Succinct Summation of Week's Events 10.9.15

Succinct Summations for the week ending October 9^th, 2015:

Positives:

1) Stocks enjoyed their strongest week of the year.

2) Initial jobless claims fell to 263k from 276k last week.  4 week average = 268k, the lowest since early August from 271k last week.

3) Purchase applications to buy a home rose 27.4% w/o/w and 48.9% y/o/y while refi’s were higher by 24.2% w/o/w and 55.1% y/o/y.

4) Import prices in September remained benign, falling by .1% m/o/m though not as much as the estimate of -.5%. The y/o/y drop was 10.7%.

5) It will be the supply side of the commodity curve that will drive the rise in inflation that the Fed and other central banks so desperately want. Glencore announces cut of 4% of global production of zinc and 1/3 of its own. Zinc spikes 10%.

6) Retail sales in the eurozone in August were flat m/o/m but July was revised higher by two tenths and thus the y/o/y gain of 2.3% was above the estimate of 1.7%.

7) China reported a slightly less than expected drop in its FX reserves in September in response to their attempts to slow the outflows. Reserves went to $3.51T from $3.56T vs the estimate of $3.5T but have fallen in 13 out of the last 15 months.

8) The BoJ chose to do nothing and Kuroda still believes that “prices will gain upward momentum toward a 2% target once the impact of falling energy prices disappear.” He is making it a point to take out both food and energy prices when calculating inflation and he puts this core rate at 1.1%.

Negatives:

1) September ISM services (nonmanufacturing) index fell to 56.9 down from 59 previously and below expectations 59.

2) The inventory to sales ratio rose to the highest since May 2009.

3) Markit also reported its version of the services sector and its index fell to 55.1, about 1 pt below the year to date average. Their viewpoint was this: “Survey respondents commented on generally supportive economic conditions during September, particularly in domestic markets, but some firms noted that weaker new business growth had weighed on activity over the month… Moreover, business confidence across the service sector moderated since August and reached its 2nd lowest level for just over three years. Some panel members pointed to greater caution among clients and the uncertain global economic outlook.”

4) While US wholesale inventories rose .1%, one tenth more than expected, a 1% decline in sales sent the inventory to sales ratio to 1.31, the highest since May 2009. The I/S ratio for auto’s in particular rose to 1.77 from 1.73 in July and was as low as 1.61 in January.

5) The U.S. trade deficit widened to -$48.3B, down from -$48.1B previously, and up sharply from the $41.8b seen in July. This increase was due to the 2% m/o/m decline in exports and 1.2% rise in imports.

6) JPM/Markit Global Manufacturing and services composite PMI index fell to 52.8, the weakest since December ’14 from 53.9 in August.

 

Thanks, Mike!