By Danny Jasper, Senior Vice President, Capital Markets

As traders return from the long holiday weekend, mortgages and treasuries are slightly better to start the day as Chinese economic data on imports and exports fell for the 11th straight month. The data raises renewed concerns about Chinese growth and putting into question whether the Federal Reserve will be justified in holding off on a rate increase before the end of the year on continued global economic risks.

Chinese imports were down 17.7%, and exports were lower by 1.1% in September versus August.  Over the weekend, the People’s Bank of China announced additional stimulus measures with hope that they will spur year-end borrowing and economic growth, which helped Chinese stocks rally yesterday, but the import/export data caused them to fade back in Tuesday’s trading session.

We also had less than optimal data in Europe, as CPI data in Germany and the United Kingdom showed little gain as low commodity prices continue to provide deflationary pressure, and European stocks are lower today.  U.S. stocks are currently unchanged to start Tuesday after seeing a seven-day rally through Monday that saw the Dow close at 17,130 and the S&P at 2,017.   Mortgages and treasury markets were closed yesterday in observance of Columbus Day, and closed Friday at 2.088% after fading throughout the week on the equity rally.

The Economic Week Ahead

While today’s U.S. economic calendar is light — NFIB Small Business Optimism was the only report, which showed a gain to 96.1 in September versus a 95.9 in August — the rest of the week is packed with valuable data releases that will provide insight on the likelihood of the Fed raises rates before the end of the year.

Wednesday, we get the Retail Sales and PPI reports, with sales expected to show a 0.3% gain at the core level after showing strength the last few months as consumers have spent more of their savings from lower commodity/gasoline prices.  If we hit this number, consumption would point to over 3% or Q3 after rising 3.6% after all net revisions in Q2.   The PPI report is expected to show a narrower gain of +0.1% at the core level in September after rising 0.3% in August.

The Fed also releases their beige book tomorrow at 2 p.m. Eastern.  On Thursday, we get weekly jobless claims and CPI data, with claims expected to rise a tad to 270K after a solid 263K print the week prior, and CPI in September is expected to show a rise of 0.1% excluding food and energy.  That CPI print would be consistent with August and would show that inflation is rising, albeit at a less than ideal pace.  We close the week Friday with data on industrial production, expected to again fall month over month after falling 0.4% in August.

No pertinent government auctions are scheduled for this week, but we do get FedSpeak from Bullard, Dudley and Mester on Thursday which should help to clarify the Fed’s thinking as we get closer to the FOMC (Federal Open Market Committee) meeting at the end of the month.

Economic calendar for the week of 10/13/15 to 10/16/2015 below (courtesy of the FNMA trading desk):

Date Time Event Period Surv(M) Actual Prior Revised
10/13/15 06:00 NFIB Small Business Optimism Sep 95.5 96.1 95.9
10/13/15-10/16/15 Monthly Budget Statement Sep $95.0b $105.8b
10/14/15 07:00 MBA Mortgage Applications 9-Oct 25.50%
10/14/15 08:30 Retail Sales Advance MoM Sep 0.20% 0.20%
10/14/15 08:30 Retail Sales Ex Auto MoM Sep -0.10% 0.10%
10/14/15 08:30 Retail Sales Ex Auto and Gas Sep 0.30% 0.30%
10/14/15 08:30 Retail Sales Control Group Sep 0.30% 0.40%
10/14/15 08:30 PPI Final Demand MoM Sep -0.20% 0.00%
10/14/15 08:30 PPI Ex Food and Energy MoM Sep 0.10% 0.30%
10/14/15 08:30 PPI Ex Food, Energy, Trade MoM Sep 0.10% 0.10%
10/14/15 08:30 PPI Final Demand YoY Sep -0.80% -0.80%
10/14/15 08:30 PPI Ex Food and Energy YoY Sep 1.20% 0.90%
10/14/15 08:30 PPI Ex Food, Energy, Trade YoY Sep 0.80% 0.70%
10/14/15 10:00 Business Inventories Aug 0.10% 0.10%
10/14/15 14:00 U.S. Federal Reserve Releases Beige Book
10/15/15 08:30 Initial Jobless Claims 10-Oct 270k 263k
10/15/15 08:30 Continuing Claims 3-Oct 2200k 2204k
10/15/15 08:30 Empire Manufacturing Oct -8 -14.67
10/15/15 08:30 CPI MoM Sep -0.20% -0.10%
10/15/15 08:30 CPI Ex Food and Energy MoM Sep 0.10% 0.10%
10/15/15 08:30 CPI YoY Sep -0.10% 0.20%
10/15/15 08:30 CPI Ex Food and Energy YoY Sep 1.80% 1.80%
10/15/15 08:30 CPI Index NSA Sep 237.8 238.32
10/15/15 08:30 CPI Core Index SA Sep 243.02 242.69
10/15/15 08:30 Real Avg Weekly Earnings YoY Sep 2.30%
10/15/15 09:45 Bloomberg Consumer Comfort 11-Oct 44.8
10/15/15 10:00 Philadelphia Fed Business Outlook Oct -2 -6
10/16/15 09:15 Industrial Production MoM Sep -0.20% -0.40%
10/16/15 09:15 Capacity Utilization Sep 77.30% 77.60%
10/16/15 09:15 Manufacturing (SIC) Production Sep -0.20% -0.50%
10/16/15 10:00 JOLTS Job Openings Aug 5600 5753
10/16/15 10:00 U. of Mich. Sentiment Oct P 89 87.2
10/16/15 10:00 U. of Mich. Current Conditions Oct P 101.2
10/16/15 10:00 U. of Mich. Expectations Oct P 78.2
10/16/15 10:00 U. of Mich. 1 Yr Inflation Oct P 2.80%
10/16/15 10:00 U. of Mich. 5-10 Yr Inflation Oct P 2.70%
10/16/15 16:00 Net Long-term TIC Flows Aug $7.7b
10/16/15 16:00 Total Net TIC Flows Aug $141.9b