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Market Brief – Wednesday 11/13/19

In overnight trading, German CPI for October increased +0.1% and remained at +1.1% from a year ago. Great Britain CPI for October fell -0.2% and slowed to +1.5% from a year ago. Excluding food and gasoline, Great Britain Core CPI for October increased +0.1% and held at +1.7% from a year ago. Great Britain PPI for October input fell -1.3% and -5.1% from a year ago while output fell -0.1% and increased +0.8% from a year ago.

Adding to the global slowdown in the manufacturing sector, Eurozone Industrial Production for September increased +0.1% but fell -1.7% from a year ago.

The volatile weekly mortgage applications increased +9.6%, the purchase index rose +5.1%, and the refinance index jumped +12.9% despite the average 30-year mortgage rate rising to 4.03%. The overall mortgage market index rose +9.6% but has remained flat since July.

U.S. CPI for October rose +0.4% and increased slightly to +1.8% from a year ago. Core CPI, excluding food and energy, for October rose +0.2% and slowed to +2.3% from a year ago. Most of the increase came from energy prices, with medical care, recreation and food price increases also contributing. Inflation-adjusted or real earnings for October fell -0.1% and slowed to +1.2% from a year ago as inflation-adjusted wages lag consumer price inflation, leaving consumers will less money for discretionary spending.

The dollar liquidity problem persists as the New York Fed accepted offers of  $77.093 billion for overnight loans and made an outright purchase of $401 million of Floating-Rate Notes against bids of $3.086 billion making the offer 129 times oversubscribed.

Stock prices and Treasury yields have been back in sync over the past 90 days with stock prices trying to pull Treasury yields higher. Treasury yields fell in overnight trading and while stock prices fought back its overnight dip, Treasury yields held firm. Oil and gas producing stocks led the market lower ahead of tonight’s API crude oil inventory report.

Chairman Powell spoke before the Joint Economic Committee this morning and mentioned several times the burgeoning debt is a problem. Powell said the debt is growing faster than the economy, which is unsustainable and can’t be fixed by lower interest rates. His recommendation was to get the economy growing faster than the debt over the long term.

After numerous investment banks warned of an interest rate spike last week, a report from Nomura today indicated that the quant-computer models have finished selling and don’t have any trigger levels for further selling in the immediate future. Bond Bulls may seize the opportunity to pull the quant models back in by driving Treasury yields lower.

A report that a snag related to farm purchases sent stocks tumbling in late trading after investors bid stock prices higher on hopes of a trade deal. China is also reportedly resisting any enforcement actions on intellectual property theft. Treasury bonds rallied on the news.

Investors quickly bid stock prices back up and sold Treasury bonds on trade hopes, as investors believe a deal will come and the global economy will rocket higher as a result. Stocks, bonds, crude oil, and gold closed higher on the day.

The South Korean Export Index for October fell further into contraction from -5.0% to -7.3% from a year ago and the Import index also fell further into contraction from -2.2% to -5.7% from a year ago.

The American Petroleum Institute reported crude oil inventories as Crude: -541k (+1.5mm expected), Cushing: -1.179mm, Gasoline: +2.259mm, and Distillates: +887k. Crude oil traded higher after the report.