Markets move back into risk on with ISM data

Manufacturing data out yesterday from both the Eurozone and UK
was disappointing across the board and started the day with GBP in
negative territory against EUR and USD. Much needed US ISM
Manufacturing data in the afternoon session helped turn the tables
back into risk on following better than expected growth compared to
the consensus expected. The USD and EUR weakened against GBP on the
back of the news.

A disappointing start to Nationwide Housing Price Index this
morning showing a greater than expected fall in average house
prices coming in at -0.4% for the month of September. UK PMI
Construction this morning came in slightly weaker than expected at
49.5 compared to 49.8 showing yet further falls for the economy,
however this did little to move the markets.

After Mariano Rajoy announced last week if Spain’s borrowing
costs remain stubbornly he will not ‘hesitate’ to request a bailout
from the ECB. Moody’s says Spain bailout may not rescue all of its
banks. This coupled with the reports that Germany has signalled to
Spain, who may now be ready, that it should refrain from requesting
a bailout from the ECB, as data released shows that Spain’s Jobless
numbers has increased 1.7% MoM and continuing protest ravage
Madrid.

Overnight the RBA cut interest rates from 3.5% to 3.25% owing to
growth in China slowing and uncertainty about near-term prospects
greater than previous months. Over the past quarter we have seen
growth slow to 0.6% in 2nd Quarter from 1.4% in 1st quarter and
this latest cut will hopefully kick start the economy as it
approaches its Spring months.

Tomorrow we have another light data day with PMI Services out
for Spain, Italy, France, Germany and UK and European retails
sales. Markets will be waiting for the Interest rate decisions from
ECB on Thursday to see if the press conference gives any attention
to the escalating situation in Spain.