European equity markets were behind the eight ball from the get-go overnight, losing ground as speculation grew that China is likely to rein in economic stimulus. Yesterday saw growth figures from China fail to excite local investors and the same sentiment knocked on to Europe. China's GDP released yesterday showed an increase of 8.9 per cent for the third quarter, in line with consensus.

Early in the European session, weaker than expected retail sales data weighed on the pound pushing it below 1.6500 against the greenback. UK Retail Sales for September came in unchanged for the second consecutive month against a market consensus of a 0.5 percent rise. This represents a rise of 2.4 percent on year against the consensus of 2.7 percent. Leading economic indicators from Europe also failed to give a boost to the local currency with the Euro-Zone Current Account making an about turn showing a deficit of EUR1.3b for the month of August from July's downward revision of a EUR3.7b surplus.

To the states and overnight Initial jobless claims for the week ending the 17th October came in above consensus rising to a level of 531,000 compared to the previous week's upward revision to 520,000. The data also showed the number of people that claim unemployment benefits on an ongoing basis fell to 5,923,000 from the previous weeks upwardly revised 6,021,000.

Not even the less than convincing jobs data could switch the balance of risk as investors found confidence on the better than expected corporate earnings, which pushed the DOW up 131 pts on the day. As a result major counterparts resumed momentum against the greenback, with the EURO once again breaking US$.1.5000 and sterling pushing through US$1.6600. Meanwhile, after falling to overnight lows of US.9187 the Aussie has clawed back gains to current levels of US$.9275. The Aussies composure was lost late yesterday with immediate sell off following the China's GDP Data. We expect a reasonably subdued day of trade in Australia with the Aussie dollar largely driven by strength in equity markets.