The Day Ahead: Futures Lower Before Data, Earnings, Speeches
Ahead of several data reports, speeches from Federal Reserve officials, and a deluge of earnings, a third straight day of sell-offs is looking probable as global markets are bleeding red across the board.
Shares in China and Japan fell 0.62% and 0.64%, respectively, on Thursday, after news that China’s economy posted a slightly-lower-than-expected 8.9% annual growth rate in Q3. Stocks in Europe are worse with London’s FTSE 100 down 1.11% recently and France’s CAC-40 down 1.50%.
Meanwhile, oil futures are trading lower but remain above the psychologically-important $80 mark. Also, the dollar is picking up against an array of currencies this morning; the euro touched above the $1.50 level yesterday but is now lower at $1.4972.
A mass of Q3 earnings reports will hit the headlines today. Key earnings include AT&T, Dow Chemical, 3M, Merck, and McDonald's.
Key Events Today:
8:30 ― Initial Jobless Claims have fallen in five of the past six weeks, most recently to a nine-month low at 514,000. That’s far from indicating job creation or even stability, but the data suggests October’s employment report will show fewer losses than September. This week forecasters believe the figure will rise to 519,000, but most predictions are little more than melding last week’s numbers with the 4-week average.
10:00 ― Leading Indicators, a composite index that tracks turning points in the overall economy, have been rising for five straight months, suggesting the recession ended in the summer even while unemployment continues to rise. August’s 0.6% gain is expected to be topped by a 0.9% gain in September as equity prices continued to rise and industrial production increased at an annual rate of 5.2% in the third quarter.
“The steep yield curve, lower jobless claims, higher stock prices and more positive consumer sentiment should all add to the index's growth rate,” said analysts from Nomura. “We expect a negative contribution from only one component: the reduced manufacturing work week.”
10:00 ― The FHFA House Price Index doesn’t always get much attention because it only covers single-family homes backed by mortgages guaranteed by Fannie Mae and Freddie Mac. Its competitor, the Case-Shiller index, covers a larger market (including subprime mortgages), and therefore is given more market attention. Both indexes have been reporting modest rises recently.
“Monthly FHFA data show prices rising May, June and July, putting the three-month annualized rate at plus 4.5%. That’s the strongest performance on this basis since early 2006,” noted Ian Shepherdson from High Frequency Economics. He added that with 30-year mortgage rates around 5%, home sales could rise considerably in the near-term.
10:30 ― Eric Rosengren, President of the Boston Fed, speaks at the bank’s annual Cape Cod conference for the second day. He will deliver a paper on whether financial stability should be added to the Fed’s objective.
In his opening remarks yesterday Rosengren compared the economic crisis to the “Great Fires” of Boston in 1760 and 1872. He argued that citywide fires have been tamed in the United States through better building codes, enforcement efforts, fire departments and other government regulations. Similarly, he argued, the government needs more “resolution authority” over non-bank firms, especially during times of crises.
"While I don't think the Federal Reserve should be involved in the resolution of individual institutions, it's very important that someone does have that authority," Rosengren said. He added that less government intervention would be required if institutions took greater greater steps to retain capital.
4:30 ― William Dudley, President of the New York Fed, moderates a panel on monetary policy instruments and the Fed's supervisory function, at the annual Cape Cod conference in Chatham, Massachusetts.