11/11/ – Succinct Summation of the Week’s Events

Positives

1. With the election of Donald Trump, the regulatory noose is about to loosen around the neck of the economy and lower taxes will allow the private sector, both corporate and individual, to have more money to save and invest.
2. Initial jobless claims fell 11k to 254k, 6k less than expected but brings the 4 week average to 260k from 258k as a 247k print drops out. Continuing claims, delayed by a week, rose 18k off the lowest level since 2000.
3. The preliminary November UoM consumer confidence index rose to 91.6 from 87.2 in October and was above the estimate of 87.9. It’s the best level since June but is about in line with the year to date average of 91.1. Current conditions rose 2.7 pts to 105.9. The June high however was 110.8. Expectations were higher by 5.7 pts to 82.5, the highest since May. Also of note, one year inflation expectations rose 3 tenths to 2.7%, a 4 month high. UoM said today’s data was “collected before the result of the Presidential election.” That said, 70% of those surveyed thought Clinton was going to win according to the UoM and “a large majority of consumers based their economic expectations in part on the policies of Clinton. Those expectations now need to be revised.”
4. Mortgage applications to buy a home rose 1.4% w/o/w off the lowest level since January and is up almost 11% y/o/y.
5. The NFIB October small business index rose to 94.9 from 94.1 in September. It’s at the best level since last December but the internals were very mixed. Wage pressures were noticeable in the Compensation data. The CEO of the NFIB said “The data contained in this report shows record levels of uncertainty among small business owners, and it is tied directly to the election, the result is economic inertia, with business owners unwilling to make the business decisions that would jumpstart the economy.” Also, “nearly half of the respondents cited taxes or regulations and red tape as their ‘Single Most Important Business Problem.’” I’m sure many surveyed will now be happy with the Trump win.
6. UK manufacturing IP grew by .6% m/o/m in September, two tenths more than expected which partially offset weakness in mining, oil and gas production and utility output which dragged down the headline figure.
7. Base earnings for Japanese workers in September grew .4% y/o/y vs a .3% gain in August. Overtime pay though fell 1.3% y/o/y and bonus’ were down by 2.9%.
8. The out of control pace of lending in China moderated in October. Aggregate financing totaled a still large 896b but below the estimate of 1T and down from 1.7T in September. It still is up by 70% y/o/y. Of this, bank loans totaled 651b, about 20b less than the forecast.
9. Chinese PPI rose 1.2% y/o/y in October vs up .1% in September. It’s the quickest pace since December 2011 and the Chinese deflation story is over.

 

Negatives

1. Let’s hope that our new President doesn’t start raising tariffs, create trade wars and build protectionist walls. Let’s also hope that the tweeting is kept to a minimum.
2. The biggest bubble in the history of the world (sorry for the hyperbole but it’s true) continues to leak air and the rapidity and quickness of this interest rate rise is potentially dangerous in an asset price world that has been medicated on low rates for 9 years. Don’t forget what got us here.
3. Refis fell 2.7% and are down for the 5^th straight week to the weakest pace since June as rates moved higher again. Bankrate’s average 30 yr rate rose 25 bps this week alone to 3.74%, the highest since early June.
4. China’s exports in both yuan and dollar terms fell more than expected in October and is not getting the hoped for lift from a weaker yuan. The decline was 3.2% in yuan and 7.3% in US dollars. Imports grew by 3.2% in yuan but fell 1.4% in US dollars. On a m/o/m basis the volume imports of copper, steel, iron ore, coal, crude oil and refined products all fell but still remain mostly higher y/o/y.
5. China’s FX reserves continued to shrink in October. It’s pile now stands at $3.12T, down $66b m/o/m and was $12b less than expected. This level was last seen in 2011 and is now down $870b from its peak in 2014.
6. Consumer prices in China rose 2.1% y/o/y in October, the most since April as both food and non food prices rose faster than September.
7. Japanese machinery orders in September fell 3.3% m/o/m, about double the estimate of down 1.5%.
8. September German exports were down .7% m/o/m, about in line with the estimates but prior months were revised down on balance. Industrial production was weak too as it fell 1.8% m/o/m vs the estimate of down .6% (partially offset by 5 tenths upward revision to August). German factory orders in September dropped .6% m/o/m instead of rising by .2% as expected. Orders domestically fell as they did to the rest of the eurozone. This was only partially offset by an increase in orders from non eurozone countries.
9. French IP was soft, falling 1.1% m/o/m vs the estimate of down .3% and the weakness was led by manufacturing.
10. Italian IP fell .8% m/o/m, but was in line with the estimate if we take the upward revision to August.
11. Industrial production in Spain in September missed expectations with a 1.4% m/o/m drop vs the forecast of down .5%.
12. Retail sales in the eurozone fell for the 2^nd straight month by .2% but was about in line with the estimate. The y/o/y gain of 1.1% is the slowest in two years.