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Sept Durable Goods surprised to the upside because of large jumps in defense and non defense aircraft orders but taking these out new orders unexpectedly fell. The core cap ex reading of non defense capital goods ex aircraft fell by .6% vs an expected gain of .8%. A 4% drop in computers/electronics orders and declines in primary and fabricated metals were the main catalyst. Also vehicle/parts orders fell for a 2nd straight month by .4%. Shipments, which get directly plugged into GDP, fell for a 2nd month by .4%. Also of note, because of a .5% rise in inventories and a drop in shipments, the inventory to shipments ratio rose to 1.59 from 1.58 to the highest since Oct ’09. The inventory build story over the past 1 1/2 yrs and its contribution to GDP has likely run its course and today’s figure may reflect the beginning of some moderation in manufacturing looking out the next few months.

After an interest rate hike from the PBOC and little substance and ire pointed toward China at the G20 meeting, the Yuan is falling to a 3 week low vs the US$. For a 2nd day, European PIG debt are trading sharply lower with the Greek 10 yr yield in particular up by 55 bps, rising above 10% for the 1st time in 3 weeks. The Greek Finance Minister today is talking about the difficulty they are still having in collecting taxes in a country that hates to pay taxes. Also, Portugal’s government and main opposition party ended talks on their very important 2011 budget and the cost of insuring Portugal’s debt is moving higher. Back in the US, ABC confidence fell 1 pt to -47, 1 pt below the 1 yr avg. The MBA said refi’s rose 3% after last week’s decline and purchases were up 3.9% from last week’s 2 month low.

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