Morning Update – 14/10/16 – by Arjun Lakhanpal

Morning all.. Wall St closed down 0.3% but had been lower before the last hour of trading, as wobbles in the EM space were seen. Asia has bounced back marginally after some better China data and this is calming nerves. The Nikkei closed up 0.52% and USDJPY rebounded back above 104.00.. The fact that China factory gate prices PPI rose for the first time since early 2012 has had some suggest the global deflationary phase may be ending. The inflation data and oil prices remaining supported at the moment may ease some of the global worries about deflation but sustained overcapacities in some Asian countries, such as Korea where capacity utilisation rates continue to fall, mean that the upside to global inflation may still be limited. Mixed bag for the USD overnight with JPY and GBP the main under-performers versus the USD. USDJPY traded up through 104.00 in line with broader positive risk tone on the margin whilst GBP traded to 1.2200 after FT comments from European Council president Tusk which outline that UK’s only alternative to “hard Brexit” is no Brexit. AUD and NZD the were able to lock in marginal gains overnight compared to yesterday’s LDN close. RBA’s Financial Stability Review (FSR) was the main focus in the Antipodean region as the Australian central bank welcomed some easing in risks to domestic household balance sheets (via tighter lending standards) but continued to signal real caution on the property market and appeared to have escalated concerns on the global front (and with respect to China in particular). This morning we get a look at CPI from Spain and Italy, Construction output from the UK and the EU trade balance. Good luck.