Key Economic Data:
EUR / USD 1.4928 Up 0.0051
USD / JPY 89.280 Up 0.0262
GBP / USD 1.6790 Down 0.0022
OIL 79.60 Up 0.46
Gold 1,145.90 Up 6.50
FNMA 30-YR 4.5%
Previous close 101.781
Opened down 0.09BPs @ 101.688
Key Economic News:
CPI and housing, Geithner and Bullard.
8:30: Consumer pirce index for Oct…a moderate report? On headline, median forecast (of 78): +0.2%, ranging from -0.2% to +0.5%; last +0.2%. On core, median forecast (of 77): +0.1%, ranging from -0.2% to +0.2%; last +0.2%. We made some modest adjustments to our forecast after PPI, but basic nature of the forecast has not changed. As was the case wthe PPI, we expect the CPI to feature a benign core reading with food and energy pulling the headline up, though not nearly as much as in the PPI. Within the core index, the rental components should continue to be flat or slighly negative, and apparel prices should also be off a bit. Medical and lodging away from home are the higher components of our forecast. Price increases for tobacco took effect late in the month to show up materially in this report; they’ll be an issue for November.
8:30: Housing starts and permits for Oct…look for a small increase. On starts, median forecast (of 77) +1.7%, ranging from -3.4% to +8.2%; last -1.2% (since revised to -0.9%). With sales of new homes and builder sentiment both stalling of late, we expect gains in housing starts will be limited.
9:00: Treasury Secretary Timothy Geithner hosts a small business financing forum at the US Treasury Department…Bullard has surprised us in both directions since he’s been on the job, so hard to know what to expect. He rotates onto the voting membership of the FOMC next year.
9:15: St. Louis Federal Reserve President James Bullard speaks on the US economic outlook…
Advice:
CPI – Gas and cars vs Everything Else in the CPI; Starts Down surprisingly.
Bottom Line:
A highly skewed report on consumer prices, with vehicles accounting for more than 80% of the core increase and energy driving most of the rest. Housing starts weaken as high vacancies weigh on new construction, especially of multifamily projects.
Key Numbers:
CPI +0.27% in Oct (mom, -0.2% yoy) vs median forecast +0.2%.
ex food and energy +0.18% (mom, +1.7% yoy) vs median forecast +0.1%.
Housing starts -10.6% in Oct (mom, -7.2% yoy) vs median forecast +1.7%.
Based on CPI and Housing Starts, I see today following in yesterdays footsteps. With all this uncertainty I would lock today.
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