Trade the News Market Internals Update at 12:00ET

***Economic Data***

– (PD) Poland Central Bank leave Base Rate unchanged from 4.50% level; as expected
– (US) MBA Mortgage Applications w/e Sept 30th: -4.3% v 9.3% prior
– (US) Sept Challenger Job Cuts: 115.7K v 51.1K prior; Y/Y: 211.5% v 47.0% prior
– (CL) Chile Aug Economic Activity Y/Y: 4.6% v 4.8%e
– (US) Sept ADP Employment Change: 91K v 73Ke
– (US) Sept ISM Non-Manufacturing Composite: 53.0 v 52.8e
– (US) Weekly DOE Energy Inventories: Crude: -4.67M v +1Me; Gasoline: -1.14M v +1Me; DISTILLATE: +750K v -500Ke; Utilization: 87.7% v 85.9% w/w

– US equity indices are floating higher this morning after briefly trading in the red after the open. Tuesday afternoon’s vicious late-day reversal had many of the characteristics of the bear market snap back rallies seen back in 2008, with extremely oversold prices (financials in particular) as rumors continued to swirl around Bank of America and Morgan Stanley. The late day rally has been ascribed to some press spin late in the US session that suggested European officials were finally looking at coordinated options for recapitalizing the banks. Earlier on Tuesday, German Finance Minister Schaeuble had said that 2008 emergency measures (such as the SoFFin fund) could be reactivated in order to prevent a banking crisis. This morning, Chancellor Merkel said that officials were prepared to recapitalize banks if necessary. In the US, the ADP and Challenger employment reports focused investors’ minds on the September payrolls report due on Friday. The Challenger job cut data were more than twice the expected amount, while ADP saw 91K jobs added in the month, with current estimates for Sept non-farm payrolls running around a 50-100K gain. Sentiment also received a boost from reports senators would introduce a bill to allow a repatriation tax holiday for foreign profits at US firms. Money is flowing away from government bond markets: the US 30-year yield has backed up above 2.85% while the Bund now stands at 1.84% up 11 basis points on the day.

– In earnings, consumer names Costco and YUM! Brands offered lackluster quarterly results. Costco actually missed bottom-line expectations for its Q4, however the retailer’s Q4 and September comps were still relatively strong. On the conference call, Costco’s CEO said new signups in Q4 were up “dramatically” y/y, helping to explain why the firm said it would raise annual membership fees on Nov 1st. YUM! only just met Q3 expectations and also reaffirmed its FY11 outlook. China comps grew a whopping 19% in the quarter, although US SSS fell 3%. The company said US comps would decline again in Q4, and that 2012 would remain challenging. Both COST and YUM are down 2% in mid-morning trade. Big ag name Monsanto’s traditional Q4 loss was less than expected, while revenue was well above par. The firm offered very strong guidance for Q1, although its initial look at FY12 was merely in line. Tech name Global Payments, Inc widely beat consensus expectations in its Q1 results and raised its FY12 outlook. Both MON and GPN are up 4% in the early going.

– The greenback was steady during the New York morning as market participants positioned themselves ahead to tomorrow’s ECB rate decision. Overall the outlook is divided as to what the ECB might do in terms of interest rates, with expectations ranging from unchanged rates to a cut the refi rate by as much as 50bps. Analaysts are confident that the ECB will continue to provide ample liquidity to the banking sector. Turkey’s central bank stepped up its efforts to stem an accelerating slide TRY currency which hit a record low against the euro and to conduct sizeable daily FX auctions to supply liquidity to market if deemed necessary. The moves highlight the extreme volatility and irregular movements in currencies of emerging countries and the concern it could have a lasting impact on economic and financial stability.

***Looking Ahead***

– 11:00 (US) Fed to purchase $3.25-4.00B in Notes/Bonds
– 11:30 (BR) Brazil Central Bank Posts Currency Flows’ Data for Prev. Week
– 11:30 (BR) Brazil Sept Commodity Price Index M/M: No est v -0.2% prior; Y/Y: No est v 18.2% prior
– 11:30 (GE) German Chancellor Merkel
– 16:20 (US) Tsy Sec Geithner
– 17:00 (CO) Colombia Aug Exports FOB: No est v $4.9B prior

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