Last month, housing starts experienced a 6.3% increase, primarily driven by the construction of multi-family units, as reported by the US Census Bureau in its recent update. In contrast, single-family starts saw a modest rise of just 1.1% compared to August. The trend toward multi-family construction is likely to continue, as indicated by September’s housing permit data. Overall, new permits increased slightly by 1.7% last month. However, single-family permits dipped by 0.5%, while new permits for multi-family units of five or more surged by 7.0% from August to September. Although the housing market’s growth appears to be slowing, the report still provides a cautiously optimistic outlook, suggesting a gentle tailwind supporting residential construction activity.
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Recently, investors have been re-evaluating Treasury yields, reacting to rising deflation risks. Yet, the latest economic reports from the US do not indicate any signs of deflation. Why this disparity? Treasuries reflect both fear and greed on a global scale, which can overshadow America’s relatively positive macroeconomic indicators for traders. Will this shift any time soon?
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● Stocks Stage Positive Reversal, Wiping Out Early Losses | IBD
US stocks experienced several fluctuations on Thursday, ultimately closing slightly above the break-even point.
● Data shows U.S. economy’s pulse is still strong | Reuters
New jobless claims in the US fell to a 14-year low last week, complemented by a significant rise in industrial output in September, offering positive indicators that alleviated concerns regarding the economic outlook.
● WTI Rebound Above $80 Holds as Goldman Sees No Oil Glut | Bloomberg
West Texas Intermediate crude maintained gains above $80 a barrel, with Goldman Sachs asserting that there is no oversupply in the market. Brent remained steady in London.
● World braces as deflation tremors hit Eurozone bond markets | The Telegraph
Deflation concerns in the Eurozone have intensified, with deepening deflation in Southern Europe and renewed turmoil in Greece causing erratic movements in European bond markets.
● Bank of England says keep interest rates low for now | BBC
To prevent long-term economic stagnation, the Bank of England’s chief economist recommended maintaining low interest rates.
The recent sharp declines in the stock market indicate that the US economy may be facing new challenges. However, today’s updates on jobless claims and industrial production show no signs of distress. In fact, the latest figures exceeded expectations, suggesting that economic growth may be on the rise. While this may seem overly optimistic, a review of today’s data reveals an encouraging macro trend.
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Tomorrow’s update for September is expected to reveal a rise in housing starts to an annual pace of 999,000, based on a median econometric forecast from The Capital Spectator. This represents a moderate increase compared to August’s rate of 956,000.
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● Risk of Deflation Feeds Global Fears | Wall Street Journal
Declining commodity prices are prompting concerns for central banks.
● Bond Yields Worldwide Plunge to Record on Global-Growth Woes | Bloomberg
US 10-year Treasuries rose for the eighth consecutive day, with yields having decreased significantly amid fears of slowing retail sales.
● Falling oil prices shake up global economies | AP
A sharp drop in oil prices is causing significant economic and political upheaval worldwide, with oil-exporting nations facing potential budget shortfalls while importing countries enjoy lower prices.
● Fed survey finds moderate growth nationwide | AP
According to the Federal Reserve, the US economy was strengthening in most regions during September to early October, driven by increases in consumer spending, manufacturing, and commercial construction.
● Analysis: Risk Gauges Flashing Warning Signs; Red or Yellow? | MNI
Market indicators are signaling potential risks this week, though it remains uncertain whether the warnings suggest immediate concern or simply a need for caution.
In tomorrow’s report from the Federal Reserve, US industrial production for September is anticipated to increase by 0.2% compared to the previous month, according to a median projection from several econometric forecasts. This modest improvement follows a 0.1% decrease in August.
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According to the latest update from the US Census Bureau, retail sales experienced a greater decline than anticipated last month. Spending decreased by 0.3% in September, marking a sharp contrast to August’s strong gain of 0.6% and representing the first monthly downturn since January. Given the backdrop of recent stock market volatility, it’s tempting to interpret this decline as a negative sign. While the data may potentially indicate emerging issues within the economy, it could also be viewed as an anomaly, especially when considering the overall year-over-year trend.
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After a turbulent period, the US stock market showed some stability yesterday, briefly alleviating pressure on the VIX Index, which measures the implied volatility of the S&P 500. Nevertheless, the VIX closed at its highest level in over two years. Since September 19, the index has doubled, reaching 22.79 as of October 14. This sharp increase in volatility raises concerns that the so-called fear index may be signaling a warning for the market. However, interpreting the VIX and market volatility in general can be complex. For better context, it’s useful to explore how the VIX compares with other measures of market volatility using percentile ranking. By this measure, the recent volatility spike leaves room for varied interpretations.
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● US-led air strikes intensify as Syria conflict destabilizes Turkey | Reuters
US-led coalition forces have significantly ramped up air strikes in recent days against Islamic State fighters threatening Kurdish regions along Syria’s border with Turkey.
● Oil Falls to Four-Year Low as Bond Yields Drop to Records | Bloomberg
Crude oil prices fell to their lowest level in almost four years, while yields on government bonds across Europe have reached record lows due to signs of slowing growth.
● U.K. Jobless Rate Lowest Since Late 2008 | RTT News
The unemployment rate in the UK fell to 6% between June and August, its lowest level since late 2008, down from 6.5% in the previous period.
● German inflation steady but still low | MarketWatch
According to Germany’s Federal Statistics Office, inflation remained stable at a low level in September, putting pressure on the European Central Bank to implement further stimulus measures for the eurozone economy.
● China inflation slows to near five-year low | BBC
Inflation in China fell to its lowest level in nearly five years in September, providing additional evidence of a slowdown in the world’s second-largest economy.
In summary, while the housing market shows some encouraging signs with an increase in multi-family construction, broader economic indicators suggest mixed signals. Retail sales have declined, raising concerns due to recent turbulence in the stock market. Nevertheless, other areas of the economy, such as jobless claims and industrial production, remain strong, highlighting the complexity of the current economic climate. Investors and analysts will need to navigate these fluctuations carefully as they assess future trends.
