Negative action continued this morning after the market rejected the Fed's announcement to expand QE3 as a market positive. Early on in Europe, EU finance ministers completed an agreement on setting up a euro-wide banking regulator that would go into effect in early 2013 and be finalized by early 2014. The regulator would be run by the ECB and cover the largest banks in each country, representing 30 billion euros in assets, or 20% of the country's GDP. This, in theory, should help negate the fears over currency devaluation.
US economic data came in a little lighter than expected, though there was a strong decline in weekly jobless claims. Initial jobless claims declined to a weekly rate of 343,000, down from last week's 372,000. This was well below the 369,000 expectations. The Labor Department noted some seasonal activity causing the severe week-to-week variations. Monthly retail sales rose at a monthly rate of 0.3%, up from last month's decline of 0.3%, but below 0.5% expectations. The Commerce Department reported both negative and positive effects from Hurricane Sandy.
Commodities notably declined with precious metals (gold, silver, platinum) falling by a full percent or more; mining stocks also underperformed. Oil, however, did not sell off as sharply.
The US Treasury sold $13 billion in the first reopening of 30-year bonds in the afternoon. Though these bonds were bid up before the auction, the maximum yield was 3.5 basis points below expectations and demand trailed. Indirect bidders were notably lacking for the second auction in a row. On the Treasury curve, the 5- and 7-year notes underperformed as the Fed will be buying less in its monthly QE program.
Tomorrow's Financial Outlook
Tomorrow the US will report consumer inflation indexes, with the annual rate expected to decline from last month's 2.2% to 1.9%. Markit will also release the preliminary reading of the US' PMI index. Lastly, in the US, the Commerce Department will release industrial production and capacity utilization figures. Notably, the capacity utilization figure is expected to increase to 78% from last month's 77.8%.
Globally, HSBC will release the figures from China's manufacturing PMI from the last month and the eurozone will release euro-wide inflation figures. China's manufacturing data is expected to increase for a second consecutive month to 50.8 from last month's 50.5 and 49.5 from the month prior.
In earnings, Rick's Cabaret
(RICK) will be the sole report.
No positions in stocks mentioned.
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