Optimism entered markets overnight as investors continued to find solace on reports European officials are working on a plan to recapitalize European banks. Overnight German Chancellor Angela Merkel also stressed the importance of swift action; throwing here support behind a plan to have a contingency plan in place to calm distressed markets. This translated to broad strength across both European and U.S equities with the S&P500 and DOW rising 2.8 and 1.2 percent respectively.
We did see a disappointing PMI-services reading for Germany which fell below the '50' index level which denotes economic contraction. Euro-zone PMI also disappointed to the downside falling to 48.8. Euro-zone retail sales fell 0.3 percent in August to represent an annual contraction of 1 percent.
UK GDP recorded 0.1 percent growth in the second quarter - just shy of market expectations of 0.2% growth - On year the UK economy grew an uninspiring 0.6 percent. Across the Atlantic, the ADP gauge of private employment growth surprised to the upside with 91,000 new jobs added in September against expectations of 75,000. A reading on the services sector by the Institute for Supply Management also came in slightly higher than expected to record an index level of 53 in September, but lower than the August read of 53.3.
Commodities, metals and energy markets rallied in unison promoting natural weakness from the greenback against major counterparts. The Aussie rallied as sentiment rebounded with price action making a break to the upside of 96 US cents. In the absence of local economic feedback we expect local and Asian equities to provide direction; we're expecting price action to remain supported above 96 US cents in domestic trade. At the time of writing the Aussie dollar is buying 96.6 US cents.