MORNING REPORT
(7am AEDT)

US industrial production rose 0.2pct in September, in line with expectations as a gain in manufacturing production offset a drop in utility output. However the August reading was revised lower to show flat output.

The New York Fed´s ´´Empire State´´ index contracted for the fifth straight month coming in at a reading minus 8.48. New orders were flat, while the gauge for business conditions six months ahead fell to its lowest levels since February 2009.

European shares fell on Monday after Germany hosed down speculation of a solution to the debt crisis. Speaking in Dusseldorf Germany´s finance minister Schaeuble, said it was unrealistic to expect a definitive solution to the euro zone debt crisis at next weekend´s EU summit. Schaeuble also remarked that there may be a need to further restructure Greece´s public debt with private creditors to accept steeper write downs than the previously agreed 21pct losses on their holdings. Banks were amongst the hardest hit with the STOXX Europe Banking index lower by 1.6pct. The FTSEurofirst index fell 1pct, the UK FTSE lost 0.5pct and the German Dax fell 1.8pct.

US sharemarkets slumped on Monday with investors disappointed that there would not be a concrete solution to the European debt crisis. The CBOE Volatility index or ´´fear gauge´´ jumped 16pct overnight. Wells Fargo fell 8.4pct after disappointing earnings. The Dow fell 247pts or 2.1pct, while the S&P 500 lower by 1.9pct and the Nasdaq lost 53pts or 2pct.

US long-dated treasuries rallied on Monday (yields lower) as euro zone debt concerns once again dominated attention. US 2yr yields were flat at 0.27pct while US 10yr yields fell by 9pts to 2.159pct.

The Euro and commodity currencies fell against the greenback on Monday with investors switching to safe-haven currencies. The Euro fell from highs of US$1.3895 to lows around US$1.3730 before ending US trade near US$1.3745. The Aussie dollar hit early highs near US103.65c before falling to lows around US101.75c holding near US101.85c in late US trade. And the Japanese yen traded between 77.45 yen per US dollar and JPY76.65, ending US trade near JPY76.85.

Global crude oil prices were lower on Monday as the fresh Euro zone debt concerns added to worries about global growth. Nymex crude oil fell 42c or 0.5pct to US$86.38 a barrel and London Brent crude fell US$2.07 to US$110.16 a barrel.

Base metal prices were mostly weaker on Monday pressured by Germany´s forecast for the upcoming EU summit. Nickel managed to gain 0.5pct but other metals lost between 0.3-2.2pct. The gold price fell in line with other commodities. The Comex December gold price fell US$6.40 an ounce to US$1,676.60

Ahead: In Australia, Reserve Bank board minutes are released. In the US, producer prices and the NAHB housing market index is expected. Chinese GDP is also set for release.