Asian Market Update

US equities are being weighed down by risk aversion sentiment this morning as conflicting headlines keep the European front unsettled. Uncertainty picked up on pre-market reports that Germany could delay the planned Oct 23rd EU summit to allow more time for negotiations about levering up the EFSF, although senior EU sources have denied the summit would be put off. In Greece, protests have turned more violent, with one protestor reported killed. There were questions overnight whether the IMF, EU and ECB were on the same page in regards to Greek debt issues, although the IMF confirmed that everything is copacetic mid morning. Lost in the shuffle has been the very strong Oct Philly Fed data, which saw its first positive reading since May. In Libya, Muammar Qaddaffi has reportedly been killed and Sirte taken by rebel forces. Front-month crude has dropped below the range seen over the last several sessions, to just below the $85 handle. Spot gold is collapsing, heading toward the $1,600 handle. Sovereign spreads are wider in Europe with the Italian 10-year yield approaching 6% once again. The US 10-year has rallied since the open keeping its yield below 2.15%.

Shares of American Express are in the red this morning despite the firm's good profit growth and excellent credit metrics, as expenses grew faster than revenue. Note that the firm boosted spending on its rewards program significantly for the third consecutive quarter. Credit card data services firm ADS crushed earnings and revenue targets and boosted its FY11 forecast. Regional bank BB&T had very solid results and said it was looking to pursue some sizable acquisitions. Private equity group Blackstone had a terrible quarter as market declines dragged down the value of its assets, driving negative revenues.

AT&T's Q3 results were right in line with expectations, although investors had expected more from postpaid adds and iPhone activations, both of which were lower on a sequential basis. In addition, wireless ARPU levels gave some analysts cause for concern. Wynn Resorts missed profit expectations as strong gains in the Macau unit failed to make up for disappointing results in Las Vegas. Southwest Airlines comfortably topped expectations, before the write downs for fuel hedging program (the write downs resulted in a net loss of $140M). Philip Morris smoked out the Street, crushing expectations.

Western Digital's Q1 results were solid, with higher margins and strong revenues. However the firm's outlook for Q2 is dire given the impact of the Thailand flooding, with a substantial losses and big revenue declines. The firm said the impact will be greater to its operation than others, even as HDD demand remains flat to lower. Multiple analysts cut the name overnight. Semi name Xilinx had mixed results, with revenues subpar and guidance for next quarter much lower than expected.

Nucor's profits were strong on excellent revenue performance. The firm cited high scrap prices and low inventories as helping to stabilize order rates. In addition, operations are profitable despite the lack of improvement in the construction markets. Ingersoll-Rand was right in line with the Street, but cut its guidance slightly. Diamond Offshore widely beat expectations in its Q3 results and declared a special cash dividend.

FX price action was highly choppy during the US session as details of EFSF guidelines emerged along with various draft proposals for the upcoming EU summit on Oct 23rd, plus the Troika report on both Ireland and Greece. The German stance continued to be a headwind to pending ratification of a final agreement to stabilize Europe. The German Finance Ministry reiterated its hard line against the expansion of EFSF powers, fueling risk aversion sentiment. EUR/USD was over a big figure off its session highs and settled in the mid- 1.37 handle by mid morning, although it was contained well within its weekly range of 1.3650 to 1.3870, which are seen as Key pivot points. USD/JPY probed the 77 handle in early NY trading aided by a think-tank report on the Japanese budget and comments on the Japanese effort to address the strong JPY currency. The EUR/CHF cross backed off its attack on 1.25 aided by uncertainty over the upcoming EU summit and dipped below the 1.23 handle.