and buy periphery debt on the secondary market.

It is possible that both options will be implemented.

Another factor that boosted markets was a signal from Draghi that the ECB will continue to buy bonds in the secondary market despite German opposition.

Also helping sentiment was an agreement within Italys coalition on a fresh set of spending controls and reform but we warn that the situation remains tenuous -- a fist-fight broke out in parliament.

The one item that remains completely unresolved is the Greek restructuring. In the coming hours Markel and Sarkozy will meet with bondholders. For the market, a 50% haircut appears to be the sweet spot; any lower or higher and EUR will fall.

Durable Goods Orders Strong

US economic data helped boost sentiment. Durable goods orders ex-transportation rose 1.7% vs the +0.4% expected. Non-defense capital goods ex-air, climbed 2.4%, the most in 6 months, compared to the +0.5% expected. Overall orders fell 0.8% (-0.9% exp) but it was due to a 25.5% fall in civilian aircraft bookings (after outsized rises in July and Aug) and a 2.7% in motor vehicles and parts.

The S&P500 gained 1.1% to 1242.

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NZD Higher on Hawkishness

The New Zealand dollar climbed a half-cent late in the day after the RBNZ held rates at 2.50% but said rates will move higher if offshore developments have only a mild impact on the economy.

BOJ Upcoming

The BOJ will render a monetary policy decision at roughly 0030 GMT. Expectations are for the bank to hike the 50 trillion asset-buying program by about 5 trillion. The decision is unlikely to have a significant effect on FX. We may also get further jawboning about yen strength but Fin Min Azumi said today it would be very hard to convince G7 members on coordinated intervention.

We are adding 2 new trades on EURUSD, and more on AUDUSD, AUDCAD, with existing trades on gold, EURGBP and US crude. More on EURJPY, USDJPY, USDCAD and ES will be added later tonight.For DIRECT ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=532 NONsubcribers can join here: http://ashraflaidi.com/products/sub01/

Ashraf Laidi

Eurozone summit begins at 1:15 pm ET, USDJPY at new lows; Japan ready to buy EFSF bonds; UK CBI orders dropped. Market turns to durable goods orders, new home sales and Canadian monetary policy report. See our latest Premium trades below.

EURUSD continues to trade in the recent 3950-3880 range ahead of the EU economic summit. The extent of private sector involvement and leveraging the EFSF are two key areas that will impact the market sentiment the most.

German parliament votes today on leveraging the EFSF. While passing is widely expected, if it is rejected/decision delayed, it could send the common currency lower as the EU summit would not be able to conclude this important issue. The Eurozone summit begins at 1:15 pm ET. Given the complexity of the issues, the press conference can be expected to take place late NY afternoon.

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USDJPY reached a new historical low today at 75.70. Japanese finance minister Jun Azumi said that he "will not rule out any steps on fx" and stated that it would be difficult to apply measures similar to those used by the SNB. This is the first time that he confirmed that such measures are even under a consideration. As jawboning has proved to be ineffective in tempering the JPY rise, an actual intervention or other unconventional steps might be considered. Minister Azumi also said that Japan is ready to buy EFSF bonds if the Eurozone presents a credible plan to solve the debt crisis.

UK CBI industrial orders dropped to -18 in October from previous -9 which is the largest drop since October 2010 and below expectations of -7. Deteriorating conditions and ongoing financial crisis in Europe is blamed. GBPUSD pulled back to 1.5976 after reaching 1.6040 earlier during the session.

The NY session kicks off at 8:30 am ET with September durable goods orders that are seen lower at -0.7% from previous -0.1%. However, core orders are expected higher at 0.5% from -0.1% in August.

US New home sales are due at 10:00 am and are anticipated higher in September at 302K from 295K.

CAD traders should watch for BOC Monetary policy report due at 10:30 am and BOC press conference that starts at 11:15 am.

At 16:00 the RBNZ will announce their rate decision. Rates are widely seen unchanged at 2.5%.

Patrik Button

Awaiting EU Summit, Aussie drops on rate cut expectations after Aussie CPI, UK CBI orders set to improve, US durable goods could well disappoint. Premium Trades remain progress, with the shorts in AUDUSD & AUDCAD few pips away from hitting all targets. See more below.

