After hoping for quiet week leading into the European debt front this week as a resolution was worked towards for the summit on the 23rd, some honesty and realest perspective from Germany spooked the market. But nevertheless, the chancellor reminds that the dreams that are emerging again, that on Monday everything will be resolved and everything will be over will again not be fulfilled, said Steffen Seibert, chief spokesman for Germany's Chancellor, Angela Merkel. The German Finance Minister also echoed these comments, with most probably the politicking on where the funds will be drawn from to underwrite the banks that take a haircut on Greek bonds a key issue as with the recapitalization of the banks. The markets previous optimism took a hit and so did risk assets, with the Euro following equity market down 1.6 cents to 1.3746 USD through the overnight sessions. The Australian dollar was down in tandem also dropping 1.75 cents, as a flight to the US dollar was the order of the night.
Industrial Production data in the States did nothing to override the European risk on fears, with a solid print of 0.2% in line with estimates. Equity markets in the US followed leads form Europe on the German damping of optimism. While looking at data so far this month in the States which has been positive, the Empire State manufacturing index which is a forward looking indicator of spending, hiring, and investment of manufacturers was a -8.5, the worst print for the Survey since November last year, which may give some rise to the organisations that are predicting recession for next year in the US.
The overnights session should not panic traders in the wake of the gains made over the last two weeks, with the Australian dollar still up 9.5 US cents in that period. And like any realest would have had a hard time seeing Europe determine a solution within 6 days like the G20 ministers had demanded rather than have a solution by their own deadline of 3-4 November. Overnight's negative session though does not lead in well to RBA monetary policy minutes which will hang on how dovish the comments are regarding rates direction and with Chinese data expecting to show a minor slowdown in growth. At the time of writing the Australian dollar is at 1.016 USD.