Recap

Likely part of the art of the deal, President Trump is again roiling markets, in if a more limited manner than could be the case. Spoos sunk to session lows dragging treasuries yields, as headlines hit that the White House is mulling limits on US portfolio inflows to China. As well the White House floated the notion that China companies may be de-listed from US exchanges. (IFR)

Personal Spending

From Trading Economics “Personal spending in the United States rose just 0.1 percent from a month earlier in August 2019, following a revised 0.5 percent growth in July and missing market expectations of 0.3 percent. An increase in consumption of recreational goods and motor vehicles was offset by a decline in spending at restaurants and hotels. Personal Spending in the United States averaged 0.53 percent from 1959 until 2019, reaching an all time high of 2.80 percent in October of 2001 and a record low of -2.10 percent in January of 1987”

Not a good sign if the Consumer is the one that has to carry the U.S. Economy.Take a look at chart it is evident that Consumer spending trending in the wrong direction.(Chart via trading economics)

United States Personal Spending

And a Line chart Via Bloomberg

QE Coming?

From Bloomberg:

(Bloomberg) — Strategists see growing likelihood that the
Federal Open Market Committee will announce the return of large-
scale Treasury purchases at its Oct. 29-30 meeting to rebuild an
appropriate reserve buffer following last week’s tumult in repo
market.


* BMO estimates that the Fed needs a buffer of more than $200b,
while TD Securities sees $300b-$500b as likely; Morgan Stanley
expects purchases to start Nov. 1 Fed will likely buy $315b of Treasuries, including bills and coupons, over the six months starting Nov. 1, while continuing to run temporary open market operations


** In a phone interview Thursday, TD’s Gennadiy Goldberg said
the central bank will struggle to communicate that the purchases
are not a form of quantitative easing, and said the announcement
will likely be accompanied by another 25bp rate cut

Both these news items, announced yesterday, but still need to be mentioned

  “The NY Fed announced that the repo operations today will be of an increased size with the o/n operation now $100bn (prev $75bn) and the term operation now $60bn (prev $30bn). Details of the o/n operation will be announced between 8:00–8:15AM ET and the overnight operation between 8:30–8:45AM ET today. The increase in size to around levels that the market was bidding after the operation early in the week received $92bn of bids for o/n and $62bn of bids for term. “Reuters

European Central Bank Executive Board and Governing Council Member Lautenschlaeger announcing her resignation, effective October 31 (after the next ECB meeting on October 24). No reason has been given, but Reuters writes the move is “likely to be seen as a further backlash against the latest stimulus measures.” She was one of the hawks so her resignation could open the door for a Dove to replace her., QE forever.

 Markets:

   Optimism  regarding Trade lifting Stocks, Spoos +6 handles Nasdaq  +10  ,European Bourses higher Mib +.8%  Stoxx 50 +.7%, Bonds bouncing a bit today after yesterday’s sell off  Bunds steady to lower.. 10 year yields sideways the last 3 days, repo issues, Auctions and upcoming Quarter keeping a lid on activity. Dollar little changed today, Euro Touched the 2019 lows for the third time this month but failed to trade below. A handful of Second tier Economic data on calendar today, markets likely to ignore them. The focus will be on the testimony of the Acting director of National Intelligence at 8:00, will he say anything that further pushes case for Trump impeachment. Oil, Gold, Copper all little changed,

Hard to place a theme on today’s trade as Both Stocks and bonds higher.

Calendar:

7:30 GDP last look at Q2

Heavy dose of Fed speak:

  • 8:30 Kaplan
  • 9:00 Bullard
  • 10:45 Clarida
  • 1:00 Kashkari
  • 3:30 Barkin

A bit of Risk On

President Trump announced a partial trade deal with Japan in which japan will lower tariffs on U.S. beef, pork and other Ag products.This has lifted cattle and Hog prices… Commentary on Japan from the USTR … U.S. total exports of agricultural products to Japan totaled $13 billion in 2018, our 3rd largest agricultural export market. Leading domestic export categories include: corn ($2.8 billion), beef & beef products ($2.1 billion), pork & pork products ($1.6 billion), soybeans ($947 million), and wheat ($698 million).

President Trump hinting multiple times today that a U.S. China Trade deal could happen soon and we are much closer to a deal then many think. An obvious attempt to push Risk higher and it worked SPX +.3%,Ndx +.8%. An Ugly 5 year auction,Strong Housing Numbers and Trump trade tweets all weighing on Treasury Complex, Yields higher by ~7 bps across the curve.

A Reminder Trump press Conference at 3:00 today