1)Initial jobless claims fell to 214k, 19k below expectations and down from 226k last week. The 4 week average was little changed at 212k vs 211k in the week prior. Continuing clams rose to 1.385mm from 1.364mm but that was just a hair above the estimate.
2)According to the Treasury International Capital flow data out for August, foreigners bought up a huge $174b of US notes and bonds. That is the biggest one month pace ever and based on where it is coming from, it’s most likely coming largely from hedge funds and other private pools of capital as the UK (foreign buyers likely using its banks as the source) and the Cayman Islands was where most of the money came from. From the UK came $100b and $68b from the Caymans. Japan and China both were buyers of notes and bonds for the first time in many months but the Japanese let about $30b of T-bills mature that were not reinvested.
3)Manheim said that wholesale used car prices fell 2% from September in the first 15 days of October and down by 10.3% y/o/y.
4)US industrial production in September exceeded expectations up .4% m/o/m vs the estimate of up .3% and August was revised up by 3 tenths. Manufacturing production was the particular catalyst.
5)Positive only because it’s less negative, consumer confidence in the UK in October rose 2 pts but to a still deeply negative -47 and that was 5 pts better than feared. These remain ugly numbers in the 40 yr history of this survey. GFK said this about the UK consumer, “Households are not just running scared of burgeoning energy and food prices, and the prospect of further base rate rises increasing mortgage costs. They are now facing the likelihood of tax rises and even austerity measures. For ordinary consumers, this web of uncertainty and turmoil amounts to a ‘new normal.’ The negative environment will deflate future spending plans, and cautious consumers could easily slow the UK economy still further.” The bold is mine, and Liz Truss paid the ultimate political price for trying to alleviate those concerns.
6)With respect to gilts and pension funds, Deputy Governor of the Bank of England Jon Cunliffe penned a letter to the Treasury Committee in Parliament and said “Taken as a whole, LDI funds are now significantly better prepared to manage shocks of this nature in the future. As such, the risk of LDI fund behavior triggering ‘fire sale’ dynamics in the gilt market and self-reinforcing falls in gilt prices has been significantly reduced.” Let’s hope so.
7)The October German ZEW investor expectations index rose to a still deeply negative -59.2 from -61.9 and that was better than the feared further decline to -66.5. The Current Situation though deteriorated again to -72.2 from -60.5, the lowest since August 2020. ZEW said simply, “Despite the slight rise in expectations, the economic outlook for Germany has thus deteriorated significantly.”
8)Japan reported its trade data and it was about as expected. Exports were goosed by the weak yen which touched 150 today, higher by 29% y/o/y. The weak yen also made imports really expensive and they were up 46% y/o/y.
9)The Bank of Indonesia hiked rates by 50 bps as expected to 4.75%.
10)French business confidence in October was unchanged m/o/m at 102 but that was 1 pt better than expected while still at the lowest level since April 2021.
11)Germany decides to leave on their remaining 3 nuclear plants thru Q1. Dutch natural gas prices falls 21% this week and German power prices are lower by 9%.
1)While we’re hopefully in some short term exhaustion phase (‘short term’ emphasized), the jump in interest rates around the world is quite unnerving.
2)The October Philly manufacturing index was -8.7 from -9.9 and vs the estimate of -5.0. The 6 month business outlook was negative for a 5th straight month and expectations for prices paid and received fell notably. Capital spending plans were little changed.
3)The October NY manufacturing index fell to -9.1 from -1.5 and that was below the estimate of -4.3. It’s also the 3rd straight month below zero and the 5th month in the past 6. Prices paid rebounded by 9 pts after falling by 16 pts last month while those received fell .7 pts to the least since January 2021. The 6 month outlook fell back below zero at -1.8 and that’s the 2nd time in the past 4 months. Capital spending plans improved but not for technology as it fell after rising in September.
4)Redfin said in September “The number of homes sold dropped 25% y/o/y while new listings fell 22% – the largest declines since May 2020 and April 2020, respectively.” They went on to say, “The US housing market is at another standstill, but the driving forces are completely different from those that triggered the standstill at the start of the pandemic. This time, demand is slumping due to surging mortgage rates, but prices are being propped up by inflation and a drop in the number of people putting their homes up for sale. Many Americans are staying put because they already relocated and scored a rock bottom mortgage rate during the pandemic, so they have little incentive to move today.”
5)With the average 30 yr mortgage rate at around 7%, the MBA said purchases fell 3.7% w/o/w and are down 38% y/o/y. Refi’s were down another 6.8% w/o/w and by 86% y/o/y.
6)Existing home sales in September fell to the lowest level since May 2020 at 4.71mm annualized. Months’ supply was 3.2, still well below the 20 yr average leading into Covid of 5.8. The y/o/y median price increase did slow to 8.4% while first time buyers remained at 29% of total closings.
7)The NAHB home builder index for October plunged further to 38. That’s down from 46 in September and 5 pts below expectations with 50 the breakeven between expansion and contraction. The Present situation dropped 9 pts to under 50 at 45 while the Future outlook component was down by 11 pts m/o/m to 35. Prospective Buyers Traffic is now down to just 25 from 31 last month. It was last above 50 in May.
8)September CPI in Japan rose 3% headline as did the ex food figure. Ex food and energy saw prices up 1.8% y/o/y from 1.6% in August and as expected while the headline was one tenth more. Go back 32 years the last time we saw a core/core rate this hot when not including value added tax hikes.
9)Exports from South Korea in the first 20 days of October declined by 5.5% y/o/y after an 8.7% drop in September. Chip exports were down by 13% and overall exports to China fell 16.3% y/o/y.
10)Taiwan said its exports dropped by 3.1% y/o/y in September, not as bad as the down 5% estimate but still negative after an up 2% print in August. Exports to China/Hong Kong dropped 28% y/o/y and a spokesperson at the statistics department said “Mainland China’s economic recovery is slower than originally estimated.”
11)Singapore said its non-oil exports in September fell by 4% m/o/m, well worse than the forecast of up .4%. They are still up 3.1% y/o/y but down from 11.4% higher seen in August. Electronic exports in particular dropped by 10.6% y/o/y. Geographically, exports to China plunged by 34% y/o/y.
12)Australia reported a weaker than expected jobs number for September.
13)Germany said its September PPI was up 45.8% y/o/y for a 2nd straight month and higher by 2.3% m/o/m.
14)The UK September headline CPI rose by 10.1% y/o/y with a core rate of up 6.5%, both one tenth more than anticipated. Input prices also grew more than expected while output charges were in line when including the August revision.