Trade the News Market Internals Update at 12:00ET

Dow +50 S&P +8.2 NASDAQ +24

***Economic Data***

– (BR) Brazil Sept FGV Inflation IGP-DI: 0.8% v 0.7%e
– (SA) South Africa Aug Electricity Consumption Y/Y: +0.4% v -0.7% prior; Electricity Production Y/Y: +0.5% v 0.1% prior
– (UK) Bank of England (BOE) raised the Asset Purchase Target by £75B to £275B; Not expected. The BOE left interest rates unchanged at 0.50% as expected
– (EU) ECB leaves the Main 7-Day Refi rate unchanged at 1.50%; as expected
– (US) Oct RBC Consumer Outlook Index: 39.2 v 40.2 prior
– (CA) Canada Aug Building Permits M/M: -10.4% v +0.3%e
– (US) Initial Jobless Claims: 401K v 410Ke; Continuing Claims: 3.700M v 3.725Me
– (BR) Brazil Sept Vehicle Production: 261.1K v 325.3K prior; Vehicle Sales: 311.7K v 327.4K prior; Vehicle Exports: 44.7K v 44.9K prior
– (CA) Canada Sept Ivey Purchasing Managers Index Seasonally Adj: 55.7 v 54.8e
– (BR) Brazil Aug CNI Capacity Utilization: 82.2% v 82.1%e
– (US) Weekly Natural Gas Inventories: +97 bcf v +93 bcf to +104 bcf expected range

– Trading has been choppy this morning as US investors react to the new measures announced in Europe. The BoE and ECB held rates steady, although the focus has been on various special measures launched by both institutions to hold down rates and boost liquidity. European officials have finally seemed to grasp the need to do something about their ailing banking sector, and investors are focusing in on comments from the European Commission’s Barroso, who said it was time for coordinated action to recapitalize the banking sector and rid it of its toxic assets. However, by all appearances European nations will be dealing with the banks on a country-by-country basis. Dexia seems to be a case in point: trading in the failed French-Belgian banks was halted this morning as France and Belgium agreed to nationalize their respective units, with Luxemburg pitching in too. The European Banking Association (EBA) said no new stress tests for European banks were planned for now (recall that Dexia passed their last round with flying colors) although it was reviewing capital levels at banks. In US data, the weekly jobless claims ticked higher again after last week’s mild decline, while the September comps data was relatively robust. Treasury prices are moving lower once again pushing up the 10-year yield above 1.95%. In Germany short term yields have bounced to 3-week highs after the ECB left rates unchanged. The Bund future is down a full point and the benchmark yield has climbed 9 basis points to 1.93% in Germany.

– In equity news, all other stories are being overshadowed by the death of Apple CEO Steve Jobs. Shares of Apple traded lower in the premarket this morning, although they were back in positive territory in the early going. Constellation Brands roundly beat earnings and revenue expectations in its Q2 report and shares of STZ are up nearly 10%. Marriott only just topped estimates and guidance was just in line. Express Scripts cut its FY11 outlook this morning, citing the soft economy. ESRX is up 8%, while MAR is up 2%.

– The September same-store sales data released this morning was relatively strong, indicated that retailers benefitted from a decent back-to-school season despite the tepid economic outlook. Big-box and department stores generally topped expectations and saw better growth than in August. Target, Kohl’s, Macy’s and Dillard’s all roundly beat consensus estimates, while high-end names Nordstrom’s and Saks both crushed expectations. JCPenny comps were negative for a second consecutive month and the company also cut its guidance for Q3 citing higher-than expected restructuring charges. Discount apparel name TJX returned to strong comps after a disappointing blip in August. Ross Stores was also very strong. The Limited repeated its double-digit comp gains as seen in August, while the Gap is still reporting comp losses, although slightly less of a loss than expected. Other retailers were a bit soft

– The greenback was firmer in early New York session following the BoE and ECB rate decisions. The BoE boosted QE measures at today’s decision, raising the Asset Purchase Target by £75B to £275B in total. The BoE said it would commence QE2 next Monday and take four months to complete. The BoE’s move drove speculation that the ECB might cut its key Refi Rate; GBP/USD slumped around 200 pips following the announcement. However the ECB held its key rate unchanged, as expected, although Trichet said that the central bank did discuss the pros/cons of a possible rate cut. The ECB fulfilled expectations that it would continue with LTROs at fixed rates, renewed the 12-month operation and reactivated its covered bond purchases. EUR/USD tested 1.3241 but recovered the bulk of their losses after Trichet noted that there was no limit to the amount in its bond buying program.

***Looking Ahead***

– (GE) German Econ Min Roesler leads trade visit to Athens
– (JP) Japan Econ Min Furukawa to meet Fed Chairman Bernanke and IMF Lipton, US Tsy Sec Geithner
– (NV) Netherlands Parliament to vote on EFSF extension (Malta & Slovakia still have to vote)
– 11:00 (GR) German Chancellor Merkel meets with Troika and OECD officials
– 11:00 (US) Treasury to announce 3-year, 10-year and 30-year Refunding
– 12:00 (UK) BOE Gov King on QE measures
– 14:00 (US) US Tsy Sec Geithner testifies on FSOC
Fri: (JP) Bank of Japan (BOJ) Interest Rate Decision: Target Rate Range currently 0.0% to 0.10%

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