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Morning Notes For October 28th 2010 at Trader’s Narrative

Morning Notes For October 28th 2010

The following is a guest post by a buy-side analyst working in a US asset management firm. The author’s comments are in italics. I welcome your feedback in the comments:

  • Lots of news next week: Tuesday is Election Day; Wednesday is the “FOMC rate decision” where the Fed announces details around Quantitative Easing II; Friday is October Payrolls. Buckle Up!

Initial Jobless Claims: Survey 455k Actual 433 Prior 452 Revised 455

  • A majority of Americans now say they are worried about making their mortgage or rent payments, underscoring the country’s economic anxiety heading into midterm elections. – WP
  • Yesterday’s sell-off in stocks and bonds was in reaction to the WSJ piece predicting next week’s Fed announcement would be for only a few hundred billion in asset purchases, which is a lot less than was expected by traders. The article was co-authored by John Hilsenrath, who is thought to have access to Bernanke himself, lending the article credibility. Today, a Bloomberg TOP story says the NY Fed recently surveyed the primary dealer community about the expected size of “initial” QE purchases, suggesting two new interpretations of the WSJ story: 1) it may have been based on a preliminary, pre-survey Fed estimate of the program’s size, and 2) while it did not say so, it may have been an estimate of the initial, not total, program size. Some of yesterday’s market losses were reversed overnight. - FTN
  • Fed asset purchases – the Fed has asked dealers and investors for projections of what they think the FOMC’s asset purchases will be over the next 6 months and how those purchases will impact yields. The NY Fed has been spending out surveys to investors seeking to gauge expectations. – Bloomberg
  • Bloomberg News reports the Bank of Japan moved its next meeting to just after the Fed’s, suggesting they will tailor their policy to offset any impact of a QE announcement on the yen-dollar exchange rate. – FTN Financial
  • Interestingly, trading in Europe appears to be moving off of earnings (today is one of the busier mornings for European earnings) and not simply the broader “macro” trade, as some of the larger stock moves today are earnings related (i.e. France Telecom, Santander, AZN, Royal Dutch Shell, etc.) – JPM
  • About one in five likely voters have yet to make a firm commitment in their choice for Congress, a lower percentage than in prior midterm elections. Voters who currently support the Republican candidate are somewhat more firm in their commitment than those supporting the Democrat. – Gallup
  • October unemployment fell below the politically important 3 million mark for the first time in 18 years, according to Germany’s labor ministry. – Roubini Global Economics

German Unemployment Rate

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