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Market Comment (21st Oct 2010, 06:30)

In the US overnight, stocks rebounded from yesterday’s fall as the US dollar resumed its slide on speculation of further stimulus from the Federal Reserve.

Stronger-than-expected results from Boeing and Yahoo! also helped lift sentiment.

The Dow Jones Industrial Average was the top performer, up 1.2% while the S&P 500 and NASDAQ added 1.1% and 0.8% respectively.

Across Asia, regional markets are mildly lower with financial stocks weighing, as speculation mounts that bank regulations will be tightened. As at 06:15, the Kospi is the region’s best performer flat on the day, while the Hang Seng is down 0.1%. Elsewhere, the Nikkei and the Shanghai Composite are lower by 0.2% and 1.2% respectively.

In Australia, the ASX 200 is flat at 4625, well off its earlier highs of 4661. Gains for the day have been driven by the consumer staples and discretionary sectors along with the industrials and materials sectors. On the flipside, the financials and energy sectors have defied positive offshore leads and traded lower.

Certainly the highlight during the Asian session was the raft of Chinese data that came out in line with what analysts had flagged. GDP grew at 9.6%, CPI +3.6%, fixed asset investment + 24.5%, industrial production +13.3% and retail sales +18.8%. Some described it as a positive result in the sense the data was not too hot so as to elicit concerns that the Chinese economy was overheating and running rampantly out of control, nor was it cold enough to raise doubts over China’s growth trajectory and the government’s ability to orchestrate a controlled slowing of the economy.

The market’s way of saying it was comfortable with the result was to almost ignore it. Equity markets didn’t react and the AUD continued to hover in the same 15bp range it had for most of the previous hour before the data’s release. It will be of great interest to see how equity and currency traders react to the numbers in the European and US session.

Given the lack of volatility and with little having happened in the latter part of the US session aside from the better-than-expected results from eBay, European markets are set to open Thursday little changed. Eurozone PMI and UK retail sales figures could however offer further direction once markets are open, whilst more details of the UK banking levy are set to be released during the session, following on from yesterday's government spending review. However, it may take some significant surprises here to have any meaningful impact on the sector.

Earnings news will once again focus on Q3 numbers from the US with Caterpillar set to give some insight as to the health of the construction sector ahead of the bell, accompanied by McDonalds. After the close, highlights will include Amazon and American Express, although there's no shortage of other reports due either and any big surprises could start to shift sentiment.

Ahead of the open we're calling the FTSE down 8 at 5721, the DAX up 1 at 6526 and the CAC up 2 at 3830.

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Market Comment (21st Oct 2010, 06:30)

In the US overnight, stocks rebounded from yesterday’s fall as the US dollar resumed its slide on speculation of further stimulus from the Federal Reserve.

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