US Equities Rebound As Sentiments Towards Syria Ease

US equities rebounded for another day as President Obama announced plans to push the strike against Syria on hold. The game changer was Russian's proposal to transfer the control of Bashar al-Assad's government's chemical weapons. Yesterday France said that it will submit a proposal to UNSC, and it's reported that Assad had accepted the proposal to avoid a military strike against the government.

The DOW rose 127.94 pts to close at 15191.05, above 55 days EMA decisively, which affirmed the case of near term reversal. The dollar was soft against the European majors, but is staying in a tight range. Commodity currencies, in particular the Aussie, remain the strongest currencies this week. Meanwhile, the yen remains the weakest currency this week on a risky rally.

US 10-year yields recovered, again, overnight to close at 2.959%, and seems to be heading back to 3% level. Markets are keeping their expectation for Fed to taper the $85 billion a month asset purchase next week, even though it may be a small step by $10 billion. According to a Reuters survey, nearly 3/4 of 69 economists expect the Fed to taper, up from 25 out of 41 economists in poll in August. The disappointing NFP report released last week was seen only as a reason for Fed to taper in a small step, but not a reason to delay.

ECB executive board member Asmussen warned of the risks of Fed's unwinding of stimulus. He noted that, "in early 1994, when the U.S. recovery gained strength, the Fed started a tightening cycle and bond markets crashed not only in the U.S. but also around the world." He said the spillover could be even "larger" today in an "even more deeply interconnected world".

On the data front, Japan BSI large manufacturing rose to 15.2 qoq in Q3, domestic CGPI rose 2.4% yoy in August. Australian Westpac consumer confidence rose 4.7% in September. TThe UK job data will be a major focus today, while Germany will release the CPI final reading for August. The US will release wholesale inventories.