Good morning. Here's what you need to know.
- Asian markets had a big day. Japan's Nikkei closed up 2.48%; Korea's Kopsi, 0.99%; and Hong Kong's Hang Seng, 0.57%. Asia got the help of positive trade numbers out of China. European markets were mixed. U.S. futures were pointing higher.
- Hours after Japan learned it will host the 2020 Olympics, the country also learned it is growing faster than expected. Reuters' Leika Kihara reports that a "marked improvement in capital expenditure led to an upward revision in April-June GDP to an annualized 3.8% expansion from a preliminary 2.6%." After years of crippling deflation, the numbers suggest Prime Minister Shinzo Abe and the BOJ's aggressive monetary policy is working.
- Asian markets were also likely assisted by the elections in Australia, which saw conservative Tony Abbott ascend to the Prime Minister's office. Abbott's pro-business campaign promised to end the country's carbon tax and cut taxes on the mining industry.
- Good inflation readings came out of China last night, with consumer prices growing 2.6% year-over-year in August. Producer prices were less negative at 1.6%, beating expectations for a 1.7% decline. Producer prices have been down for five straight months, but the latest data suggests it may have bottomed in July.
- Signs of the European recovery continued with the Sentix index — which measures investor confidence in Europe — turning positive for the first time in 2 years, easily besting expectations. The index rose in September by 11.3 to +6.5 points, the first positive print since July 2011 and the second strongest rise of the indicator since its creation in 2003.
- This afternoon, at 3:00 PM, we'll get U.S. consumer credit. Economists are expecting $12.3 billion in new credit, compared to $13.818 billion last month. The Fed's report also could lend information on whether higher bond yields are having a negative affect on bank loans. At the end of the week we'll get the retail sales report, which takes on higher importance after Friday's weak jobs report.
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- Economists still believe this month will see the "taper" of the Fed's asset purchasing program, even considering Friday's weak jobs report. But now the consensus has shifted to a more "dovish taper," a reduction of bond purchases at a slower rate than expected. "We continue to expect a token taper of $10 billion to be announced at the September meeting. We would expect a reduction in both Treasury debt and mortgage-backed securities although we cannot rule out a taper focused solely on reduced US Treasury buying," UBS wrote to clients.
- The politics surrounding a Syria intervention will make it less likely that Larry Summers receives the nomination for Fed chair, writes our Josh Barro. "President Obama is already asking liberals for a big favor by seeking their support for an authorization to attack Syria. Many Democrats in Congress are instinctively opposed to military action. They also remember the price Hillary Clinton paid for voting for a war that voters came to regret. If Obama nominates Summers, he'll be coming back to those same liberals just weeks later and asking them to defy their base again."
- According to the Bank of Italy's monthly report, banks' bad loans jumped by 22.3% in the 12 months to end July, a sign that the European recovery is still far from pervasive in Italy. The country's 48.8 PMI print was behind its Eurozone peers.
- After increasingly paltry returns, hedge funds have adjusted the industry standard "2 and 20" rule — where management charges 2% of assets and 20% of investment profits for the honor of investing your money. The Wall Street Journal's Gregory Zuckerman, Juliet Chung, and Michael Corkery report that now funds are charging fees of 1.6% and taking 18% of investment gains.