Last week saw another favorable performance for many high-risk assets globally. While the increases were modest compared to the significant gains from the week ending October 9, a generally optimistic trend was evident over the five trading days leading to October 16. This marks a second consecutive week of rising prices across the major asset classes, as per a selection of representative ETFs.
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● US industrial output declined for the second consecutive month in September | RTT
● US Consumer Sentiment increased more than anticipated in October | RTT
● China’s GDP growth slowed to 6.9% in Q3, the lowest since 2009 | Bloomberg
● Growth in China’s industrial production was less than expected for September | Investing.com
● Concerns over the US federal debt ceiling deadline on November 3 worry investors | P&I
● Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe
By Greg Ip
Summary via publisher (Hachette/Little, Brown)
This book explores how our safety mechanisms, such as money market funds and anti-lock brakes, can sometimes pose greater risks to our well-being. Despite our increasing knowledge of human behavior and disasters, incidents like car crashes and financial crises persist. The very safety measures that reduce immediate danger can allow us to take larger risks. As our urban environments, transport systems, and financial markets grow more interconnected and complex, the likelihood of catastrophe increases. How can we ensure our safety? Are we exposing ourselves to more risks despite our precautions? Does accepting danger offer better security? In “Foolproof,” Greg Ip articulates a comprehensive theory about human nature and disaster, presenting solutions for maintaining safety in an increasingly perilous world.
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Industrial output fell 0.2% last month, according to a report from the Federal Reserve here. Overall output has decreased in seven of the last eight months, marking the longest stretch of negative monthly comparisons since 2008. Year-over-year statistics do not present a better picture. Although production is experiencing an annual increase, it’s occurring at the slowest rate since December 2009, when output dropped compared to the previous year.
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Are the Federal Reserve’s plans for tightening monetary policy being reconsidered? Recent weak economic data has certainly provided reasons to postpone any intentions to raise interest rates. Comments from Fed officials this week have yielded mixed signals regarding future policy directions, although some members insist the perceived divisions on monetary policy have been overstated, as reported by Reuters. Nonetheless, the latest figures for the US monetary base (M0) and the effective Fed funds rate suggest a slight retreat from what had seemed to be a clear inclination towards a tighter monetary stance recently.
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● US jobless claims dropped to a 42-year low once again | MarketWatch
● Bloomberg’s US Consumer Comfort Index rose for the fourth consecutive week | Bloomberg
● Survey results from Philly & NY Fed indicate continued contraction in manufacturing for October | MarketWatch
● Fed officials minimize concerns regarding divisions over rate hikes | Reuters
● US federal debt at a seven-year low | Time
● US debt ceiling deadline approaching on November 3 | The Hill
● Eurozone inflation confirmed at a negative rate for September | RTT
● Eurozone trade surplus declined more than expected in August | RTT
The upcoming report on US industrial production for September is predicted to show no change compared to the previous month, according to the average forecasts provided by The Capital Spectator’s econometric estimates. This projection of flat output contrasts with August’s 0.4% decrease.
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The consistent drop in jobless claims is almost too good to believe, and some argue it alone is a definitive indicator. History, however, suggests otherwise. If the optimistic signals from low new unemployment benefit claims turn out to be misleading—especially given Challenger’s report on rising layoffs—we’ll find out soon. Meanwhile, the Labor Department has announced that claims decreased last week to 255,000, a seasonally adjusted figure that marks the second instance since July of reaching a 42-year low. If taken at face value, these numbers suggest that the sluggish rate of payroll growth witnessed recently may soon improve.
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Talk of a recession is gaining momentum, and it’s not hard to see why: economic indicators have been lackluster. For example, the recent monthly report on retail sales shows an increase of only 0.1%. Other indicators also reveal softness, including industrial production, the ISM Manufacturing Index, and stagnant or slightly negative growth in the US monetary base. The financial markets are also reflecting higher macro risks, as discussed earlier this week. This paints a concerning picture that could suggest the US might be heading toward a recession. However, another scenario could unfold: sluggish growth that mimics a recession without triggering a formal NBER-defined downturn.
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● US retail sales saw a slight increase in September | MarketWatch
● US business inventories remained unchanged in August | Reuters
● A sharp decline in US mortgage applications follows recent regulatory changes | HousingWire
● The Fed’s Beige Book indicates “modest” US expansion at the end of Q3 | WSJ
● Adjusted figures for Japan’s industrial output hint at a potential recession | MarketWatch
● Gold prices are nearing a 3.5-month high on speculation of a delay in the Fed’s rate hike | Reuters