Morning Forex Fundamental

EUR

'During the summer months, the German economy's safety net against the euro crisis has become dangerously thin' - Carsten Brzeski, a senior economist from ING

German factory orders fell more than expected in August

Impact Medium

German industrial orders fell more than expected in August due to weak domestic demand, the Federal Ministry of Economics and Technology reported on Friday. Order intake dipped to a seasonally adjusted -1.3%, down from 0.3% in the preceding month. At the same time, domestic bookings tumbled 3.0 per cent.

'During the summer months, the German economy's safety net against the euro crisis has become dangerously thin,' said Carsten Brzeski, a senior economist from ING in Brussels. 'Order books have rapidly become smaller and at the same time companies have increased their inventories; a combination boding ill for growth in the coming months. The downswing in German industry will continue.'

Also Friday, the European statistics agency, Eurostat, said the eurozone's economy contracted more rapidly in the second quarter of 2012. Region's gross domestic product shrank by 0.2% from the first three months of the year, meeting analysts' expectations.

The Stoxx Europe 600 Index jumped 1.02 per cent to 274.11. Germany's DAX Index soared 1.27 per cent to 7,397.87 and France's CAC 40 Index edged higher 1.64 per cent to 3,457.04

USD

'If you look at the payroll number, it's not a good number' - Steve Blitz, chief economist of ITG Investment Research

U.S. unemployment rate fell to 7.8% in September

Impact High

The U.S. unemployment rate surprisingly fell to 7.8% in September, down from 8.1%, reaching its lowest level since January 2009, as employers hired more part-time workers. The Labor Department said on Friday, that the nation's economy added 114,000 workers last month, above analysts' expectations of an 110,000 increase.

'If you look at the payroll number, it's not a good number,' said Steve Blitz, chief economist of ITG Investment Research. 'When you look inside the report you see bits and pieces of good things.'

'We're looking for ongoing, sustained improvement in the labor market,' Fed Chairman Ben S. Bernanke told reporters following the announcement on Sept. 13. 'What we've seen in the last six months isn't it.'

The Standard & Poor's 500 declined 0.03 per cent to 1,460.93. The Dow Jones Industrial Average advanced 0.26 per cent to 13,610.15. The Nasdaq Composite plunged 0.42 per cent to 3,316.19.

GBP

'The data... add to evidence that the economy pulled out of recession in the third quarter...' - Chris Williamson, chief economist of research firm Markit

U.K. consumer spending jumped 3% in September

Impact High

The U.K. consumer spending recorded its strongest monthly growth since May 2009 in September, according to Visa Europe's UK expenditure index. Sales jumped 3% as consumers spend more at clothes as well as hotels and restaurants. Despite strong improvement in consumer spending, online spending tumbled 1.5% last month.

'The data... add to evidence that the economy pulled out of recession in the third quarter, but still leaves the question of whether this is merely temporary or the start of a sustained upturn,' said Chris Williamson, chief economist of research firm Markit.

'However, consumer confidence remains historically low as uncertainty about the economy and job security persists, suggesting that the bounce in spending seen in the third quarter could be as good as it gets for the foreseeable future.'

The FTSE 100 Index added 0.74 per cent to 5,871.02. The broader FTSE All-Share Index rose by 0.76 per cent to 3,067.73.

CHF

'Due to the slowdown in global economic growth over the summer period and the weaker-than-expected Swiss growth in spring, Swiss GDP will in 2012 only grow by 0.9 percent' - KOF Swiss Economic Institute

Swiss KOF cut its growth forecast for 2012, 2013

Impact: Medium

Swiss KOF economic institute downgraded its growth forecast for 2012 and 2013, because of gloomy global prospect affected by the eurozone's debt crisis. The Swiss economy is expected to expand by 0.9% in 2012, compared to a previous estimate of 1.2%, while the forecast for 2013 was lowered by 0.4% to 1.3%.

'Due to the slowdown in global economic growth over the summer period and the weaker-than-expected Swiss growth in spring, Swiss GDP will in 2012 only grow by 0.9 percent,' KOF said.

'Due to the policy of muddling through, uncertainties regarding the future of the euro persist which are in turn hampering companies' willingness to invest.'

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies jumped 0.66 per cent to 6,674.82. The broader Swiss Performance Index edged higher 0.62 per cent to 6,162.58.

