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Market Moment

  • September 13, 2019 Headline Bingo: Trade Tensions Easing by Lester Murray

    Bond prices are retreating and the Ten-Year's yield has been pushed above 1.80%. The latest trade news might be why. In an apparent show of good faith, China is encouraging its domestic companies to buy more U.S. farm products while at the same time, the Commerce Ministry works to exempt a wider range of American goods from previously imposed tariffs. It looks like China is trying to play nice.

    Domestically, the Census Bureau announced that August's Retail Sales outperformed expectations with a rise of 0.4% versus an anticipated boost of just 0.2%. The American consumer continues to do the heavy lifting. We also learned that for their purchases from foreign shores, the Import Price Index fell by 0.5% while at the same time, the Export Price Index dropped by 0.6%. Good for consumption; bad for those looking for signs of inflation.

  • September 12, 2019 Mario Stimulates; Trump Steams by Lester Murray

    The European Central Bank this morning announced a deeper plunge into negativity by further lowering its benchmark deposit rate to minus 0.5% from minus 0.4%. While this was widely anticipated by investors worldwide, the announcement of the resumption of quantitative easing through central bank bond purchases was less of a sure thing. Now it's a sure thing that will begin November 1. President Trump was quick to tweet his concerns about his perception that the ECB's actions are an attempt to devaluate the Euro and potentially damage American exports. Mr. Trump has made no secret of his wish for America's monetary policy to become more accommodative through more aggressive rate reductions. The FOMC meets next week.

    Market reactions have been swift and significant. Treasury prices are up all along the curve while the Ten-Year's yield his been pushed back below 1.70%. Domestic equity markets are also liking the news as major indices are poised for an enthusiastic opening.

    For those looking for greater inflationary enthusiasm, this morning's release by the BLS of August's Consumer Price Index provided a mixed bag.  For the month, headline CPI rose by the expected 0.1% while the year-over-year measure fell from 1.8% to 1.7%. At the core level, August's rise of 0.3% slightly exceeded expectations as did the new year-over-year pace of 2.4%. July's measure was 2.2%. Some good news for consumers came in the form of higher, inflation-adjusted, Real Average Weekly Earnings. July's growth rate of 0.8% became August's rate of 1.2%. Consumption is driving America's growth train and higher real earnings should promote greater consumption; or greater savings. We'll see.

  • September 11, 2019 When Inflation is Good News by Lester Murray

    Higher prices for the sake of higher prices is never desired, but in an environment of disinflation and growing global fears of deflation, anything that assuages those fears is welcome. So it is that this morning's Producer Price Index report from the BLS is good news for our policy-makers. August's rise of 0.1% for headline PPI doesn't look like much, and it isn't, but it's better than the forecast of "unchanged."  That brings the year-over-year rate to 1.8%; also one-tenth better than expected. 

    At the core level, without food and energy, the rise of 0.3% looks pretty good compared to expectations of just 0.2%.  On a year-over-year basis, the new core rate came in at 2.3% and that was also slightly better than expected. Market reaction isn't much with most Treasury issues unchanged all along the curve. The mild but steady sell-off over the last few days seems to have found a resting place with the Ten-Year yield around 1.73%, the long-bond at 2.21%, and the Two-Year looking at 1.67%.

    The other shoe drops tomorrow with the release of the Consumer Price Index. Pre-release surveys are suggesting slight upticks to August's levels for both the headline and core rates. The FOMC meets next week and one supposes that inflationary trends and expectations just might be a topic of discussion.

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