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):
|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||—|