Global markets remained capped under the weight of negativity surrounding China’s growth prospects overnight, with yesterday’s HSBC flash PMI compounding concerns the world’s second largest economy won’t be there to break the fall of heavy weight’s Europe and the United States. The Negativity was exacerbated after Euro-Zone composite manufacturing PMI fell to 39 month lows in September, amid continued concerns over the future of Spain. Solid demand for a sale of Spanish debt at auction failed to reignite a sustained sense of optimism despite the 10-yr benchmark fetching a yield of 5.7 percent, down from 6.7 percent in a previous auction. Political uncertainty in the region has overshadowed Spain’s reluctance to request a bailout, with the autonomous region of Catalonia launching a push to separate the region from the rest of Spain. Catalonia’s leader, Artur Mas stated in a news conference, “The people and society of Catalonia are on the move, as we have seen on Sept. 11, and not willing to accept that our future will be gray when it could be more brilliant.”

A series of negative themes helped the Euro to break the downside of $US1.30 amid a broad based reprieve from the U.S dollar signally growth concerns are overshadowing the recent stimulus-offensive unveiled by the central banks of the U.S and Europe. After last week’s post-Fed slide, the greenback has begun to show signs of life with its safe haven properties kicking into gear against its risk counterparts. Concerns of China’s economic stability also took priority in the U.S despite a moderately better Philly-fed index which fell 1.9 index points in September, against a fall of 7.1 in August, suggesting the pace of the fall in manufacturing activity is slowing. Economists’ had anticipated a greater fall of 4.5.

The Australian dollar succumbed to Chinese concern breaking the downside of 104 US cents late yesterday, before paring losses over the course of U.S trade. Value traders moved in after the Aussie fell to lows of 103.66 US cents late yesterday and began to grind higher in the U.S session alongside equity markets.  In the absence of local data, we anticipate regional equities to remain the key driver for the local unit in the domestic session. At the time of writing the Australian dollar is buying 104.3 US cents.