Yesterday saw a trifecta of better than expected earnings, encouraging weekly jobless and continuing claims numbers and news that chain store sales (yes you guesses it) beat expectations. This all helped US equity indices to a 0.6%-0.7% gain. Homebuilders rallied as Congress mulls a possible extension of the $8,000 first-time homebuyer's tax credit, which is set to expire on Nov. 30.

Of the results to have trickled out so far (31 of the S&P500 companies) 74% have beaten "consensus" (fire the analysts I say). Early days perhaps, but nonetheless consistent, with the bulls forecast for another positive earnings season that supports risk and chips away at the dollar. All is not plain sailing of course and Japanese machinery orders data overnight provided another reminder that global manufacturing data is losing momentum (+0.5% actual vs. +2.1% consensus). Risk markets are thus caught between two countervailing forces at present – "earnings" vs. mixed and patchy economic data. Concern that economic growth is relapsing will moderate the extent of the risk rally. As for today, well early indications are that players are looking to book a little profit and take some money off the table. With the Columbus weekend coming up in the US expect volumes to drop off a cliff come mid afternoon.

Today's Market Moving News

• While not as startling in terms of the outright number (when compared to say the stellar jobs news from Australia) the US jobless claims figures were a lot better than expected. The decline to 521k for the week ending 3 October was the lowest reading since 3 January. What's more, the drop in the 4 week moving average to 540k took it to the lowest level since 17 January. The 4 week moving average is now close to 220k below the level it peaked in the week ending 4 April. Also of note was the 72k fall in continuing claims. This pushed the insured rate of unemployment to 4.5%, the lowest reading since 4 April. This series does track the unemployment rate and suggests we should see a peak in unemployment sometime within the next 6 months.
• Japanese core machinery orders edged up only slightly in August from a record low the previous month, suggesting stagnant capital spending will weigh on Japan's tentative economic recovery. The 0.5% rise in orders, a volatile figure seen as a leading gauge of capital spending, was smaller than a median market forecast for a 2.1% increase. The Bank of Japan's closely watched tankan survey this month showed that large firms plan to cut their capital expenditure by 10.8% in the year to March. The weak orders come as the Bank of Japan debates whether to phase out its unconventional measures supporting corporate finance, including some purchases of corporate debt. The BOJ is due to hold a two-day policy board meeting on Oct 13-14.
• China's services sector paused for breath last month but remained firmly in expansionary territory according to the China Federation of Logistics and Purchasing. Its non-manufacturing business activity index fell to 58.9 in September from 59.9 in August.