• Fed Has Managed to Raise Rates Without Triggering Recession

• 'Being At Neutral Would Make Sense'

• Currently Policy Rate Is Below Neutral But 'Getting Closer'

• Some Evidence of Global Slowing, Will Be Relevant to My Outlook

• We Have Seen The Bottom In Productivity Rates

• U.S. Economy Is Doing Well

• Data-Dependence Less Relevant When Fed First Started Raising Rates From Zero

• Fed Needs to Be Especially Data-Dependent Right Now

Manufacturing sales edged up 0.2% in September to $58.5 billion, following a 0.5% decrease in August.

Sales increased in 8 of 21 industries, led by higher sales in the transportation equipment industry. However, these gains were largely offset by declines in the machinery and wood product industries.

Constant dollar sales edged down 0.1%, indicating a lower volume of goods sold.

Sales of transportation equipment increased 3.1% to $11.0 billion in September, following a 1.8% decline in August. The growth was mainly attributable to higher sales in the motor vehicle assembly (+6.1%) and motor vehicle parts (+1.9%) industries, reflecting a ramp up in production following motor vehicle assembly plant shutdowns in July and August. In constant dollars, sales volumes rose 4.8% in the motor vehicle assembly industry and 2.1% in the motor vehicle parts industry in September.

As a result of upward revisions primarily in mining, the overall index is now reported to have advanced at an annual rate of 4.7 percent in the third quarter, appreciably above the gain of 3.3 percent reported initially. Hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1 percent per month. In October, manufacturing output rose 0.3 percent for its fifth consecutive monthly increase, while the indexes for mining and for utilities declined 0.3 percent and 0.5 percent, respectively. At 109.1 percent of its 2012 average, total industrial production was 4.1 percent higher in October than it was a year earlier. Capacity utilization for the industrial sector was 78.4 percent, a rate that is 1.4 percentage points below its long-run (1972–2017) average.

Foreign investment in Canadian securities totalled $7.7 billion in September, mainly acquisitions of money market instruments. At the same time, Canadian investment in foreign securities resumed to reach $10.6 billion, led by purchases of non-US instruments.

As a result, international transactions in securities generated a net outflow of funds of $2.9 billion from the Canadian economy in September. For the third quarter, portfolio investment generated a net inflow of funds in the economy of $2.4 billion, the lowest in nearly three years.

Foreign investment in Canadian securities increased to $7.7 billion in September, up from $2.6 billion in August. The investment activity in September mainly targeted the Canadian money market.

From January to September, foreign purchases of Canadian securities totalled $73.5 billion, compared with $144.6 billion for the same period in 2017. Foreign investors decreased their holdings of government bonds by $31.8 billion from January to September 2018, compared with total investments of $40.6 billion for the same period in 2017.

U.S. stock-index futures indicated a lower open on Friday, as disappointing forecasts from chip-makers Nvidia (NVDA; -18%) and Applied Materials (AMAT; -9%) weighed on the technology sector.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Home Depot (HD) downgraded to Neutral from Buy at BofA/Merrill

NVIDIA (NVDA) reported Q3 FY 2018 earnings of $1.97 per share (versus $1.33 in Q3 FY 2017), beating analysts’ consensus estimate of $1.92.

The company’s quarterly revenues amounted to $3.181 bln (+20.7% y/y), missing analysts’ consensus estimate of $3.241 bln.

The company also issued downside guidance for Q4, projecting EPS of ~$1.32-1.49 (versus analysts’ consensus estimate of $2.01) and revenues of $2.65-2.75 bln (versus analysts’ consensus estimate of $3.4 bln).

NVDA fell to $166.15 (-17.91%) in pre-market trading.

U.K. bank shares also steadied in early trading. Shares in Barclays PLC were up 0.2% after falling 4.1% on Thursday, while Royal Bank of Scotland Group PLC was up 0.4% after sliding nearly 10%. The U.K.'s FTSE 250 index, which is more domestically focused than the country's benchmark FTSE 100, was up 0.4% after sliding 1.3% on Thursday.

In September 2018 seasonally-adjusted data, compared to August 2018, decreased both for outgoing flows (-2.1%) and for incoming flows (-0.3%). Exports fell both for non EU countries and EU countries (-2.9% and -1.4% respectively). Imports rose for non EU countries (+4.1%) and decreased for EU countries (-3.4%).

