MIG Market Watch, September 30th, 2019

MIG Market Watch, September 30th, 2019


MIG Market Watch, September 30th, 2019

MARKET COMMENT

Mortgage bond prices were near unchanged to slightly positive which kept rates in check. The FHFA House price index rose 0.4% as expected. Consumer confidence was 125.1 versus the expected 134. The big miss on the confidence number Tuesday morning helped erase the recent losses. Stronger data Wednesday morning countered some of the movement from Tuesday. New home sales rose 713K versus the expected 670K increase. Politics took center stage as Brexit and US Presidential Impeachment talks dominated headlines mid-week. Weekly jobless claims were near estimates. Q2 Gross Domestic Product rose 2% as expected. PCE core inflation rose 0.1% versus the expected 0.2% increase. Durable goods orders and consumer sentiment were both higher than expected. Mortgage interest rates finished the week unchanged to better by 1/8 of a discount point.

LOOKING AHEAD

Economic Indicator Release Date & Time Consensus Estimate Analysis
ISM Index Tuesday, Oct. 1,
10:00 am, et
50.4 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, Oct. 2,
8:30 am, et
195K Important. An indication of employment. Weakness may bring lower rates.
Weekly Jobless Claims Thursday, Oct. 3,
8:30 am, et
212K Important. An indication of employment. Higher claims may result in lower rates.
Factory Orders Thursday, Oct. 3,
10:00 am, et
Up 1.1% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Employment Friday, Oct. 4,
8:30 am, et
3.7%,
Payrolls +135K
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Trade Data Friday, Oct. 4,
8:30 am, et
$56B deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.

 

Trade Data

In the distant past the US economy tended to be viewed as relatively unaffected by economic activity in other countries. However, increased trades with other countries and an increased reliance on foreign purchases of US debt have generated a market awareness of trade-related issues. The exchange rate of the dollar and foreign trade flows are interrelated. One must buy dollars to purchase US exports and sell dollars to buy imports. Likewise, foreign investment in US debt requires the purchase of US dollars and is thus affected by exchange rates.

Each month the Commerce Department gathers an enormous amount of detailed data on exports and imports. The data is broken between goods and services trade. The overall trade balance is the dollar difference between US exports and imports on a seasonally adjusted basis. The report also highlights trade flows between the US and various partners. Since the mid-1970’s, US imports of consumer and capital goods have exceeded exports, so a merchandise trade deficit has existed. The US has always maintained a service trade surplus, and because this surplus is not enough to offset the merchandise trade deficit, a net export deficit has resulted.

Due to the overwhelming amount of data considered, trade is difficult to forecast, and can present surprises. For a variety of reasons, the financial markets will often be unaffected by surprises in trade data. However, the data still can cause mortgage interest rate volatility.

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