Morning Meeting: Mind the WindowDressing.

Good Morning,

Spanish Prime Minister Mariano Rajoy's government announced its fifth austerity package in what may be a move to head off tougher conditions demanded as part of a potential European bailout. His Cabinet approved a new tax on lottery winnings and a cut in ministries' spending as part of a 13 billion-euro central government package to shrink the euro area's third-biggest budget deficit.

The move has been interpreted by investors as the first step toward a possible aid package, which would have pave the way for initiating ECB's bond buying program aimed at easing the country's borrowing strains.

Markets' cheered up to the news: the S&P500 rose 0.96% to 1,447.15, the DJIA gained 0.54% to 13,486 and the tech Nasdaq closed up 1.39% to 3,136.60. Riskier currencies such as the Australian dollar, the euro and commodities drifted higher as the dollar remained defensive.

In Asia, Hong Kong and Shanghai shares led gains, rising respectively 0.31% and 1.24% as the Chinese government hinted to be ready to take measures over the coming long holiday to boost the economy and support its domestic market. We are still questioning the effectiveness of this move due to the Chinese assets bubble worries.

The yen hit a two-week high against the dollar around 77.50 yen, pressuring Japanese exporters. Shares in Japan Nikkei bucked the rest of Asia and fell 0.79% to 8,879.14 as consumer prices in August matched the steepest decline in 16 months, and the nation's industrial production fell more than economists forecast, while output in South Korea dropped for a third month. Adjustments related to the end of the fiscal first-half also weighted on the benchmark performance.

The Euro rose 0.13% to 1.2931$ versus the greenback, rebounding from a two-week low of 1.2828$ touched yesterday. But pressures are not over on the common currency: later today a stress test of Spain's banking sector will be released,which will reveal how much more money is needed to recapitalize its banks. Moody's latest credit rating review is also expected this week.  A downgrade will be seen as another step toward the bailout request.

US crude rose 0.5% to $92.29 a barrel and Brent rose 0.5% to $112.51. Gold futures extended gains in electronic trading today,

Gold for December delivery  added $3.40, or 0.19%, to $1,783.90 an ounce on the Comex division of the New York Mercantile Exchange during Asia trading hours. The precious metal rallied to a seven-month high during Thursday's regular Nymex session, gold is on track to post a healthy rise for the quarter and the month. Prices are trading up nearly 13% for the third quarter, and 6.3% for the month.

Hint: today is the last trading day of the Month and it's quarter-end therefore “Mind the WindowDressing”.

Originally posted at www.77sigmatrading.com