JPY

'Japan's economic activity is more or less leveling off' - the Bank of Japan

No fresh stimulus from BoJ, rates unchanged

Impact: Medium

The Bank of Japan decided not to expand its asset-purchase fund, which was earlier enlarged to 55 trillion yen ($700 billion), while cut its assessment of the nation's economy due to weakening production and exports. The central bank also maintained its benchmark interest rate between 0.0 and 0.1 per cent, in line with analysts' expectations.

'Japan's economic activity is more or less leveling off,' the BOJ said in a statement announcing its policy decision.

'There's a chance that the BOJ will employ more monetary stimulus at its next meeting,' said Yoshimasa Maruyama, chief economist at Itochu Corp. (8001) in Tokyo. 'The BOJ will likely revise down its CPI forecasts for fiscal 2012 and 2013,' at the meeting.

'Downgrading the economy or growth rates means revising down the outlook for improvement in the supply-demand gap,' said BOJ Governor Masaaki Shirakawa.

The Nikkei 225 Stock Average advanced 0.44 per cent, or 38.71 points, to 8,863.30. The broader Topix Index edged higher 0.24 per cent, or 1.75, to 737.13.

Press Review

Europe

Eurozone's Consumer price inflation jumped to a seasonally adjusted annual rate of 2.7% in September , up from 2.6% in the prior month, while analysts had estimated the annual rate of inflation fell to 2.4%.

German business confidence fell by 0.9 point to a seasonally adjusted 101.4 in September, down from 102.3 in August, reaching the lowest level in more than two and a half years.

David Cameron 'would veto' EU budget

http://www.bbc.com/news/business-19862239

Prime Minister David Cameron has said he would veto a new European Union budget "if necessary".

Europe Seeks to Contain Spanish Troubles as Finance Chiefs Meet

http://www.bloomberg.com/news/2012-10-07/europe-moves-to-contain-spanish-trouble-as-finance-chiefs-meet.html

European officials will move to prevent Spain from dragging the single currency into a new round of convulsions this week as a series of high-level meetings aim to ease the three-year-old European debt crisis.

USA

Initial jobless claims dropped by 26,000 to a seasonally adjusted 359,000in the week ending September 22, compared to expectations for a fall of 7,000 to 378,000, while down from 385,000 in the previous week.

U.S. gross domestic product increased at a seasonally adjusted annual rate of 1.3%, down from a previous estimate of 1.7%. as consumer spending and business investment declined, the Bureau of Economic Analysis said on Thursday.

Hiring Notches Modest Gains

http://online.wsj.com/article/SB10000872396390443768804578038150747630398.html?mod=WSJ_economy_LEADStoryTop

The U.S. unemployment rate fell sharply in September to its lowest level since January 2009, suggesting that summer job growth was stronger than previously thought and providing new fodder for a presidential race that has focused on competing views of the nation's economic health.

U.S. Companies Remain Wary of Hiring

http://www.businessweek.com/articles/2012-10-04/u-dot-s-dot-companies-remain-wary-of-hiring

The share of U.S. chief executive officers planning to add employees or expand investment during the next six months declined in the third quarter. And according to a Business Roundtable survey, an even larger number said they planned to cut jobs and spending.

Asia & Pacific

Chinese trade balance rose more than expected in August, the National Bureau of Statistics of China reported on Monday. Nation's trade surplus widened to $26.661B versus expectations of $19.75B, up from 25.10B in the prior month.

Japanese corporate service price index fell to a seasonally adjusted annual rate of -0.3% in August from the previous month, after falling a revised 0.1% in July. The reading came in lower than the median analyst forecast of -0.2%.

World Bank cuts East Asia GDP outlook, flags China risks

http://www.reuters.com/article/2012/10/08/us-worldbank-asia-outlook-idUSBRE89701420121008

The World Bank cut its economic growth forecasts for the East Asia and Pacific region on Monday and said there was a risk the slowdown in China could worsen and last longer than many analysts have forecast.

Japan Carmakers to Cut China Production by Half

http://www.cnbc.com/id/49324675

Japan's Toyota Motor, Nissan Motor and Honda Motor plan to slash production in China by roughly half, the Nikkei newspaper reported on Monday, as a territorial row between Asia's two largest economies cuts sales of Japanese cars in the world's biggest auto market.