It’s still touch and go with risk warnings according to stock market volatility, but the threat pulled back from extreme levels yesterday. The VIX (a measure of the implied volatility of S&P 500), for instance, dipped below 20 for the first time since October 9. A day or two of slightly lower vol after the recent surge in risk could easily turn out to be noise and so it’s not yet obvious that the roller coaster ride is over. But for the moment, the decline inspires a bit of optimism that the market may be headed for calmer waters.
● China’s growth slowest since global crisis, annual target at risk | Reuters
China grew at its slowest pace since the global financial crisis in the September quarter and risks missing its official target for the first time in 15 years, adding to concerns the world’s second-largest economy is becoming a drag on global growth.
● Analysts: VIX Back In Risk Friendly Waters; S&P nears 1,900 | MNI
The CBOE’s volatility index or VIX moved back into sub 20, risk-friendly waters Monday, with market players eager to see if the move will be sustained.
● Income Growth: The Taxman Cometh | Wells Fargo
Roughly five years into the recovery, income growth has been notoriously slow to pick up. Between 2009 and 2013, before-tax income grew a mere 1.5 percent. After taxes, income shrank 7.2 percent
● WTI Climbs Amid Estimates of U.S. Gasoline-Supply Drop | Bloomberg
West Texas Intermediate rose for the third time in four days amid speculation motor-fuel inventories shrank in the U.S., the world’s biggest oil consumer. Brent advanced in London.
● EU to mediate in gas dispute between Ukraine and Russia | Deutsche Welle
The European Union is set to host gas talks between Russia and Ukraine aimed at securing a payment deal and avoiding disrupting gas supplies this winter.
Economic worries for the global economy are again taking a toll on sentiment these days, but the US macro trend shows few signs of stress, based on data through September. It remains to be seen if the resiliency holds up in the October profile. An early clue arrives on Thursday, with the initial estimate of manufacturing activity for the US via Markit’s business survey release for October. Meantime, the rear-view mirror continues to show a considerable degree of positive momentum for the US overall, based on the September update of a diversified set of 14 economic and financial indicators.
● World stocks advance on strong data, earnings | Reuters
Global stocks climbed on Monday, with strong U.S. data and encouraging third-quarter earnings easing concerns about the pace of global economic recovery and raising appetite for riskier assets.
● Volatility Unlikely to Alter Fed’s Policy Course | NY Times
The Federal Reserve is watching carefully as financial markets bounce around, but the likely course of monetary policy remains the same, officials have said in recent public comments and interviews.
● Q3 Business Conditions Slowed, but Remained Solid; Growth Expected | NABE
Results from NABE’s October 2014 Business Conditions Survey suggest that growth is continuing at a majority of survey respondents’ organizations, with an increasing number of panelists also reporting employment growth and less difficulty in filling open positions.
● European Leaders Pivot to Debt Crisis After Wake-Up Call | Bloomberg
European leaders jolted by the sudden return of debt-crisis turmoil will gather for talks in Brussels this week as they attempt to restore investor confidence in the euro area.
● UK economic growth to fall to 2.4% in 2015, says EY Item Club | BBC
The UK economy will grow by 2.4% in 2015, well below the 3.1% growth expected this year, forecasting group EY Item Club has said.
● Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance by Ian Klaus
Summary via publisher (Yale University Press)
Vice is endemic to Western capitalism, according to this fascinating, wildly entertaining, often startling history of modern finance. Ian Klaus’s Forging Capitalism demonstrates how international financial affairs in the nineteenth century were conducted not only by gentlemen as a noble pursuit but also by connivers, thieves, swindlers, and frauds who believed that no risk was too great and no scheme too outrageous if the monetary reward was substantial enough. Taken together, the grand deceptions of the ambitious schemers and the determined efforts to guard against them have been instrumental in creating the financial establishments of today.
Housing starts rose 6.3% last month, primarily due to construction of multi-family units, according to this morning’s update from the US Census Bureau. The single-family slice of starts, by contrast, rose just 1.1% last month vs. August. The multi-family growth bias looks set to persist, based on the September data for newly issued housing permits. New permits overall rose a tepid 1.7% last month as single-family permits retreated 0.5%; fresh authorization to build multi units of five or more, however, jumped 7.0% in September vs. August. It’s fair to say that the housing market’s growth rate has slowed in general and that’s not likely to change anytime soon. But the key point in today’s report remains upbeat, albeit moderately so via a gentle tailwind that’s blowing in residential construction activity.
The crowd’s been repricing Treasuries lately on expectations that deflation risk is on the rise… again. But there’s no sign of it in the latest economic reports for the US. Why the disconnect? Treasuries, for good or ill, reflect fear and greed for a global audience as well the folks in Peoria. As a result, America’s relatively upbeat macro profile is an afterthought these days for traders in the Treasury market. Is that about to change?
● Stocks Stage Positive Reversal, Wiping Out Early Losses | IBD
US stocks made several U-turns Thursday, eventually closing just above the break-even line.
● Data shows U.S. economy’s pulse is still strong | Reuters
The number of Americans filing new claims for jobless benefits fell to a 14-year low last week and industrial output rose sharply in September, positive signals that helped ease fears over the economic outlook.
● WTI Rebound Above $80 Holds as Goldman Sees No Oil Glut | Bloomberg
West Texas Intermediate crude held gains above $80 a barrel as Goldman Sachs Group Inc. said the market isn’t oversupplied. Brent was steady in London.
● World braces as deflation tremors hit Eurozone bond markets | The Telegraph
Eurozone fears have returned with a vengeance as deepening deflation across Southern Europe and fresh turmoil in Greece set off wild moves on the European bond markets.
● Bank of England says keep interest rates low for now | BBC
Interest rates should remain low to avoid long-term economic stagnation, the chief economist at the Bank of England has said.
The sharp losses in the stock market lately suggest that the US economy faces a new round of headwinds. Yet there’s no sign of trouble in today’s updates on jobless claims and industrial production. In fact, the numbers du jour delivered substantially better-than-expected results. Taken at face value, today’s data implies that economic growth is accelerating. That’s probably assuming too much at this point, although it’s safe to say that the macro trend still looks encouraging after reviewing this morning’s releases.
Housing starts are expected to increase to an annual pace of 999,000 in tomorrow’s update for September, based on The Capital Spectator’s median econometric point forecast for several econometric forecasts. The projection represents a moderately higher number of starts vs. 956,000 for August.