Trade the News Market Internals Update at 12:00ET

Dow +158 S&P +19 NASDAQ +49

***Economic Data***

– (GE) Germany Aug Preliminary Consumer Price Index M/M: -0.1% v -0.1%e; Y/Y: 2.3% v 2.3%e
– (GE) Germany Aug Preliminary CPI EU Harmonized M/M: -0.1% v 0.1%e; Y/Y: 2.4% v 2.5%e
– (US) July Personal Income: 0.3% v 0.3%e; Personal Spending: 0.8% v 0.5%e
– (US) July PCE Core M/M: 0.2% v 0.2%e; Y/Y: 1.6% v 1.4%e; PCE Deflator Y/Y: 2.8% v 2.7%e
– (US) Chicago Fed July Midwest Manufacturing Index: 84.8 v 84.0 prior
– (GE) Germany Aug CPI Baden Wuerttemberg M/M: -0.2 v +0.5% prior; Y/Y: 2.5% v 2.7% prior
– (PE) Peru Q2 GDP Y/Y: 6.6% v 6.7%e
– (US) July Pending Home Sales M/M: -1.3% v -0.9%e; Y/Y: 10.1% v 13.6%e
– (US) Aug Dallas Fed Manufacturing Activity: -11.4 v -8.5e
– (IS) Israel Central Bank leaves the Base Rate unchanged at 3.25%; as expected

– US equity markets are following Asia and Europe higher this morning, with all three major indices up 1.5-2.0%. Markets have been responding positively to Bernanke’s speech at Jackson Hole, and are shrugging off comments made by IMF’s Lagarde, who warned that some European banks would need to be recapitalized. In the US, July personal spending racked up yet another month of slow, steady growth. Like the other August regional Fed surveys, the Dallas Fed survey was well below expectations, including a big dip in new orders. Note also that the IMF released a draft of its upcoming World Economic Outlook that cut is global growth outlook for 2011 and 2012. The IMF also cut its economic forecast for the US and the euro zone. After rebounding late last week, traders took profits again in gold, with spot gold dropping back below $1,800 in the wake of the cash equity open. A reversal in safe haven flows can be seen in currency and bond markets as well. The US 10-year is down more than half a point sending its yield back above 2.25%. The Yen and Swiss Franc are trading lower.

– In FX trading, the price action saw an unwind of safe-haven flows. The CHF and JPY related currency pairs and precious metals followed suit. USD/CHF moved above the 0.82 level while EUR/CHF cross was edging towards the 1.20 handle. Dealers were pondering whether the incoming Japanese PM would be an interventionist who would be willing to take more forceful action to contain JPY appreciation. USD/JPY was testing the 77 handle. With the draft World Economic Outlook, the IMF commented that it believes the ECB has room to ease monetary policy if downside risks persisted and that it should continue to intervene in sovereign debt markets. The IMF also said the Fed should be prepared to launch new unconventional measures to support the US economy. Dealers pointed out that nowhere in the IMF forecasts was there any mention of a possible recession.

***Looking Ahead***

– 11:00 (GE) German Chancellor Merkel attends State Election Campaign Events in Mecklenburg
– 11:00 (US) Fed to purchase $2.75-3.50B in Notes/Bonds
– 11:30 (US) Treasury to sell $29B in 3-month and $27B in 6-month Bills
– 15:00 (AR) Argentina July Supermarket Sales Y/Y: No est v 14.9% prior

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