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#151

US MBA mortgage application -1.2% vs -4.1% prior


US MBA mortgage market data week ending 28 October 2016

  • Mortgage market index 486.2 vs 492.0
  • Purchase index 207.0 vs 207.8
  • Refi index 2088.0 vs 2122.5
  • 30yr mortgage rate 3.75% vs 3.71% prior
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#152

October 2016 US ADP employment 147k vs 165k exp


The details from the October 2016 US ADP employment report 2 November 2016

  • Prior 154k. Revised to 202k
  • Small biz 34k vs 34k prior
  • Medium 48k vs 56k prior
  • Large 64k vs 64k prior
  • Service sector 165k vs 151k prior
  • Goods producing -18k vs 3k prior
  • Construction -15k vs 11k prior
  • Manufacturing -1k vs -6k prior
  • Trade & transport 17k vs 15k prior
  • Financials 18k vs 11k prior
  • Professional & business 69k vs 45k prior
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#153

October 2016 US ISM New York business conditions index 49.2 vs 49.6 prior


October 2016 US ISM New York business conditions index report 2 November 2016

  • Outlook 56.9 vs 59.6 prior
  • Employment 50.6 vs 33.9 prior
  • Prices paid 56.6 vs 60.3 prior
  • 6m expectations 60.3 vs 56.7
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#154

October ISM New York Index Little Changed At 49.2, Employment Stabilises


The New York ISM business activity index edged slightly lower to 49.2 for October from 49.6 the previous month, while the six-month outlook was also weaker at 56.9 from 59.6 previously.

The quantity of purchases index declined to 44.3 from 47.1, while current revenues fell slightly to 51.4 from 51.6. In contrast, the index for expected revenues strengthened to 60.3 from 56.7 and was the highest reading for three months.

After the very sharp decline in the employment index in the September reading, there was a recovery to 50.6 in October from 33.9. Many more companies were somewhat likely to increase jobs over the next six months than in the previous survey, which underpinned the component. The employment index also strengthened from the level last year, which suggests last month’s reading was an outlier.

The prices paid index declined to 55.6 from 60.3, although this remained well above the 2016 average and above the October 2015 level.

The data overall does not provide any great insights into the outlook, but there will be relief that the employment index recovered strongly on the month and the overall trend suggests moderate economic growth is continuing. Importantly, the index remains comfortably above the levels seen in the second quarter of 2016.


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#155

US initial jobless claims 265k vs 256K estimate


Prior week 258K initially reported. That was unrevised in the current week.

  • The weekly US initial jobless claims came in at 265K
  • The 4-week MA came in at 257.75K.  This was up from 253.0K
  • US continuing claims  came in at 2026K versus 2043K estimate.  The prior  week was revised up to 2040K versus 2039K initially reported.
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#156

Trump worries hand dollar worst week in 12, jobs data eyed


The dollar inched up from a four-week low on Friday ahead of the U.S. non-farm payrolls report later in the day but was on track for its worst week in 12, pressured by worries that Donald Trump could win next week's U.S. presidential election.

The greenback has fallen 1.2 percent this week against a basket of major currencies (DXY) as Democrat Hillary Clinton's lead over Republican rival Trump in polls has dwindled following the re-emergence of a controversy over her private email server.

The U.S. currency had hit a nine-month high last week as investors bet that the Federal Reserve would hike interest rates later this year, but a Trump victory is seen delaying that hike. Clinton is viewed as a candidate of the status quo, while much uncertainty surrounds Trump's stance on key issues including foreign policy, trade and the economy.

"No doubt investors will retain a cautious stance today, fearful of fresh polls," said ING currency strategist Chris Turner, in London. "Where macro does play a role in today's proceedings, we believe it should be dollar-positive."

Economists polled by Reuters forecast non-farm employment to have risen by 175,000 in October from 156,000 in September, in data due at 1230 GMT . An upbeat jobs report is expected to bolster bets on a December rate hike, which would typically push U.S. yields higher and support the greenback.

Turner said it would take a headline number of below 75,000 to seriously challenge the market's conviction of a Fed hike in December, and therefore to knock the dollar.

But politics have trumped economics in foreign exchange markets in recent weeks. Investors are focused on the Nov. 8 election and have paid scant attention to what would normally be key events such as the Fed's policy decision earlier this week.

"The market is likely to greet a strong payrolls report with a straightforward enough response and bid the dollar higher," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. "But the rise could fade quickly amid the 'Trump risk' woes."


