NY Session: Markets Choppy Ahead of EU Summit

FX markets were largely rangebound but choppy and headline risk remained elevated as several developments continue to flow out of the Euro zone. Discussion over the size and possible leverage of the EFSF, bank recapitalization plans, PSI, and Greek austerity came across the wires today. In Greece, riots continued as Prime Minister Papandreou gets 154 votes to win the second ballot on the austerity bill. The EU said a second summit will be held on Wednesday Oct. 26 to assess a ‘comprehensive and ambitious’ bailout package. German spokesman Seibert said the EU aims to reach accord in two stages ‘next week’. We are cautious that such firm commitments may be setting investors up for disappointment. The euro advanced against the buck but was weaker against the franc as economic data out of Switzerland showed a growing trade surplus and increasing exports in the month that the SNB established a EUR/CHF floor.

In the U.S., weekly jobless claims fell to 403K from the prior 409K and the 4-week moving average fell by -6.3K to 403K. September leading indicators came out in line with expectations at +0.2% (prior +0.3%) and existing home sales fell by -3.0% m/m to 4.91M from the prior 5.06M showing that the housing market remains sluggish. A bright spot in the data was a surprisingly positive Philly Fed reading of +8.7 (cons. -9.6 prior -17.5). Although the Philadelphia Fed index is quite volatile, it tends to have a strong relationship to the ISM manufacturing report which is released a couple weeks later.

Other economic data showed Oct. EZ consumer confidence falling to -19.9 from the prior -19.1 and Canada’s wholesale sales gain +0.2% m/m in Aug. (cons. +0.5% prior +0.9%).

U.S. equities traded in and out of positive territory and ultimately closed the day to the upside. The Dow Jones Industrial Average finished the day higher by around +0.31% and the S&P 500 gained about +0.45%. Precious metals were softer with gold and silver currently down about -1.22% and -2.03% respectively.

There is relatively light economic data flow over night with NZ September card spending, and Australia import and export price index for Q3 scheduled for release from down under. China will see the Oct. flash business sentiment survey.