The focus of the day remains the outcome of todays EU leaders meeting following the cancellation of yesterdays ECOFIN meeting. Angela Merkel has an appointment with the Bundestag this afternoon where ratification is required of the latest changes to the EFSF and the decision to use leverage to increase its firepower to 1trn.

Differences still remain about the size of Greek haircuts or PSI and there is a chance that we may not get a final decision on that today. There is also uncertainty about the position of Italy PM Berlusconi as he tries to raise the pension age to 67 against stiff opposition within his own party. This could well precipitate the fall of the Italian government which would add another layer of delay and uncertainty to the proceedings.

Aussie rallied strongly in the past couple of weeks as fears about a hard landing in China have slowly diminished. In the wake of this weeks lower than expected New Zealand CPI numbers it wasnt much of a surprise to see Australian CPI data come in similarly lower in line with expectations. The quarterly number slipped back from 0.9% to 0.6%, while the year on year figure slipped back from 3.6% to 3.5% and keeping the door open for a rate cut.

In the UK, the latest CBI industrial orders data for October is expected to show that the UK economy continues to be moribund, with expectations of a slight improvement from -9 to -7.

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In the US and the wake of yesterdays rather disappointing consumer confidence figures, hitting their lowest levels since March 2009, US investors will be hoping for some improvement in September durable goods orders, however this could well be misplaced.

As a result of all the aforementioned uncertainties, gold jumped by more than $50 rising above $1,700 an ounce for the first time in over a month.

Our Shorts in AUDUSD & AUDCAD are in progress, helped by Aussie Q3 CPI coming within expectations at 0.6% but weaker than the previous 0.9%, with weaker Trimmed mean. The figures supporting speculation for a possible RBA rate cut next month (see previous post). We are AMENDING the 2nd AUDUSD trade, which was had not been filled. Click here for DIRECT ACCESS http://www.ashraflaidi.com/products/sub01/access/?a=531 To become a subscriber: http://www.ashraflaidi.com/products/sub01/

AUDUSD, AUDCAD, EURUSD , EURGBP, gold, US Crude are among the latest trades in the Premium Intermarket Insights ahead of Aussie CPI -- due at 00:30 GMT (1:30 BST) expected +3.5% y/y after +3.6% in Q2 and +0.6% q/q after +0.9% in Q2. Market will measure the y/y figures against the 2.5% mid point of the the RBA's target band.

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Apprehension about US economic growth and the situation in Europe pull risk assets lower on Tuesday. JPY and CHF were the top performers while NZD and CAD lagged. Australias CPI is the major release of the upcoming session. Premium Trades to be issued at approx 22:30 GMT Previewing the Aussie CPI. Stay tuned.

The planned euro finance ministers summit on Wednesday was cancelled but the EU leaders summit is still expected to take place. The combination points to a likelihood that a bank capital deal is near completion but that no EFSF deal or Greek haircut deal will be reached this week. Germany is also campaigning for an end to ECB bond purchases in the secondary market.

Despite this news, EUR/USD was able to hold above 1.39. Two factors have been supporting this pair. 1) broad reports of European fund repatriation and a curb in USD lending ahead of the anticipated recapitalization announcement. 2) The dollar is growing less attractive as a safe haven because of recent Fed rumblings about QE3.

US economic data was disappointing on every front.

1) consumer confidence plunged to 39.8 from 46.4. A reading of 46.2 was expected.

2) the Richmond Fed was unchanged at -6, missing the +2 consensus.

3) US house prices, as measured by the S&P/Case-Shiller index fell 3.8% y/y compared to the -3.6% expected.

The most troubling number was consumer confidence as it fell to the lowest since March 2009. A reading above 90 has been historically needed to indicate the economy is healthy. There is now a deep divide between sentiment data and real economic performance that cannot continue. Sentiment data is generally a leading indicator and makes us extremely cautious about the US economic outlook at year end.

The S&P 500 fell 2.0% to 1229, ending the day near the lows and futures were quoted lower on earnings misses after the bell.

Asia-Pacific Preview

The highly anticipated Q3 Australian GDP report will be released at 0030 GMT. The market is pricing in a better than 70% chance of a rate cut at the November meeting. The consensus is a 3.5% y/y rise after a 3.6% increase in Q2. Stats Australia recently changed its inflation calculating methodology, putting downward pressure on the Q2 numbers. Normally, the y/y numbers are followed most closely but today it may be better to look at the q/q change. Expectations are for a 0.6% rise (2.4% annualized pace). A fall to +0.4% would cement market expectations for a rate cut and pull down AUD by at least 50 pips.