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#157

October 2016 US non farm payrolls 161k vs 175k exp


Details of the October 2016 US non farm payrolls and labour market report 4 November 2016

  • Prior 156k
  • Unemployment rate 4.9% vs 4.9% exp. Prior 5.0%
  • Average hourly earnings 0.4% vs 0.3% exp m/m. Prior 0.2%
  • 2.8% vs 2.6% exp y/y. Prior 2.6%
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#158

USD Lives Or Dies By U.S. Election: 3 Scenarios


 Now that the Federal Reserve’s monetary policy meeting and U.S. nonfarm payrolls reports are behind us, investors can focus solely on Tuesday’s U.S. presidential election. Friday’s U.S. jobs report failed to change the market’s expectations for a rate hike in December. A total of 161K jobs were created in October but September job growth was revised higher, the unemployment rate dropped back below 4.9% and average hourly earnings rose 0.4%, which was more than expected. But the only thing that matters next week is who becomes the next president of the United States. Economics and monetary policy will take a back seat to the unfolding political drama, especially since there are no major U.S. economic reports on the calendar. Over the past 2 weeks we have gotten a taste of how equities and currencies could trade if Donald Trump becomes president. On November 1, when a poll suggested that Trump led Clinton by 1 point, the Dollar Index dropped 1%, the Mexican peso fell 1.75% and the Swiss franc soared 1.4%. Investors took the U.S. dollar lower against all of the major currencies as the race tightened and the polling gap between Donald Trump and Hillary Clinton closed. As shown in the chart below, USD/JPY has been taking its cue from Real Clear Politics’ 2016 Presidential Poll Average Value for Hillary Clinton (white line) – a similar relationship can be seen with the dollar index. Over the past 3 months, when Clinton’s popularity rose the U.S. dollar strengthened and when it fell (like it has recently), USD/JPY crashes.

U.S. elections don’t normally elicit major market volatility but the problem in 2016 is that for the better part of this year, market participants did not consider a Trump victory realistic, and now that the election is too close to call, they are bailing out of U.S. assets and rushing to protect their portfolios. Regardless of your political leanings, it is hard to ignore the fact that investors fear a Trump Presidency. His foreign policy, trade ideas and plan to overhaul the Federal Reserve scare domestic and foreign investors alike and the general lack of specificity could mean a long period of uncertainty. Beyond the immediate impact, investors also worry that if markets sell-off and the U.S. economy slows, the Fed could forgo a rate hike in December, which would exacerbate the dollar's slide through year's end.

But what if Hillary Clinton makes history by becoming the first female president of the United States? The market’s reaction depends on the margin of her victory.


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#159

US Sept consumer credit +$19.29B vs $17.5B exp


US consumer credit outstanding

  • +$19.29B vs $17.5B exp
  • Prior $25.87B vs $26.75B
  • Revolving credit +$4.19B
  • Non-revolving credit $15.1B

Revolving credit is generally credit cards.

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#160

Trump becomes 45th President of the USA


Republican Donald Trump now officially President-elect 9 Nov

Currently making his victory speech.

Trump will take office on 1 January

Have whatever view you wish on the matter but the American people have spoken, and the protest vote that we saw with Brexit continues to dominate the landscape.

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#161

US MBA Mortgage Applications Fall 1.2%


The latest Mortgage Bankers Association (MBA) data recorded a 1.2% decline in the week ending November 4th, the same decline as had been reported the previous week. Yield trends will be a key short-term factor for mortgage applications as uncertainty increases.

Applications for home purchase increased 1.0% on the week and there was an 11.0% gain from the same week in 2015.
Re-mortgage applications declined 3.0% on the week and were at the lowest level since May.

Mortgage rates will continue to be watched closely in the short term with 30-year fixed rates rising to 3.77% in the latest week from 3.75% previously. This was the fifth consecutive weekly increase and the highest level since June.

Longer-term yields have continued to move higher over the past week and mortgage rates will also tend to move higher in the short term.

The Presidential election and Trump’s victory has introduced a further high degree of uncertainty surrounding the outlook. There will be doubts surrounding the economic outlook following the election result, which will potentially undermine confidence in the housing sector.

The trend in US yields will also be watched very closely in the short term. There has been very choppy trading in bonds following the election result with prices declining sharply after securing initial gains. Overall, there has been upward pressure on yields with 30-year rates close to 2.75% ahead of the US open.


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#162

US initial jobless claims 254k vs 260k exp


US initial jobless claims week ending 4 November 2016

  • Prior 265k
  • Continued claims 2.041m vs 2.030m exp. Prior 2.026m. Revised to 2.023m
  • 4 week average 259.75k vs 257.75k. Revised to 258.0k
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#163

US Federal Budget Deficit $44.2bn For October, Trump Plans Under Scrutiny


The US Federal budget recorded a deficit of $44.19bn for October compared with a deficit of $136.6bn the previous year. Receipts rose 5.0% over the year while there was a sharp decline in spending of over 18%, although this was distorted by calendar effects and the impact of Medicare payments.

