Market Recon Tuesday

Good Morning,

Out of Europe.

Globally, equities are a bit higher this morning, as the US Dollar takes a breather. This has given some lift to commodities including Oil, and pushed yields slightly lower across the planet. Notice the price of WTI Crude moves one percent higher, and so does the Asia Dow, as well as Europe’s Stoxx 600. The European underperformer? The FTSE 100, still higher, but lagging the pack after UK consumer prices beat expectations at both the headline and the core for September. I don’t think that means that Mark Carney is about to tighten monetary policy in Britain, but it does mean that he’s probably not going to consider easing further. Keep in mind that when he ran the Bank of Canada, his truest instincts were quite hawkish. Consumer prices will also be the focus here in New York this morning, especially after Fed Vice Chair Stanley Fischer again leaned hawkish yesterday.

and into China.

Last week, Chinese export data bumped global markets amid concerns over forward looking global demand. Fed Chair Janet Yellen has used China as an excuse to slow down policy changes in the past. Then, the very next day, increased Chinese consumer level inflation put some of those fears on pause. Tonight, we’ll see a trio of Chinese macro-economic data-points that certainly could rattle some cages overnight, particularly along the Pacific Rim. At 10pm ET, the Chinese National Bureau of Statistics will release Q3 GDP (exp 6.7% q/y ann.), September Retail Sales (exp. 10.7% y/y), and September Industrial Production (exp. 6.4% y/y). In the case of GDP, this would be holding the level. The Chinese government has kind of made 6.5% out to be a line in the sand for GDP.  In the other two cases, the expectation represents minor improvement. The Retail Sales number is obviously domestic in nature, but a miss in industrial Production would be close to a confirmation of those troubling Export numbers that already hit the tape.

Macro

08:30 – CPI (September): Expecting 0.3%, August 0.2% m/m.

08:30 – Core CPI (September): Expecting 0.2%, August 0.3% m/m. With the Federal Reserve Bank seemingly on the verge of tightening monetary policy, what could be more important than consumer prices? With that in mind, even though this item is not What the FOMC is specifically watching, it is what the rest of us are watching, and the year over year data will likely have as much market impact if not more so than the month over month numbers. The recent boost in energy prices will likely give the headline print a northerly nudge from the 1.1% August release, but it is the highly focused upon Core data that can move the marketplace. We see a tick up from August’s 2.3%, and you’ll see a tick up in the WIRP as well. This item is likely to at least print at 2% or greater for the eleventh consecutive (but, who’s counting?) month today.

08:55 – Redbook (Weekly): Last Week 0.5% y/y. Coming off of the prior week’s 1.3% y/y pop, we really needed to see that print around the 0.5% gain that we did see last week after several weeks of continuously sluggish growth. The trick for today will be keeping growth from falling below that level.

10:00 – NAHB Housing Market Index (October): Expecting 63, September 65. this item is also known as the Homebuilder Optimism Index, and optimism surged in September. In fact, 60 had been resistance in this space since last January, so even if there were to be a pull-back this month, anything between 60 and 65 is still going to be taken as generally positive.

16:00 – TIC (August): Expecting $45B, July $103.9B. This information prints with a lag, and will not move markets, but remains very interesting. July was a big surprise to the upside for US cross-border investment. US investors were net sellers of foreign long-term securities to the tune of $31.3, while foreign investors net purchased $72.6B worth of US long-term securities. When it comes to Treasuries, China net sold $7.7B worth of US debt in July, but easily remained the largest holder at 19.8%.

Tuesday’s Earnings Highlights

Before the Open: BLK (4.99), CMA (.78), DPZ (.89), GS (3.83), HOG (.64), JNJ (1.65), UNH (2.08)

After the Close: INTC (.72), YHOO (.14)