Other notable economic data included Japans corporate price goods index at 2350 GMT and New Zealand business confidence 10 minutes later.

A few days after Germanys Oct Ifo business sentiment index hit a 16-month low, its forward-looking expectations index dropped to 27-month lows, and both German and Eurozone manufacturing PMIs hit their worst in 25 and 27 months respectively, US consumer confidence dips to a 31 month low at 39.8. The Conference Boards index is now below its 3 month moving average for seven months, the longest period since 2007-2008 recession. LATEST PREMIUM trades hit all targets in 7 out of 10 trades, with ES 4 pts short from hitting all targets, EURGBP in progress, one EURUSD trade unfilled the other stopped out. For DIRECT ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=528 NONsubcribers can join here: http://ashraflaidi.com/products/sub01/access

Ashraf Laidi

German consumer confidence rose; UK current account deficit narrowed; Italian government may fall. Canadian retail sales rose 0.5%, BoC unchanged. US consumer confidence, manufacturing data due. 6 trades hit all targets. 3 partly hit all targets.

Despite the disappointing data, November GfK German consumer confidence increased to 5.3 from 5.2. German labor market that remains strong and rising income expectations contributed to the increase. However, the economic expectations index fell to -6.2 from 4.8.

PREMIUM TRADES in EURUSD, EURJPY, USDCAD, gold, US crude hit all targets. ES 4 pts away from all targets. EURGBP, Silver, the other EURUSD and other EURJPY partly hit all targets. For DIRECT ACCESS, click here: http://ashraflaidi.com/products/sub01/access/?a=528 NONsubcribers can join here: http://ashraflaidi.com/products/sub01/access

In the UK, current account deficit narrowed to GBP -2 bln in Q2 from GBP -4.1 bln in Q1 which is the best print since Q1 2008. BOE Governor King said today that inflation is peaking and that QE was executed because there was a risk that the inflation would fall below BOE target level. GBP has been relatively strong over the past few sessions pushing GBPUSD to over 1.6 today.

Italian political situation became more complex as one of PM Berlusconi's ministers warned that the government could fall over economic reforms demanded by the EU. PM Berlusconi is supposed to present a growth and debt reduction plan on Wednesday but yesterday's Italian government meeting failed to produce any agreements. Falling government in the fourth largest European economy would surely reverse the current risk on environment.

Aug S&P Case-Shiller index fell 0.05% m/m from +0.05% m/m; -3.8% y/y from -4.11%.

US Oct Consumer confidence due at 10:00 am EST should tick up slightly to 46.1 from 45.4 in October and Richmond manufacturing index is expected to print +2 from -6.

Canada Aug retail sales rise 0.5% vs prev -0.5%; ex autos sales +0.4% vs. 0.1%

Angela Merkel faces key vote Wednesday ahead of EU summit, German, French and Italian consumer confidence set to fall further, Mervyn King to speak at House of Commons Treasury select committee, Bank of Canada rate decision and US consumer confidence due. Latest Premium trades (initially released 9 hrs ago) are below, including key daily & weekly oscillator charts.

In the game of poker that is the European debt crisis, German chancellor Angela Merkel faces a key vote in the German Bundestag on Wednesday on leveraging up the EFSF to over 1trn without any extra money being put on the line. How this will be achieved is not entirely clear, especially given that the ECB will not be involved in any way.

In any case the leveraging up of the EFSF is the least of Europe's problems given the increasing likelihood that the European economy is falling back into recession, after yesterdays PMI data indicating that the private sector is struggling.

This disappointing PMI data has reinforced fears of a recession and today's consumer confidence data out of both Germany and France is likely to show that confidence remains fragile with German Gfk consumer confidence expected to fall to 5.1 from 5.2, while French consumer confidence is expected to fall from 80 to 78 in October.

Italian retail sales for August are also expected to disappoint, falling 0.1%, the same as the previous month of July, while Italian consumer confidence is also expected to fall back for October to 97.6 from 98.5 in September.

