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3 Numbers to Watch: US Industrial Prod & TIC, EZ Current Acct

Blogger / MoreLiver's Daily
Finland

This Friday the calendar is short on big-ticket items, but given the end of the week, the recent volatility, Europe’s continuing uncertainties, next week’s US holidays and ensuing position adjustments, I have a feeling we’re in for an interesting trading day.  I’m not expecting much from the numbers, but it is the market’s interpretation that counts. Thus, I believe the market will over-interpret today’s numbers and we will see some good trading opportunities. Also watch out for President Obama, who meets with Congressional leaders (fiscal cliff).

Eurozone Sep Current Account Balance (09:00 GMT) is expected to show a surplus of EUR 9bn (prev. EUR 8.8bn). While the headline figure will probably not surprise by much, the geographical breakdown might provide some interesting tidbits.

I would be on the lookout for signs that the creditor countries’ (Finland, Austria, Netherlands and Germany) exports to outside the Eurozone have been suffering. While export deterioration could at a first glance be easily interpreted as negative for the euro, bad numbers could actually push the politicians to get their act together – and that would be a medium-term positive for the euro.

The EURUSD has rallied for the past couple of days, and the test of the 1.28-resistance level is currently under way. Either the euro's downtrend from mid-October resumes, or we are back to directionless markets – this data release could very well be the excuse for the markets to make the call. The trade balance figures are released at 10:00 GMT, but any effects will already have been felt by then. 

US Sep Treasury International Capital data (14:00 GMT), or the difference between the net purchases of long-term securities by US citizens and foreign investors, is expected to come in around USD 75bn (prev. USD 90.0bn). The higher the TIC number, the more there is demand for the USD. The series is volatile and any reasonable change should normally have little impact. The recent search for yield in zero-interest rate environment has pushed the yields of corporate bonds very low and even the lower credit quality papers have been in high demand. This has changed during the current market correction, and even though the TIC numbers are now old, they could provide ammunition for bears and bulls alike. For the risk markets, the worst scenario would be decreased foreign interest in US corporate paper. 

 US Sep TIC Data

US Oct Industrial Production (14:15 GMT) is expected to be +0.2% (prev. +0.4%), with capacity utilization to remain unchanged at 78.3%. Instead of showing the usual progression of the revised indexed production, I would like to draw your attention to the initially reported number (often subject to revisions) and the consensus expectation at the time.

What interests us is not the revised history, but the actual reported number vs. the expectations at the time. With the recent range of the monthly IP changes, the chance of a negative surprise is definitely there, but as markets have already sold off, any surprise could translate into policy expectations and thus turn out to be a market positive after all.

I am paying a lot of attention on the price response today, as I believe it will set the tone for the next 5-10 days. Should the stock market "like" the number (either because it was bad = more easing or it was good = better earnings), the sentiment would improve and carry the markets for a week or so. In addition to the EURUSD level mentioned previously, the S&P 500’s recent correction has reached the historical ‘average’ size – and there is a triple-witching expiration in US.  

 US Oct Industrial Production

6y
James Picerno James Picerno
A better-than-expected bounce would be just the thing to wipe away some of yesterday's surge in US jobless claims, which may be storm related. Even so, the markets are getting skittish with so much dark news lately.
6y
Juhani Huopainen Juhani Huopainen
too much doom and gloom in the air at the moment. Just like EURUSD "surprised us all" by not succumbing to the steady negative newsflow, and climbing from 1.2650 to 1.28, I guess we're in for a surprise today on US stocks. The assumption probably is that no-one is willing to go home for the w/e long - I've often said that the market's purpose is to hurt as many traders as possible. Today the max pain would be the market edging higher against expectations. Prob 60%.
6y
James Picerno James Picerno
As you point out, the consensus prediction for ind pro is 0.2%, which would be a drop from the previous 0.4% gain. Within the consensus range for estimates I've seen the highest forecast is 0.5%. But it's unclear how much the hurricane skewed the data so there's a bit more anxiety this time around.
6y
Juhani Huopainen Juhani Huopainen
In the grand scheme of things, either because of actually being meaningless, or because of being meaningless now due to Sandy and monetary policy, I really don't believe today's numbers mean anything. They just provide rhythm to the expiration day's trading. As Ramones said it, one-two-three-four!
6y
Juhani Huopainen Juhani Huopainen
and it happened as it had been written. Lousy numbers, stocks close at highs, max pain.
6y
James Picerno James Picerno
The modest pop in US stocks on Fri suggests the market doesn't (yet) think the week's weak economic news is the genuine article, i.e., it's storm-related. The housing reports on Mon (Nov 19) will provide a new read on whether that theory has validity. Stay tuned for my overview...
6y
Juhani Huopainen Juhani Huopainen
Same thoughts here - the Friday's market action is a good sign for the next 5-10 days. Perhaps A) some good old-fashioned range-trading , followed by another bull leg - or B) one or two days of rallying, followed by another try at the bottom - and thus establishing a range. I've noticed that the less I follow SPX, the better my hunches are. It is often better to keep stuff as simple as possible - but not any simpler :) Have a good w/e.

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