The week is kicking off rather strong after suffering a relatively large market correction last week. All three major equity indices opened in the green, but are currently trading slightly lower. On a day light with domestic economic data and no major earnings yet, the market is left to trade on geopolitical activity. Brazilian stocks are on a tear this morning as the country’s Leftist President, Dilma Rousseff placed first in Sunday's presidential election, but did not get enough votes to avoid a runoff. As a result, she will face pro-business rival Aecio Neves, whose election may indicate strength for Brazil’s economy in the near-term. On a negative note, The World Bank has cut its growth forecast for China and now expects the massive emerging economy to grow by less than the 7.5% rate targeted by the Chinese government. One place getting little attention at the moment is Europe – the largest economy is currently showing some further weakness.

German factory orders declined by 5.7% between July and August; this was much worse than the 2.5% decline expected by economists. Orders were also down a sizable 1.3% when compared to August 2013. This is the worst single-month drop since the beginning of 2009. In particular, German export orders were hit the hardest. They match recent business surveys that suggest that there has been a knock-on effect from the ongoing conflict in Ukraine. However, things are still quite off domestically as Germany’s domestic orders declined 2% over July. The latest economic survey showed that the sector is shrinking. Deteriorating confidence is the main factor undermining a rebound in Germany’s economy from its second-quarter slump. In fact, Europe is struggling to sustain its recovery amid rising political tension with Russia over its support of separatists in Ukraine and inflation is presently at a fraction of the European Central Bank’s (ECB) definition of price stability. Below is a chart of the widening spread among Germany’s factory orders over the last year.

We note that the market may get quite volatile going into the latter half of the day as US Treasury Secretary Jack Lew is expected to give a treasury update at 3:00PM.