• The dollar fell in volatile trading Wednesday. The S&P 500 declined 3.53 points to 1,057.08 but recovered most of earlier losses incurred on a disappointing Chicago PMI report. Risk appetite returned after Federal Reserve Vice Chairman Donald Kohn said slack in the US economy means the Fed can keep interest rates at around zero for an extended period. The yen gained. The euro advanced as Germany's unemployment unexpectedly fell and the European Central Bank reduced the size of its 12-month auction. Sterling rose modestly, supported by UK consumer confidence rising to the highest level since January 2008. The Canadian dollar rose on surging oil prices. The Swiss franc fell against the euro on speculation the Swiss National Bank sold the currency to curb its gain. The SNB said that it will continue to act to prevent an appreciation of the franc.

  • The AUD/USD rose to a new yearly high as commodity prices surged on Wednesday. The pair was also supported by stronger-than-expected Australian retail sales. The AUD/USD, having been strongly correlated with the stock and commodity markets, is also boosted by speculation that the Reserve Bank of Australia will hike interest rates before other central banks. The trend is up. There are strong supports in the 0.86 and 0.84 areas and resistance in the 0.90 area.

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Financial and Economic News and Comments

US & Canada

  • US GDP in Q2 2009 was revised up to a -0.7% annualized growth rate from a previously reported -1.0% pace, final Q2 GDP data from the Commerce Department showed, after a -6.4% rate in Q1. Q2 GDP contracted 3.8% y/y. The largest drags on Q2 GDP were inventories (down at a $160.2 billion annual rate) and business investment (down at a 9.6% annual rate). The largest positive contributors were international trade (the trade deficit fell at a $56.1 billion annual rate) and government purchases (up 6.7% annualized). Personal consumption declined at a 0.9% rate in Q2, less than the previously estimated. The GDP price index was unrevised at 0.0%.

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  • US private-sector payrolls declined 254,000 in September, according to estimates by Automatic Data Processing Inc. (ADP) and Macroeconomic Advisers. August data was revised to show a decline of 277,000, down from a previous estimate of 298,000. Friday's official employment report released by the Labor Department may show overall job losses approximately 180,000 with the unemployment rate rising to 9.8%.

  • The Chicago business barometer unexpectedly declined to 46.1 in September from 50.0 in August, indicating US business activity contracted this month and stumbled en route to establishing the possible end of the 2007-2009 recession, according to the Chicago Report by Kingsbury International, Ltd. and the Institute for Supply Management - Chicago, Inc.

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  • Midwest manufacturing output fell in August. The Chicago Fed Midwest manufacturing index declined 0.3% in August to 80.1 after an upwardly revised 3.1% increase in July to 80.4, the Federal Reserve Bank of Chicago said.

  • Canada's GDP unexpectedly stalled in July after a 0.1% m/m increase in June, GDP data from Statistics Canada showed, signaling Canada is struggling to emerge from its recession.

  • Canada's industrial product prices increased as forecast 0.5% m/m in August, the second gain in three months, after a revised 0.6% m/m decline in July, while raw materials prices rose a more-than-expected 3.7% m/m, the third rise in four months, following July's revised 3.9% m/m decrease, a separate report from Statistics Canada showed.

Europe

  • Eurozone consumer prices fell a slightly more-than-expected 0.3% y/y in September, a fourth consecutive fall, a flash CPI estimate released by Eurostat showed, after a 0.2% y/y decline in August.

  • Germany's unemployment unexpectedly declined 12,000 to 3.46 million in September on a seasonally adjusted basis after falling a revised 5,000 in August, figures from the Federal Statistical Office showed. The seasonally adjusted unemployment rate declined to 8.2% from 8.3%.

  • The GfK UK consumer sentiment index rose more than expected to -16 in September from -25 in August, indicating UK consumer confidence climbed to the highest level since January 2008, data from GfK NOP showed.

  • UK service-sector output declined 0.2% in the three months to July after a 0.6% decrease in the three months to June, registering the thirteenth consecutive three months on previous three months decline, the Office for National Statistics said.

  • The KOF Swiss leading economic index rose more than expected to 0.85 in September from -0.04 in August, indicating Switzerland's Q4 2009 GDP may record positive year-on-year growth, the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research reported.

Asia-Pacific

  • The Nomura/JMMA PMI rose to 54.5 in September from 53.6 in August, indicating Japan's manufacturing activity expanded for a third consecutive month, according to data released by Markit Economics.

  • Japan's industrial production gained for a sixth straight month in August, increasing 1.8% m/m, in line with expectations, after a 2.1% m/m advance in July, preliminary August IP data from the Ministry of Economy, Trade and Industry showed, registering the longest stretch of gains in 12 years. August IP fell 18.7% y/y, following July's 22.7% y/y drop.

  • Japan's labor cash earnings fell a less-than-expected 3.1% y/y in August, slowing the pace of decline following July's revised 5.6% y/y decrease, according to the Ministry of Health, Labour and Welfare.

  • Japanese housing starts fell for a ninth consecutive month in August, falling a more-than-expected 38.3% y/y, after a 32.1% y/y decrease in July, figures from the Ministry of Land, Infrastructure and Transport showed. Construction orders fell for a tenth straight month in August, falling 25.2% y/y to ¥694.3 billion ($7.7 billion), following July's 42.8% y/y drop.

  • The Conference Board Australian leading economic index advanced 0.7% m/m to stand at 113.4 in July, the fifth rise in the last six months, after a downwardly revised 0.6% m/m increase in June and a revised 0.6% m/m decline in May, the Conference Board reported. The coincident economic index was unchanged in July.

  • Australia's seasonally adjusted retail sales increased a more-than-expected 0.9% m/m in August after a revised 0.9% m/m decrease in July, according to data from the Australian Bureau of Statistics (ABS). The August increase was led by department stores (+2.4%), household goods retailing (+0.9%), and cafes, restaurants and takeaway food services (+1.9%).

  • Australia's building approvals unexpectedly declined 0.1% m/m in August after a downwardly revised 6.6% m/m increase in July, data from the ABS showed. August building approvals were unchanged y/y, following July's revised 3.0% y/y decrease. Approvals to build private houses rose 3.1% m/m in August, an eighth consecutive monthly gain.

  • Australia's private sector credit increased 0.1% m/m in August after a 0.2% m/m advance in July, the Reserve Bank of Australia reported. August private sector credit grew 2.5% y/y, following July's downwardly revised 2.9% y/y rise. Housing credit was up 0.6% m/m August, up 7.4% y/y.