Daily Comments

The Chinese Ministry of Commerce said that China and the U.S. were holding “deep” discussions on trade. Asian markets were mostly higher. The Nikkei 225 rose +0.70% but the Shanghai Composite slipped -0.64%. October euro zone inflation slowed to +0.7% y/y. European equities closed higher. The DAX rose +0.47%. Yields on 10-yr. Bunds moved up to -0.335%. September Business Inventories fell -0.2%. October Retail Sales were up +0.3% (ex-autos +0.2%), Import Prices fell -0.5%, Export Prices lost -0.1%, Industrial Production fell by -0.8% (more than expected), and Capacity Utilization slipped to 76.7%. The November Empire State Mfg Survey was soft at 2.9. Baker-Hughes reported that the U.S. oil rig count for 11/08 fell by 10 to 674, the 4th consecutive decline. Yields on 10-Year Notes edged up to 1.834%. The December US$ Index slipped -0.15 to 97.87. December gold lost -0.3% to $1,468.50. December crude jumped +1.7% to $57.72. Equites jumped on trade comments from Trade Adviser Kudlow and Commerce Secretary Ross. Markets focused on nothing but a trade deal expected to close soon, finishing broadly higher.

October China industrial production grew +4.7% y/y, much less than expected. Asian markets were mixed. The Nikkei 225 fell -0.76% but the Shanghai Composite recovered to close up +0.16% on possible government intervention. German Q3 GDP grew +0.1%, avoiding recession for now. European equities closed lower. The DAX fell -0.38%. Yields on 10-yr. Bunds fell back again, now at -0.346%. Initial Claims for 11/08 rose to 225K. October PPI was +0.4% (ex-food and energy +0.3%), slightly hotter than expected. Last night’s API report showed a surprise draw of crude inventories for the week of 11/8 of -541K barrels, but this morning’s EIA report was more in line with expectations, showing a build of +2.2M barrels. Yields on 10-Year Notes fell to 1.822%. The December US$ Index lost -0.21 to 98.02. December gold added another +0.7% to $1,473.40. December crude fell -0.6% to $56.77. Following a recent pattern, early weakness was met with buyers trying to push averages higher, but today sellers came in and markets turned lower. Despite the concerns over trade developments, selling abated and markets slowly recovered, closing essentially flat.

Sentiment soured after President Trump offered no new detail on trade progress with China. Asian markets were lower. The Nikkei 225 fell -0.85% and the Shanghai Composite lost -0.33%. September euro zone industrial production managed a second consecutive increase, rising +0.1%. European equities closed lower. The DAX fell -0.40%. Yields on 10-yr. Bunds fell back to -0.301%. October CPI was a little hotter than expected, up +0.4%, though ex-food and energy it was a more muted +0.2%. The October Treasury deficit was a little wider than expected at -$134.5B. Yields on 10-Year Notes eased to 1.884%. The December US$ Index rose +0.08 to 98.23. December gold rebounded up +0.7% to $1,463.30. December crude rose +0.6% to $57.12. Overnight concerns about trade led to a weak open, but markets quickly steadied and began to recover, eventually moving into the black, although volume remained light. Gains evaporated on a new report of trouble in trade negotiations. Still hope for a deal persists so markets reversed again and rallied to close narrowly mixed.