Trade the News Market Internals Update at 12:00ET

Dow -233 S&P -27 NASDAQ -63

***Economic Data***

– (PD) Poland Central Bank leaves the Base Rate unchanged at 4.50%; as expected
– (US) MBA Mortgage Applications w/e Nov 4th: 10.3 v +0.2% prior
– (CA) Canada Sept New Housing Price Index M/M: 0.2% v 0.1%e; Y/Y: 2.3% v 2.2%e
– (MX) Mexico Oct Consumer Prices M/M: 0.7% v 0.7%e; Y/Y: 3.2% v 3.2%e; CPI Core M/M:0.3% v 0.3%e
– (MX) Mexico Sept Final Trade Balance: -$1.8B v -$1.8B prelim
– (US) Sept Wholesale Inventories: -0.1% v +0.5%e
– (MX) Mexico Oct Vehicle Production: 240.7K v 240.0Ke; Vehicle Domestic Sales: 75.8K v 74.0K prior; Vehicle Exports: 192.8K v 193.6K prior
– (US) Weekly DOE Energy Inventory data: Crude: -1.37M v +1Me; Gasoline: -2.10M v +500Ke; Distillate: -6.02M v -2Me; Utilization: 82.6% v 85.4%e
– (UK) BOE Asset Purchase Facility (APF) bought £1.7B in 2022-2036 Gilts in reverse auction; Bid-to-cover: 1.62x v x prior

– Fear is intensifying this morning as the euro zone’s worst nightmare appears to be coming true: contagion is overtaking Italy. The yield on 10-year Italian government debt are surging to almost 7.5% following a move by clearinghouses to boost raise margin requirements for Italian bonds, moves only slightly tempered by at least three rounds of ECB bond buying. In Greece, PM Papandreou announced a new unity government, helping to remove at least one vector of risk aversion. Note that there have been rumors of an emergency ECB meeting taking place today, with speculation that the ECB might discuss unsterilized primary and secondary bond purchases (although this type of action is currently forbidden under the central bank charter). Spot gold remains elevated by still has not managed to break the key $1,800 level. Front-month crude is firmly above $95 as jitters about Iran continue. The Bund future is again at all-time contract highs pushing its yield briefly below 1.7%. The US 10-year is under 2% and the long bond is under 3% ahead of this afternoons 10-year note auction.

– General Motors Q3 profit was down 15% y/y thanks to a loss in Europe. In addition, the firm warned that operating profit in the current quarter would be flat. Note that before the open Ford’s CEO said he was concerned with the uncertainty facing the economy and pledged to deliver on the company’s earlier FY11 European forecasts. GM was down as much as 10% in early trading, while shares of Ford were down 4%.

– Computer gaming names Activision and Take-Two both topped expectations in quarterly reports yesterday afternoon. Activision hiked is FY11 outlook and Take-Two reaffirmed its FY12 outlook. However, shares of ATVI and TTWO are both deep in the red this morning along with the rest of the market. Computer Sciences Corp beat profit estimates ex a big one-time charge. However it cut its FY12 profit forecast sharply. Shares of CSC are down 11%. In other tech news, Adobe offered an initial forecast for the next fiscal year, guiding FY12 revenue up 4-6%, although margins would be flat. Yahoo signed a big ad deal with AoL and Microsoft.

– Retailers have begun reporting their Q3 results. Macy’s, Liz Claiborne and Ralph Lauren all comfortably topped earnings expectations, Macy’s and Liz by wide margins. Liz and Ralph Lauren saw big double-digit increases in quarterly comp sales metrics. Macy’s also tweaked its FY11 outlook higher. Shares of M and RL are down more than 5% thanks to weak markets, although LIZ has popped back to unchanged.

– EUR/USD tested one-month lows below the 1.3565 handle as Italian yields remain above the 7% level. Risk aversion sentiment has sent equity prices lower and aided the JPY and CHF pairs against the European pairs.

***Looking Ahead***

– 11:00 (US) Fed to sell $1.00-1.50B in Notes
– 11:30 (GE) German Gov’s advisor Franz speaks on Wise Men’s Economic Report
– 11:30 (EU) EFSF CEO Regling
– 12:15 (EU) EU President Van Rompuy speaks in Zurich
– 12:15 (US) Fed member Tarullo speaks on Regulation in New York

This information was brought to you courtesy of TradetheNews.com, for your free trial Click Here