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In the UK Bank of England governor Mervyn King as well as deputy governor Charles Bean are set to appear before the House of Commons Treasury Select committee to explain this months unanimous decision to restart the latest asset purchase program of 75bn, even though inflation remains at its highest levels in years and core CPI also remains well above 3%. Given the governors fondness for talking the pound down, one can probably expect more of the same.

The latest BBA mortgage approvals data for September are expected to show a modest improvement to 36k, but the numbers still remain low historically, even though they are probably likely to be the highest for six months.

In Canada the latest interest rate decision is due from the Bank of Canada as well as the latest retail sales numbers for August, while in the US consumer confidence for October could well improve slightly from Septembers figure.

Positive corporate news and dovish talk from the Fed boosted sentiment as the weary market continues to await news from Europe. The Australian dollar was the top performer once again while USD lagged. Early in Asia-Pac trading, NZD fell as the CPI cast doubt on rate increases. Aussie CPI IS DUE WEDNESDAY NOT TUESDAY. Latest Premium Trades are up.

Despite moderate volatility, volumes across markets were low as traders rest on the sidelines ahead of an ECB resolution.

Nearly 40% of the S&P 500 releases earnings this week so there is an understandable focus on the corporate sector as macro players await news from Europe and US Q3 GDP.

Three of the most influential Fed officials (Yellen, Tarullo and Dudly) talked about the possibility of QE3 and other stimulus measures in speeches on Monday. The comments weighed down the US dollar and aided broad risk sentiment.

News from Europe slowed to a trickle, although the FT is reporting that Greek bondholders are being asked to take a 60% haircut. Such steep losses are said to be possible of causing problems at European banks. Italy appears to be under further pressure from its neighbours to cut spending and Berlusconi called an emergency cabinet meeting on Monday.

EUR/USD trading was choppy, after opening the session 50 pips lower, the common currency jumped more than 2 cents to a high of 1.3956, where it stalled out twice. USD/JPY closed at its lowest ever, just above 76.00.

Overall sentiment may now be overstretched to the positive side with markets on a tremendous run since the start of October based on a European resolution and moderately positive US economic news.

Early in todays Asia-Pacific session, New Zealand released a quarterly CPI report that fell well short of estimates. Prices rose 0.4% in the quarter, far less than the +0.8% expected. NZD promptly fell 40 pips and the report cements our view that there will be no rate hikes for at least six months

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The long indicator remaining on the Asia-Pacific schedule is the Conference Boards consumer confidence report for Australia. The prior reading was -0.1% and some modest improvement is likely. In any case, there is unlikely to be a reaction from AUD.

Focus on Wednesday's EU summit; German manufacturing sector contracts, but service sector grew; Eurozone PMI declined further and industrial orders rose. NY session can see higher volatility during two FOMC member William Dudley speeches. The German contraction that Ashraf is at its early stages see the chart on the left here: bit.ly/p9MIMn For the latest on Premium Trades, see below. Ashraf will be on AlArabiya at 12:30 GMT (16:30 Dubai time)

Another European meeting ended with no concrete conclusion yesterday. The next EU summit which is on Wednesday is in focus now and is likely to be a key event this week. Risk on sentiment may continue to support equities and punish the USD on hopes that EU leaders are closer to a debt crisis solution. However, as markets expect the Eurozone to announce concrete steps with significant provisions, risk aversion can return with a vengeance should the Wednesday's summit come to a close with no specific results.

Data from Germany was mixed today as German manufacturing sector contracted for the first time in more than two years. Manufacturing PMI printed 48.9 in October from previous 50.3. However, German services sector expanded as services PMI increased to 52.1 from 49.7.

In the Eurozone, manufacturing PMI has contracted for three months in a row as it printed 47.3 from 48.5 and services PMI declined to 47.2 from 48.8 deepening fears of a recession. New orders sub component has also been declining for three months which points to an additional weakness in the months ahead. EURUSD fell on the news from 1.3900 to 1.3843. Session low is 1.3822.

