Australia: Offshore equity markets were hit severely, as were commodity prices, which have a large effect on our local currency. The current level of the AUD hasn’t been seen since March this year. US equity markets were down more than 5%; the sixth biggest Dow Jones decline in history.

[Kick off your trading day with our newsletter]

The DOW finished down 5.5% at 10810 and the S&P 500 down 6.7%. Standard and Poor’s followed their announcement on Friday of the downgrade of US sovereign debt, with further downgrades of the US government sponsored enterprises, Fannie Mae and Freddie Mac from AAA to AA+.

Standard and Poor’s also came out defending the downgrade, telling CNBC the decision was driven by sound analysis and concerns that political infighting could threaten efforts to address the nation’s fiscal challenges. Gold was the only winner overnight on the back of safe haven trading, gaining more than 3%, passing through the USD1700 for the first time.

Although the data releases for today are unlikely to be market moving, as investors continue to look to the US and Europe for developments; today sees the release of our housing finance data as well as the NAB Business Survey. The housing data is expected to show a continuing slow-down in the sector, as is the business survey, with many businesses still struggling through our current economic conditions.

Chinese data released today may have a greater impact with their CPI, PPI, industrial production and retail sales data due for release at 12:00pm AEST. As mentioned above, it’s likely that our markets will be looking offshore for developments, but should our equity markets continue on the same path as overnight markets then we could see the AUD weaken further and make a move towards parity.

Majors: An announcement by the European Central Bank overnight that they will be implementing a plan to buy Italian and Spanish bonds was an attempt to instil some confidence in the markets; but this didn’t have much of an affect. While European equities were stronger earlier in the session after the announcement, the sharp movement down in the US equities dragged the European equities down. The EUR/USD was weaker as safe haven trading saw the

USD demand increase. Many analysts believe the EUR is still stronger than it should be, given most of the currency’s gains came on projections of strong global economic growth. With the US potentially slipping back in recession, it’s thought the EUR should be back down around USD1.2000.

Economic Calendar
AU NAB Business Conditions / Confidence JULY
CH Producer / Consumer Price Index JULY
CH Industrial Production / Retail Sales JULY
US FOMC Rate Decision AUG