Global stocks dropped yesterday, lead by China where Shanghai Composite Index declined 5.8% yesterday, as investors are concerned about the economy since it isn’t expanding fast enough to justify the rally of equity markets, and need to see more good fundamentals in the market which could keep pushing stocks higher. Standard & Poor’s 500 index dropped 2.4% to 979.73, being the biggest drop in 6 weeks. Dow Jones also lost 2% to close at 9,135.34 and Nasdaq ended the day with a loss of 2.8% closing at 1,930.84. However, today we have seen a clear reversal in risk appetite as Asia's regional indexes are trading higher (positive correlation between Shanghai and EURUSD is still intacted) and Europe pointing to a stronger open. The US Dollar was higher yesterday against major currencies except the Yen, and I believe we got used to this scenario, whenever investors are in risk aversion mode, this is pushing low yielding currencies up, and brining equities, commodities, and higher yield currencies down. This correlation seems to continue in the near term as long central banks are willing to keep the interest rates their current levels. Most major currencies started falling against the Dollar at the beginning of the Asian Session. The Euro has a straight drop from 1.4175 to bottom at 1.4050, the pound came back to its last 2 months trading range between 1.60 – 1.65. The pound opened at 1.6467 and dropped to 1.6276 European session. Australian and Canadian Dollar also dropped pressured by commodity prices. The US housing market increased in August to 18 from 17 in July, indicating US builder confidence rose this month. The Empire Manufacturing Index, a monthly survey by the New York Fed over the manufacturing activity in New York State rose to a higher-than-expected 12.1 in August from -0.6 in July. The Euro Zone trade surplus widened to €4.6 billion. Japan's GDP expanded 0.9% QoQ in Q2 2009 after a revised 3.1% QoQ decline in Q1. Today we inflation data releases from UK and U.S., but concerns today are more towards the German and Euro Zone ZEW Index which measures Europeans confidence in the market, where a higher than expected figure could push the Euro higher.

G10 Advancers and Decliners vs USD
Global Indexes Current Level % Change
Nikkei 225 Index10,284.96+ 0.15
Hang Seng Index20,342.54+ 1.01
Shanghai Index2,910.88+ 1.40
FTSE 100 Index4,679.62+ 0.74
DAX Index5,234.61+ 0.63
SMI Futures5,896.75+ 0.22
DJIA futures9,178.00+ 0.63

World Markets Current Level % Change
Gold939.75+ 0.55
Silver14.20+ 1.35
VIX27.89+ 14.91
Crude wti67.43+ 1.01
USD Index79.17- 0.19

Todays Calender Estimates Previous Country / GMT
CPI, % m/m (y/y) Jul-0.3 (1.5)0.3 (1.8)GBP / 08.30
RPI, % m/m (y/y) Jul-0.2, -1.70.3 (-1.6)GBP / 08.30
RPIX, % m/m (y/y) Jul(0.9)0.3 (1.0)GBP / 08.30
GDP (Annualized) 2Q-3.3-6.4ZAR / 08.30
German ZEW economic expectations index Aug45.039.5EUR / 09.00
PPI, % m/m (y/y) Jul-0.2, -5.81.8 (-4.6)USD / 12.30
Core PPI, % m/m (y/y) Jul0.1 (2.8)0.5 (3.3)USD / 12.30
Housing starts, thous Jul598582USD / 12.30
Building permits, thous Jul573570USD / 12.30
CBT Rate Announcement7.75%8.25%TRY / 14.00