►Wall Street focuses on the ‘three Es.’
Julianne Pepitone/CNNMoney/Oct 24
Investors are bracing for an onslaught of news this week: The earnings avalanche continues, midterm elections are approaching and economic data are due in a bunch of sectors. Those “three Es” are a lot for investors to digest individually, and this week’s triple-whammy could bring volatility to a market that’s been behaving somewhat normally.
►Dollar sell-off resumes after G20, eyes on Fed
By Anirban Nag/Reuters/Oct 25
The dollar dropped broadly on Monday, hitting a 15-year low versus the yen, as a Group of 20 agreement to shun competitive currency devaluations was taken as a green light to resume dollar selling by investors…”The G-20 was seen as a hurdle by some and now that is over, investors are back to do what they are most comfortable with — dollar selling,” said Ankita Dudani, G-10 currency strategist at RBS.
►Gold Gains on Dollar’s Drop; Palladium Soars to Highest Level Since 2001
By Nicholas Larkin and Sungwoo Park/Bloomberg/Oct 25
Gold climbed in London as a weaker dollar boosted demand for the precious metal as an alternative investment. Palladium advanced to a nine-year high…“We have an anti-dollar sentiment in place as long as uncertainty about the next Fed steps exists,” said Bayram Dincer, an analyst at LGT Capital Management in Switzerland. “Thus, people prefer to direct investments towards gold.”
►Markets Seem to Be Taking Fed Seriously
Karl Smith/Modeled Behavior/Oct 24
The 10 year breakeven rate seems to be moving higher indicating that the market is expecting inflation.
►New NABE Survey Shows Business Recovery Gaining Momentum, with More Jobs Ahead
NABE Industry Survey October 2010/National Assoc. for Business Economists/Oct 25
“NABE’s October 2010 Industry Survey confirms that the U.S. recovery from the Great Recession continues, with business conditions improving,” said William Strauss, Federal Reserve Bank of Chicago. “Industry demand, profits, costs, employment and capital spending strengthened compared to results in the July 2010 report. Outside of skilled labor, no significant amount of shortages was reported. Inflation appears to remain contained, with more firms reporting falling prices than increasing prices for their products. An improved outlook for hiring over the next six months was reported, with the best reading this year. While regulatory policy and federal taxes are expected to have a negative impact on respondents’ companies’ performance over the coming year, monetary policy is forecast to have a positive impact.”
►The Central Banker’s Case for Doing More
Adam S. Posen/Peterson Institute for International Economics/Oct 24
Posen argues that monetary policy should continue to be aggressive about promoting recovery, and further quantitative easing should be undertaken. Policymakers face a clear and sustained uphill battle, in which monetary ease has an ongoing role to play, even if it may not deliver the desired sustained recovery on its own. In every major economy, actual output has fallen so much versus where trend growth would have put them, and trend growth has not been above potential for long enough as yet, that there remains a significant gap between what the economy could be producing at full employment and what it currently produces. Thus, policymakers should not settle for weak growth out of misplaced fear of inflation. If price stability is at risk over the medium term, it is on the downside.
►The Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for Clunkers’ Program
By Atif Mian and Amir Sufi/Stanford University/Sep 2010
A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases…We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.