PREMIUM TRADES Fridays Premium long in gold hit most targets, silver in progress. USDCAD Premium short hit all limits. The EURUSD short in the Premium dual trade hit all targets, while the long remains unfilled. Long EURJPY hit all targets while the short is 7 pips away from completing all targets. Our oil long partly hit the limits before being stopped out. Gold and silver are in progress, while ES Premium trade is stopped out. Click here for DIRECT ACCESS http://ashraflaidi.com/products/sub01/access/?a=527 Click here for a 1-week trial http://ashraflaidi.com/products/sub01 MONDAYs PREMIUM TRADES will be released at approx. 16:00 GMT

Eurozone industrial orders grew solid 1.9% in August after declining -1.6% in July. However, on annual basis orders grew only 6.2% from previous 8.9%.

There is no data due during the US session today. Market volatility could increase at 8:45 am ET and also at 1:00 pm ET when NY Fed president and FOMC member William Dudley delivers speeches and answers audience questions in New York.

European summits remain the focus as more meetings planned, Chinese Manufacturing PMI bounces back to expansion territory, Japanese September Trade balance returns to surplus, Australian Q3 PPI falls back as China slows. More developments in Friday's Premium Intermarket Insights below.

Todays publication of French, German and Eurozone October manufacturing and services PMI data is expected to show further weakness with particular focus on French data in the wake of ratings agency Standard and Poors warning on Friday about further economic deterioration putting at risk Frances blue chip triple A credit rating.

If as expected the PMIs show further weakness the above fears will increase. Manufacturing PMI expected to slip further into contraction territory to 48, from 48.2, while services PMI is expected to stall to around 50.4, from 51.5.

German PMI seen stalling around 50, while Eurozone data is expected to weaken further into contraction territory with services slipping to 48.5 and manufacturing to 48.1.

In China the latest HSBC manufacturing PMI for October climbed to 51.1, a five month high, from 49.9 in September with new orders also rising, indicating that the recent slowdown in manufacturing activity maybe starting to rebound and reducing fears of a hard landing.

After hitting another record high against the US dollar last week Japanese officials approved another 12trn yen stimulus package to counter the effects of the strong yen on the Japanese economy. The government also warned it retained the option to intervene in currency markets if the need arose. Todays publication of September trade balance to a higher than expected 300bn yen surplus after the previous months deficit was an encouraging sign but was still well below last years comparable figure and continues to highlight the problems the strong yen is bringing to an economy still struggling from the aftermath of the earthquake and tsunami earlier this year.

USDCAD Premium short hit all limits. The EURUSD short in the Premium dual trade hit all targets, while the long remains unfilled. The long held short in USDJPY hit all targets. Long EURJPY hit all targets while the short is 7 pips away from completing all targets. Our oil long partly hit the limits before being stopped out. Gold and silver are in progress, while ES Premium trade is stopped out. Click here for DIRECT ACCESS http://ashraflaidi.com/products/sub01/access/?a=527 Click here for a 1-week trial http://ashraflaidi.com/products/sub01

In a sign of cooling Aussie inflationary pressures on the back of a slowdown in commodity prices and China, the annualised figure for PPI showed that prices fell by more than expected from 3.4% in Q2 to 2.7% in Q3. This suggests that this weeks CPI could also come in on the softer side and spell suggestions for RBA easing.

Three more days of meetings and European leaders will have a decisive solution to the sovereign crisis or so they say. The euro opened the week lower as the broad risk trade suffers on a lack of concrete action. Details on latest Fridays Premium trades are below. Our EURUSD short hit all targets, while long oil stopped out. The EURJPY trades have hit all targets.

The three issues facing leaders are 1) bank recapitalization 2) increasing the EFSF 3) Greek debt restructuring. European Council President Van Rompuy said he is confident of an agreement on all three points on Wednesday. Sarkozy echoed his comments.

There were signs of a framework for a deal on some issues but work remains on others.

As was widely speculated last week, leaders appear to have agreed on a 100 billion bank recapitalization plan. Analysts had been expecting a larger number and the early declines in the euro are partly reflecting this disappointment. Money from the EFSF will only be made available as a last resort.

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France appears to have given up on a proposal to turn the EFSF into a bank that can borrow from the ECB. Two options remain on the table, using the EFSF to guarantee the first 20-30% of losses in bond sales or creating an EFSF-insured fund that would seek outside investment. China is said to be an interested investor if Europe alters trade documents to call it a market economy. The IMF may also boost its involvement.

The group negotiating on behalf of Greek debtholders said progress has been limited. According to one report, bondholders have offered a 40% voluntary haircut but the troika is pushing for 50%.