Benchmark interest rates traded in a tight range overnight near yesterday's yield lows while equity futures ticked sideways near yesterday's highs. Currently Treasuries are slightly weaker and equities are modestly higher ahead of multiple data points this morning and Google earnings data this afternoon.
At 8:30, markets will be looking at new figures for the trade deficit, weekly jobless claims, and producer inflation data.
S&P 500 futures are +3.75 at 1177.75 and Dow futures are +15 at 11,059. The 10 year Treasury note is -0-06+ at 101-18 yielding 2.445% (+2.3bps). The December delivery FNCL 3.5 is UNCH at 100-31 and the December FNCL 4.0 is -0-01 at 103-03.
Light crude oil is +0.53% at 83.45 and gold prices are up 0.43%to $1,3776.80 per ounce.
The dollar fell to a fresh 15-year low against the Japanese Yen overnight.
Key Events Today:
Google posts earnings results after the bell. Reuters expects to see an increase in profit, but notes that acquisitions could hurt Q3 profits. “The Internet giant's free-spending ― from more than 20 acquisitions this year alone to internal projects such as self-driven cars and big bets in wind energy ― has weighed on the stock, which has underperformed the market this year.”
8:30 ― The Trade Balance is anticipated to come in short by $44.3 billion in August, with estimates ranging between $40 and $47.5 billion. In the prior report for July, the gap narrowed substantially by $6 billion to $43.8 billion; August forecasts mostly reflect the view that the gap will widen as imports pick up, but some believe the recent narrowing was more than just a blip.
“Although the trade deficit narrowed significantly in July, we thought this was a predictable payback from the sharp widening in the deficit in Q2,” said economists at Nomura, predicting a $40.9 billion trade deficit. “We therefore think July's narrowing will ‘stick’, and in fact continue for at least one more month. For the quarter, we forecast that the net trade balance will add 0.6pp to GDP growth after subtracting 3.5pp in Q2.”
Economists at IHS Global Insight take a more mainstream view. They said the import surge occurring in May and June continues to unwind and said to expect lower imports of autos and consumer goods in both value and volume.
“Imports of petroleum products should decline in value, as lower volumes will outweigh higher prices,” they added. “We expect little change in exports in value terms, but a decline in export volumes. Higher food and raw material prices will prop up export values. We expect volumes to be hurt by a sharp drop in aircraft exports, which spiked higher in July. Overall, we expect trade to be a small drag on third-quarter growth, after being a huge drag in the second quarter.”
8:30 ― The Producer Price Index should provide the context for the Federal Reserve to implement a second dose of quantitative easing. Total PPI os anticipated to rise 0.2% in September, following a 0.4% gain the month before. Core PPI is set to rise 0.1% for the second straight month. Energy prices weakened last month, food prices rose, while overall consumption remained subdued amid the modest recovery.
Economists said vehicle prices will be a wild card for the core index, as September through November prices can be volatile with auto dealers importing next year’s models.
8:30 ― Initial Jobless Claims are anticipated to come in below the 450k mark for the second consecutive week in the period ending Oct. 9. New claims for unemployment benefits fell 11k to 445k in the last report, and economists now expect another 2k decline. That could be significant insofar as some economists believe it’s the 450k mark that indicates whether the national labor market is growing.
“Initial and continuing jobless claims are expected to remain elevated but significantly lower than its level during the financial crisis when initial claims reached 651K in March 27, 2009,” said economists at Nomura. “We expect continuing claims continue to decline by 12K to 4450K after decreasing four consecutive weeks.”
5:00pm ― Narayana Kocherlakota, president of the Minnesota Fed, speaks to the UMACHA Payments Conference in Bloomington, Minnesota. His talk is called “"The Tools of the FOMC."
ISSUANCE
* 11:00 Treasury announces 3- and 6-month and 52-week bills
* 13:00 Treasury auctions $13 bln 30-year bonds
* Dubai Elec & Wtr Auth, $2 bln 2-part 6s/10s[6.5-6.625%(6s);7.5-7.625%(10s)]; Citi/CA CIB/NBAD/SCB/RBS
* Reliance Holdings, benchmark 2-part 10s/30s; BAML/Citi/HSBC/RBS
* Pohang, $700m 5-year rumored; BAML/BNP/DB/GS/MS
* Lancer Fin, $275m 6-year rumored
* CBA, benchmark bond rumored; JPM