SMF Notes Morning Call for Thursday, October 11, 2012

Overnight Developments

Dec E-mini S&Ps are up +0.40% on the +0.61% rally in European stocks and on some optimism after Italy today successfully sold 3-year bonds. The markets have been able to shake off S&P's downgrade of Spain late yesterday. Asian stocks today closed mostly lower with Japan down -0.58% and China down -0.93%. Commodity prices are mildly higher by +0.13% with Nov crude oil +0.94%, Dec gold +0.44%, Dec copper +0.74%, and agriculture prices trading mostly lower. The dollar index is down -0.09%. EUR/USD is up +0.29% and USD/JPY is up +0.24%. Dec 10-year T-notes are down -0.5 tick.
S&P late yesterday cut Spain's debt rating by two notches to BBB- from BBB+ where the rating is now only one notch above junk. S&P left Spain's rating on negative watch.
Italy today sold 3.75 billion euros of 3-year bonds at 2.86% with a bid cover ratio of 1.67, up from 1.49 last month.
South Korea's central bank cut its policy rate by 25 bp to 2.75% from 3.00%, which was in line with market expectations. The central bank cut its 2012 South Korean GDP forecast to +2.4% from +3.0%. South Korea's rate cut followed the 25 bp rate cut in Brazil on Wednesday to address weak global economic growth.
The Greek unemployment rate in July climbed to a new record high of 25.1% from a revised 24.8% in June.
Japan Aug machine orders fell -3.3% m/m and -6.1% y/y, which was weaker than market expectations of -2.3% m/m and -4.7% y/y.
Germany's Sep CPI was left unrevised at unch m/m and +2.0% y/y.

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