October 31, 2012
Sentiment is mixed this morning as investors have a chance to react after the U.S. equity and bond markets remained closed yesterday; this marked the first time since 1888 that weather interrupted U.S. equity trading for two consecutive days. European shares extended this week’s advance, gaining an initial lift from better than anticipated earnings from Lufthansa and Air France-KLM as well as German Retail Sales data that came in ahead of expectations. Since those reports, EU bourses have come down and are now trading nearly even on the day.
Treasuries declined in overnight trading, led down by the belly of the curve (5s and 7s), after trading resumed for the first time since Monday’s half-day session. On daily charts, 2s and 5s are consolidating near mid-Oct. lows, while the rest of the curve rebounding from Monday is breaking lower. The 10yr is still testing slightly below its 50-DMA at 1.71%; support rests at the Oct. 29 low of 1.7%. Sovereign spreads to German bunds in Europe are mostly slightly higher, while the 10yr bund itself has traded down -1.5bps to a YTM of 1.46%
Today’s Economic Data Lineup (EST)
5:50am: France to sell 4.25% 2019 bonds, 2.25% 2022, 4.75% 2035
6:30am: Germany to sell additional EU2b 30-year notes
7:00am: MBA Mortgage Applications, Oct. 26 (prior -12.0%)
8:30am: Employment Cost Index, 3Q, est. 0.5% (prior 0.5%)
9:00am: NAPM-Milwaukee, Oct. (prior 47.2)
9:00am: U.S. to announce plans for sale of 3-yr, 10-yr, 30-yr debt; quarterly refunding
9:45am: Chicago Purchasing Manager, Oct. est. 51.0 (prior 49.7)
11:00am: Fed to buy $4.25b-5.25b notes due 11/15/2018-8/15/2020
12:45pm: Fed’s Williams speaks on monetary policy in New York
2:00pm Fed announces Twist purchase schedule for the next month
- Business activity in the U.S. contracted unexpectedly in Oct., with a gauge from the ISM-Chicago rising to 49.9 from 49.7 in Sept., adding to signs that manufacturing has taken a back seat in the economic recovery. Economists had predicted a reading of 51.
- The jobless rate in the euro zone climbed to a record in Sept. as the fiscal crisis and more austerity measures threaten to deepen the economy’s slump. Unemployment rose to 11.6% from 11.5% in Aug., the highest since the data series started in 1995.
- Euro-area finance chiefs may grant Greek Prime Minister Atonis Samaras’ government “a somewhat flatter adjustment path” to achieve its deficit-reduction goal, according to Thomas Wieser, head of the group that prepares meetings of euro-area finance ministers.
- U.K. consumer confidence tumbled to a six-month low in October, with an index of sentiment falling to -30 from -28 in the prior month. A gauge of how consumers see their personal financial situation over the next year dropped five points to -13, yet another six-month low.
- Australian home-building approvals rose for a second straight month in Sept., a sign the central bank’s decision to cut interest rates is helping to boost housing demand; the number of approvals granted gained +7.8% from Aug.
- South Korean industrial production rose for the first time in four months, with output rising +0.8% from August when it dropped a revised -0.9%, as stronger car and electronic sales offset the effects of the cooling global economy. The figure, however, did miss the median estimate of 11 economists that called for a +1.5% rise.
- GDP in Taiwan grew +1.02% from a year earlier, after a -0.18% decline in the prior quarter.
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.”