The equity markets tumbled yesterday as investors succumbed to pressure for profit-taking as reality began to bite. The overall disappointing earnings outside of the US have hurt the tone of the market as uncertainties over the sustainability of growth come to the fore. Arguably, we have been waiting for sometime for this correction, but apart from the potential key trend line break in the S&P 500, none of the other key indices are looking currently vulnerable for bullish trend line breaks, thus investors should not reach the crisis button just yet. Additionally, yesterday housing data was not as disappointing as the news headlines would have you believe; it has been a consistent view that one of the key elements we need for the housing market to recover, on a sustainable footing, is a reduction in inventory levels. Yesterday, new homes data suggests that this reduction is well underway, a positive for the sector, going forward. Today, the key data is US Q3 GDP, where the consensus forecast is for a 3.2% expansion.

Still focusing on a more positive note the ECB bank lending survey highlighted a further normalisation in credit markets. Of note in the report was only 8% of banks indicated that they were tightening credit standards in Q3 a marked drop from 21% in Q2 and a net 64% in Q3 and Q4 2008 when the credit crunch was at its peak. Meanwhile, a net 1% of banks expect corporate loan standards to ease in Q4, the first time that banks have expected loans to ease in the following quarter since Q1 2007. The report also highlights a significant improvement in mortgage lending with a net 14% of banks reporting that they have tightened standards in Q3, down from 22% in Q2. Whilst, a net 10% of banks are reporting rising demand in Q3, a turnaround of -63% a year ago. Finally, a net 9% of banks expect demand for mortgages to rise in Q4, the first net positive since Q2 2006. The ECB described this report as a “turning point” and it suggests that lending, at least in the Eurozone, is improving.

Sources: Reuters: BBC: Bloomberg: Lawshare: Deutsche Bank (db): Proquote: Financial Times: Wall Street Journal: CLSA: Sharescope: Market News. Capital Economics: CNBC: Wikipedia:

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