When adjusted for calendar effects, there was an October deficit of $84bn from $88bn the previous year.

Income tax receipts rose by 11% over the year, but there was a sharp decline in corporate tax receipts. There are major problems in extrapolating from monthly data, but there has been a consistent pattern of weak corporate tax receipts throughout the last year.

For fiscal 2016, the deficit amounted to $587.3bn, equivalent to 3.2% of GDP, an increase from 2.5% of GDP the previous year, the first increase in terms of GDP since 2009.

The Congressional Budget Office (CBO) is currently projecting a deficit of $594bn for fiscal 2017, although there is a very strong probability that there will be changes to fiscal policy under the new Administration, which will force major changes to the forecasts.

Fiscal policy has received only limited attention over the past few months, especially with effective gridlock between the Administration and Congress, but the budget will be a much bigger focus over the next few months and is likely to have a substantial market impact.


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#164

Dollar Extends Gains But Resistance Nears For Many Pairs


 Investors continued to buy U.S. dollars Thursday, 48 hours after the 2016 Presidential election. We didn’t get a chance to share our views Wednesday because we were busy trading election night and the day after but there’s no doubt that the outcome was a big surprise. It sparked widespread volatility and short covering in the financial markets but when the dust settled, the U.S. dollar and U.S. stocks recovered all of their steep losses. Instead of mourning, investors cheered a Trump victory as they hoped he will be positive for the economy. He ran on a campaign of aggressive spending and this is the first time in 8 years that there’s the prospect of a sizeable fiscal stimulus package. His victory speech was conciliatory and heavily Keynesian, which went a long way in boosting risk appetite and lifting Treasury yields. Perhaps feeling the weight of his new responsibilities, Trump is toning down his abrasiveness and opening his ears to outside counsel and advice. He may not have a specific plan for creating new jobs, offsetting the tax cuts he plans or finding the money for infrastructure spending outside of ballooning the deficit, but the mere promise of a fiscal stimulus program at a time when the Federal Reserve is preparing to raise interest rates reinvigorated hope for a new cycle of growth.

The odds for a rate hike after the election hasn’t changed and in fact increased from 80% to 84% according to Fed Fund futures. This is not a big surprise because stocks recovered strongly. Had they fallen 500 or 600 points on Wednesday, the Fed would most certainly reconsider its plans for tightening. Instead, with the Dow Jones Industrial Average at a record high, Janet Yellen has an even stronger case to boost rates in December. It would be her last decision before President Trump can pressure the central bank and the move would show that she isn’t buckling on future political pressure. Data was also good with jobless claims falling 11k. Weekly claims have remained below 300K for 88 weeks, the longest stretch in more than 45 years. The University of Michigan consumer sentiment index is scheduled for release Friday and a steady reading is expected. Meanwhile, it is important to recognize that rising U.S. yields are the primary reason for the dollar’s strength. Ten-year Treasury yields rose above 2% on Wednesday, taking USD/JPY above 105 and Thursday’s extension in rates drove the pair within 5 pips of 107. There’s no question that USD/JPY is overbought, but we could see the pair break 107 before the rally finally fizzles. Of course, it could also stall here, right at the 200-day SMA and 38.2% Fibonacci retracement of the 2011 to 2015 rally.


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#165

November University of Michigan Consumer Confidence Strengthens To 91.6, Inflation Expectations Rise


The US University of Michigan consumer confidence index strengthened to a preliminary 91.6 for November from 87.2 the previous month. This was the highest reading since July and also above consensus expectations of a figure around 87.5.

The current conditions index strengthened to 105.9 from 103.2 to give a 1.5% gain over the year, while the expectations index advanced to 82.5 from 76.8, although there was a slight decline over the year.

According to the survey, overall confidence in the outlook for the economy improved and readings of this level are consistent with annual GDP growth of around 2.5%. The overall survey reading was just above the 2016 average.

Significantly, there was an increase in inflation expectations in the data with both the 1-year and 5-year expected rates increasing to 2.7% from 2.4% the previous month. The increase may not be significant, but does suggest that inflation expectations have bottomed out.

This is potentially very important given that the Fed has been concerned that inflation expectations have been declining to dangerously low levels and this has been a major barrier to raising interest rates.

The data was collected before the US Presidential election and there will be some caution over potential near-term trends.


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