Can the US Consumer Power the Recovery?

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Equities flat
FX – all eyes on the pound
Nikkei -0.41% Dax 0.37%
UST 10Y 0.72
Oil $40
Gold $1908/oz
BTCUSD $11291/oz.

Asia and the EU
EUR CPI 0.2%

North America Open
USD Retail Sales 8:30

It’s been a quiet night of trade on the last day of the workweek with equity futures basically flat and FX pairs stuck in 20 pip ranges.

Last night’s dueling Town Hall meetings by President Trump and Vice President Biden produced some mild volatility in futures but in the end, there was no major headline from either event and it is doubtful that any voter changed their minds.

In Europe, the focus today is on the continuing Brexit negotiation saga with markets betting that PM Johnson will extend the self-imposed October 15 deadline. The impasse over fisheries which is a negligible part of either party’s GDP is clearly more of a political rather than economic matter and it will come down to the simple choice of whether the EU and UK are willing to sacrifice a trade deal over such an insignificant matter.

For now, the market is betting that cooler heads will prevail and that some sort of a compromise on a comprehensive trade package will be reached. Cable was mildly bid at 1.2938 in mid-morning London trade.

In North America, the market will get a look at US Retail Sales data due at 12:30 GMT. The consensus view is that the number will show a modest 0.2% gain vs. -0.1% the month prior. Consumer spending is sure to become a bigger story in the market analysis into the year-end especially now that prospects on stimulus look bleak. A strong Retail Sales number would buttress the bulls’ argument that US recovery is organically strong and does not require additional stimulus as consumers and businesses return to normal capacity. A weaker than expected print would only add to the narrative that the recovery is stalling and growth is in danger of turning negative if no fiscal help is given.

A weaker than expected print could accelerate the selling into the weekend with stocks already wobbly after the negative news on stimulus talks with shorts likely to try to run the 11,000 level in Nasdaq if the numbers turn the sentiment sour.

Boris Schlossberg
Managing Director

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