Market Recon Monday

Good Morning,
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Europe.
                    The lead stories today all seem to be related to Europe. Most noticeably, the British Pound weakened this morning on comments mage by UK Prime Minister Theresa May. The Prime Minister indicated her intent to trigger Article 50 by March with the goal of a clean cut away from the EU being completed by 2019. May did not mince words, making sovereignty the issue. Ironically, on the back of that weaker Pound, the FTSE 100 is Europe’s strongest major equity index this morning. Today is also August Manufacturing PMI day around the world, and Europe did better than expected. Spain, Italy, and France all beat, though France still printed in contraction. Germany, and the EMU in general both met expectations. Is this enough to give Mario Draghi some breathing room? Probably not, given the state of German Retail Sales and EMU Core CPI. The BOE meets this month on 13 October, the ECB on the 20th.
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Friday Looms Ahead.
                   This is “Jobs WeeK”, which is always a priority for US traders. However, looking ahead to Friday, there are a bevy of Fed speakers scheduled for that day after the BLS releases it’s data. Included in the lot are Esther George, the FOMC’s most hawkish member, and Lael Brainard the FOMC’s top dove. Clearly, the headline NFP number, and the numbers on wage growth will be interpreted almost immediately. The thing is that the FOMC does not meet on policy again until November 2nd, and nobody is expecting a policy shift less than one week prior to the presidential election. Numbers released Friday, and words spoken on Friday will move the marketplace, but will be far from the last numbers or words to do so in 2016.
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US Focus/Financials.
                    Remaining in focus early this week, will be the negotiations between Deutsche Bank and the US Department of Justice. Rumors of a coming agreement put a significant bid under the financial sector (and the equity market in general) on Friday, a bid that is still there this morning in Europe. According to everything that I’m reading this morning, the payment being spoken of is still close to $5.4B, down from the $14B originally requested. Supposedly, the newer proposal has not reached top level decision makers on either side as of yet. This will leave plenty of rumor-induced wiggle room for volatility in the equity space until something “final sounding” hits the tape.
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Macro
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All Day – Total Vehicle Sales (September): Expecting 17.3M, August 17.0M ann. After printing at a number approaching late 2015 levels in July, total sales fell back below trend in August.  That said, if we did not have the second half of 2015 to look at for comparison, this is one spot where 2016 actually looks pretty good. Being spread out over hours, this data-point will not impact the marketplace all at once. Individual releases will however, impact the auto makers throughout the day.
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09:45 – Marikit Manufacturing PMI (September -F): Flashed 51.4. There may be a slight upward revision to the flashed number released on September 23rd. The marketplace has never truly adopted Markit as their provider of manufacturing information, and will wait 15 minutes for the ISM number to react.
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10:00 – ISM Manufacturing Index (September): Expecting 50.3, August 49.4. There is some hope in this space. Printing contraction for August, after a five month run in expansion was disappointing for those following the nation’s troubles in the manufacturing space. Many key components came in below 50 as well, such as New Orders, Production, and Employment (which was already below 50). On the positive side, for September, two of the five Federal Reserve districts that release manufacturing data printed in expansion, and two more were not very negative. The market will react if this is far from consensus, and the Atlanta Fed will adjust their Q3 GDP expectation (now 2.4%) accordingly on this print.
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10:00 – Construction Spending (August): Expecting 0.2%, July 0.0% m/m. In theory , this item should be quite important. The truth is that due to regularly sizable revisions after the fact, the initial print in this space in not taken very seriously by economists. On top of that, the initial print is dated to begin with. You’ll likely get a more accurate read on July today than you will on August. For a solid read on August, I’ll see you next month when the Census Bureau puts September to the tape.

One thought on “Market Recon Monday”

  1. All of the data points to a drop in the unemployment rate and a drop in the participation rate. The headline number, Seasonally Adjusted PrivateSector Jobs, could go negative. How much will they downwardly revise July and August to boost September? Will they invent a new seasonal factor to skew the data higher? How can we potentially lose unemployed workers, see a decline in participation, and still explain away jobs growth. Most of the important data is calculated from the CPS data. The official jobs number is the CES data. Will the number be good enough for the White House to tweet it? They didn’t for the May or August number.

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