Over the last three months, seasonally-adjusted data showed both an increase for exports (+0.3%) and for imports (+2.9%) compared with three months earlier.

In September 2018, exports fell (-2.8%) while imports raised (+5.7%), compared with the same month of the previous year. Outgoing flows decreased by 7.1% for non EU countries and increased by 0.4% for EU countries. Incoming flows increased by 17.6% for non EU area and dropped by 1.6% for EU area. In September the trade balance amounted to +1,274 million Euros (+91 million Euros for non EU area and +1,183 million Euros for EU countries).

A year earlier, the rate was 1.4%. European Union annual inflation was also 2.2% in October 2018, up from 2.1% in September 2018. A year earlier, the rate was 1.7%.

The lowest annual rates were registered in Denmark (0.7%), Portugal (0.8%) and Ireland (1.1%). The highest annual rates were recorded in Estonia (4.5%), Romania (4.2%) and Hungary (3.9%). Compared with September 2018, annual inflation fell in eight Member States, remained stable in five and rose in fourteen. In October 2018, the highest contribution to the annual euro area inflation rate came from energy (+1.02 percentage points, pp), followed by services (+0.65 pp), food, alcohol & tobacco (+0.42 pp) and non-energy industrial goods (+0.11 pp).

• Downing Street Are Preparing For A No Confidence Motion In Theresa May As Conservative Leader

• The euro area economy has now been growing for five years, and we expect the expansion to continue in the coming years

• The slowdown has raised questions about the strength of the growth outlook and, in turn, about whether the ongoing convergence of inflation towards our objective will be sustained

• Production slowed as carmakers tried to avoid building up inventory of untested models, which weighed heavily on economies with large automobile sectors, such as Germany

• But this effect should be temporary. As the testing backlog clears, car production should return to normal by the end of the year and the effect on output should dissipate

EUR/USD

Resistance levels (open interest**, contracts)

$1.1454 (2571)

$1.1435 (897)

$1.1409 (115)

Price at time of writing this review: $1.1353

Support levels (open interest**, contracts):

$1.1322 (2140)

$1.1273 (2266)

$1.1242 (4084)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date December, 7 is 124030 contracts (according to data from November, 15) with the maximum number of contracts with strike price $1,1200 (6630);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3020 (1284)

$1.2975 (650)

$1.2939 (260)

Price at time of writing this review: $1.2803

Support levels (open interest**, contracts):

$1.2741 (1817)

$1.2709 (2555)

$1.2689 (2747)

Comments:

- Overall open interest on the CALL options with the expiration date December, 7 is 57737 contracts, with the maximum number of contracts with strike price $1,3100 (5256);

- Overall open interest on the PUT options with the expiration date December, 7 is 47536 contracts, with the maximum number of contracts with strike price $1,2500 (4403);

- The ratio of PUT/CALL was 0.82 versus 0.79 from the previous trading day according to data from November, 15

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

• 'Sympathetic' to Take Tough Action on China Trade

• Challenging China on Trade Comes With Costs and Risks

• Wage Gains Aren't Pointing to Coming Inflation Problem

• No Signs Economy Is Overheating

• Trump Fed Criticism Has No Impact on Rate Decisions

• Carefully Monitoring Wages, Which Haven't Increased as Quickly as Hoped

• Fed's Powell: October Employment Report Was 'Very Strong'

• Community Development Supports Economic Growth in Long Run

• Didn't Comment Publicly on Interest Rates

• Fed Is Not Too Far From Achieving Neutral Rate Stance

• Fed Should Follow 'Tentative' Approach to Monetary Policy

• Fed Faces Considerable Uncertainty Whether Economy Risks Overheating

• Unclear How Much More Fed Needs to Raise Rates

• It's 'Very Difficult' to Know if Economy Is Overheating

A positive start to trading on the stock markets of Europe is expected, following mainly similar tones on Wall Street and China.

As reported by the Federal Statistical Office, the selling prices in wholesale trade increased by 4.0% in October 2018 from the corresponding month of the preceding year. In September 2018 and in August 2018 the annual rates of change were +3.5% and +3.8%, respectively.

From September 2018 to October 2018 the index rose by 0.3%.