Greece and earnings will determine October

As we look to a new quarter, the two most important things that will impact markets in October will be how Europe deals with Greece once the EFSF is fully up and running (after Austria today, 4 left to vote) and to what extent corporate earnings were hurt by the global economic slowdown. With respect to Europe, a German lawmaker laid out his thoughts after they approved the expanded EFSF yesterday by saying “The step that we are taking now will certainly not be sufficient…there will be another sequel to the euro thriller.” On the corporate side, IR is lowering Q3 guidance today as they said “Revenues were negatively affected by slower than expected end markets in several businesses.” The ECB meets next Thursday and the Sept Euro zone CPI figure out today has them likely keeping rates unchanged. At 3% y/o/y, it was well above estimates of 2.5% and the highest since Oct ’08. Either way, a rate cut of 25-50 bps is not the answer to Europe’s problems, just ask the Fed. German retail sales in Aug fell 2.9% m/o/m, much more than the expected drop of .5%. Reuters is reporting that Greece is considering selling a 100 yr bond but as Deutsche Bank CEO said today, “At the very end, we will probably have some sort of restructuring of the Greek debt.” In Asia, the China HSBC Sept mfr’g index at 49.9 was a touch above the preliminary reading of 49.4 last week. Here’s a quick gauge of the mini crash some markets had in Q3, Hang Seng down 21%, Shanghai down 14.6%, South Korea down 16%, DAX and CAC down 25%, Italy down 27%, Greece down 38% and the Bovespa down by 14%

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