Trade the News Market Internals Update at 14:00ET

Dow -143 S&P -16 NASDAQ -27

***Economic Data***

– (SA) South Africa Sept Trade Balance (ZAR): 2.5BB v 1.0Be
– (CA) Canada Aug Gross Domestic Product M/M: 0.3% v 0.2%e; Y/Y: 2.4% v 2.2%e
– (CA) Canada Sept Industrial Product Price M/M: 0.4% v 0.2%e; Raw Materials Price Index M/M: +1.4% v -1.9%e
– (BR) Brazil Sept Nominal Budget Balance (BRL): -9.2B v -17.1B prior; Primary Budget Balance: 8.1B v 8.1Be; Net Debt to GDP Ratio: 37.2% v 39.2% prior
– (PD) Poland Oct NBP Inflation Expectations: 4.2% v 3.8% prior
– (US) Oct Chicago Purchasing Manager: 58.4 v 59.0e
– (US) Oct Dallas Fed Manufacturing Activity: +2.3 v -5.0e
– (EU) ECB drained €173.5B vs. €173.5B targeted in 8-day Term Deposit tender

– A confluence of global economic events is shaking up US markets this morning. Another BoJ’s solo currency intervention has faced some stiff headwinds in the form of a highly risk averse trading environment to begin the week. In Europe, equity indices fell sharply as yields on Spanish and Italian debt spiked higher, as investors expressed worries about the details of the EFSF deal. In the US, MF Global declared bankruptcy after negotiations for the sale of assets with various partners broke down, following a terrible Q2 earnings last week driven by big write downs on holdings of European debt, much like Dexia in early October. Share of Citigroup and Morgan Stanley fell as much as 6% in the first hour of trading, while financials are broadly lower. MF is a major derivatives market player, and its traders have been barred from clearing trades on the ICE, NYMEX and CME, potentially restricting liquidity on the exchanges. The US benchmark 10-year is up a full point depressing its yield to 2.2%.

– In earnings news, heath insurance giant Humana followed in the footsteps of its major competitors and reported very strong profits and hiked its FY11 outlook. Home improvement retailer Lowes missed earnings targets by a wide margin, as revenue contracted from year-ago levels. Note that Catastrophe losses at CNA, in which Loews has a 90 percent stake, were $32 million after-tax, compared with $8 million a year ago. Shares of Lowes are down 2% in the early going Industrial name Shaw Group’s results also widely missed expectations, although the firm said that it was evaluating alternatives for its energy and chemicals business and has received “multiple indications of interest,” helping shares. SHAW is up 6%.

– USD/JPY consolidated around the 78.00 level throughout the NY morning as dealers waited to seek if the BOJ would continues with its intervention effort. The pair did test 78.35 for a brief time as various accounts tried to spoof intervention price action. The 78.00 was the prior resistance over the last two months and viewed as a pivotal level for the NY close. EUR/USD hovered around the 1.40 handle in the session as risk aversion flows were driven by the widening peripheral yields in Europe.

***Looking Ahead***

– 11:30 (US) Treasury to sell $29B in 3-Month and $27B in 6-Month Bills
– 12:00 (CO) Colombia Sept Urban Unemployment Rate: 10.1%e v 10.4% prior
– 14:00 (GE) Bundesbank member Boehmler speaks in Schwabisch Gmund, Germany
– 15:00 (AR) Argentina Sep Construction Activity M/M: No est v 1.80% prior; Y/Y: No est v 11.5% prior
– 22:30 (CH) China Oct HSBC Manufacturing PMI: No est v 49.9 prior
– 23:30 (AU) RBA Interest Rate Decision: Expected to cut the Cast Target by 25bps to 4.50%

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