Capital Markets Update

By Louis S. Barnes                                   Friday, October 10, 2014

Mortgage interest rates improved this past week on concerns that the global economy is slowing and that deflation is spreading. The IMF lowered its global growth outlook again for 2015 down to +3.8%. German Factory Orders fell to their lowest levels since 2009. The FOMC Minutes from its September meeting indicated that risks of a weak global economy will allow the Fed to keep the Fed Funds rate at its current levels for a considerable time. September Import prices were down 0.9% year over year and Export prices were down 0.2% year over year. Inflation in Europe is currently only 0.3% and in the U.S. is only 1.5%. Other economic data of note included the August JOLTS Job Openings, weekly jobless claims, and August Wholesale Inventories which were all stronger than expected. August Consumer Credit, though, was weaker than expected. The revolving credit component fell for the first time in six months. The Treasury auctioned $61 billion in 3 Year Notes, 10 Year Notes, and 30 Year Bonds which were met with mixed demand.

The Dow Jones Industrial Average is currently at 16,695, down over 300 points on the week. The crude oil spot price is currently $85.61 per barrel, down over $4 per barrel on the week. The Dollar weakened versus the Euro and Yen on the week.

Next week look toward Wednesday’s Producer Price Index (PPI) and Retail Sales, Thursday’s Jobless Claims, Industrial Production, and Philadelphia Fed Survey, and Friday’s Housing Starts and Consumer Sentiment Index as potential market moving events. Bond markets are closed on Monday for Columbus Day.