What's up, what's coming up, and a curious claim from ..... well, who else could it be ?

Thursday 12th October 2017

What's up, what's coming up, and a curious claim from ..... well, who else could it be ? 

ref :- General, and "Trump just claimed stock market gains actually offset national debt", CNBC

Just very briefly ...... 

The Dollar and US Treasury yields have been marked a bit lower as markets study the minutes of last month's Federal Reserve meeting, released last night. The only slight surprise is the level of debate between members as to whether the forces that are holding inflation at lower levels than might be expected are temporary, or representative of  a more fundamental change in how these things work. We know that even if they all acknowledge that factors like technology, globalization and demographics might well being playing some part in things, the majority at the Fed believe that inflation will start to feed through given the tightness of the labour market. To learn therefore that the possibility of a more permanent change to the dynamics driving inflation was discussed in such depth is being taken as mildly doveish. Not that widespread expectation of a rate hike in December has been dented any, but the minutes didn't do much to further confidence in the Fed's belief that we'll see three more rises next year.

The Brexit soap opera continues, and if most other currencies have posted gains against the Dollar this morning, Sterling took a mid-morning lurch lower after Michel Barnier, the EU's chief negotiator said that talks on Britain's divorce bill were at a standstill. As we've said before, we're not sure how helpful it is to read too much into the day-to-day squabbles surrounding these negotiations with regard to the long-term view (not yet, anyway), but inevitably the markets will react. Equally inevitably, each setback encourages speculation about the possibility of "no deal", or at least of a "hard Brexit", and it must be said that optimists are having their faith tested much more strongly than they would like.

There's a raft of central bankers ready to offer us the benefit of their wisdom today and tomorrow, literally hundreds of the blighters. Oh all right, not quite hundreds but to start with there's : Haldane of the Bank of England , Draghi, Praet, Coeure, Lautenschlager and Constancio of the ECB, Brainard, Powell, Rosengren, Kaplan, Powell again and Evans from the Fed. Frankly, the avalanche of central bank-speak is not guaranteed to teach us anything new but investors will be straining to glean any fresh nuances, real or imagined. Mario Draghi and any further thoughts he might have about turning off the QE tap might be the most interesting.

Whether you believe a December rate hike from the Fed is a foregone conclusion or not, a close eye must be kept on the economic releases between now and then just to check that your rationale is being validated and not contradicted. US Producer Price Index is out later today, but more importantly the Consumer Price Index and the Retail Sales data for September comes tomorrow. The retail sales number is important, but this particular number may be skewed by the hurricanes. The inflation data, given the debate going on both inside and outside the Fed, is pretty crucial no matter which way you look at it.

And finally, we return to Donald Trump ..... well, it's almost impossible to stay away from this endlessly fascinating creature. His grasp of basic economics (!) is being called into question after his claim last night that the national debt has been reduced by virtue of the stock market gains his administration has presided over. What ??!! Where on earth did you get that one, Donald ? There is absolutely NO correlation between markets increasing in value and lessening of the national debt. Someone might like to point out to the president that the bull market in stocks has been going on since 2009, and furthermore (just to prove the point about there being no connection between the two) the national debt has been soaring during that period.

Talk about "fake news" ......