Optimistic Mood

October 25, 2016

Commodity prices are higher, led by metals. WTI oil and Comex gold climbed 0.6% and 0.5% to $50.84 per barrel and $1,269.80 per ounce.

Markets are discounting a higher likelihood of a fed funds hike this year, but investors increasingly believe the U.S. economy can tolerate such action.

U.S. political opinion polls continue to indicate that Clinton should win the election two weeks from today. A continuing concern, however, is whether the legitimacy of the result will be accepted widely, and whether political opposition will stymie her agenda.

Stocks in the Pacific Rim rose 0.9% in New Zealand, 0.8% in Japan, 0.7% in Taiwan and 0.6% in Australia, but modest losses happened in South Korea, Indonesia, India and Hong Kong.

Share prices are slightly up in Germany, France and the U.K. but down in Greece, Spain, and Italy.

Ten-year bond yields rose three basis points in Britain and a basis point in Germany but slipped in Spain, Italy and Japan. A higher 10-year Treasury yield is indicated in the futures market.

Commodity-sensitive currencies like the rand, Aussie dollar and kiwi strengthened. The U.S. dollar is unchanged relative to sterling and the euro, up 0.3% versus the loonie and yen and 0.1% higher against the Swissie. The yuan is weak but steady.

Germany’s IFO business climate index for October reflects a “gathering impetus” as the fourth quarter began. The overall index climbed 1.0 points to 110.5 after a 3.2-point revival in the prior month. Current conditions improved somewhat, but the gain was concentrated mostly in expectations.

Italian industrial orders rebounded 10.2% in August from a 10.4% July drop and were 15.9% greater than in August 2015.

German construction orders settled back 2.2% in August but were still 10.5% greater than a year before.

Euro zone officials agreed to a further EUR 2.8 billion loan for Greece.

French business sentiment stayed level at 101 in October. Manufacturing confidence dipped a point to a reading of 102.

Producer prices in Spain and Sweden posted on-year declines in September of 2.0% and 0.1%, respectively.

Japan’s government released a new monthly economic assessment, which embodied a modest upgrade for the first time since January. Industrial production and business sentiment were upgraded, but the designation on construction was reduced.

South Korean real GDP grew 0.7% last quarter, more than expected, and was 2.7% greater than a year earlier.

Euroland’s fiscal deficit to GDP ratio was 1.5% in the second quarter, down from 1.6% in 1Q, 2.1% in the second quarter of 2015 and 2.5% in the spring of 2014. The debt/GDP ratio was 91.2% in 2Q16 versus 92.1% a year earlier.

South Africa’s index of leading economic indicators rebounded 1.5% in August and was 0.6% higher than a year earlier.

U.S. data due today are consumer confidence, the Case-Shiller house price index, the Richmond Fed manufacturing index and the IBD/TIPP optimism index. There is a monetary policy meeting today in Hungary.

Copyright 2016, Larry Greenberg.  All rights reserved. No secondary distribution without express permission.

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