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Just when it seemed that all was fine and dandy in the financial markets, risk aversion popped its ugly head back in when geopolitical troubles and trade tensions came in play.

  • U.S. core PCE price index up 0.2% vs. 0.1% forecast, 0.0% previous
  • U.S. personal income up 0.4% as expected in Sept
  • Aug personal income figure upgraded from 0.3% to 0.5%
  • U.S. personal spending up 0.2% vs. 0.4% forecast
  • Aug personal spending figure upgraded from 0.3% to 0.4%
  • German Chancellor Merkel won’t be seeking re-election as CDU chair
  • U.K. budget included tax cuts and easing of welfare curbs
  • Hammond: Brexit deal needed to end U.K. austerity
  • U.K. to impose new sales levy on big tech firms
  • More U.S. tariffs on Chinese imports in the works?

Major Events/Reports:

Trade tensions resurface

Higher-yielding currencies and equities started the New York session on a positive note, carrying on from the upside momentum in the earlier trading session. However, those rallies came to a halt when it was reported that the U.S. stands ready to impose another round of tariffs on China if talks between Trump and Xi Jinping fail.

According to unnamed sources interviewed by Bloomberg, another set of tariffs worth as much as $257 billion could be announced by December should next month’s pow-wow be unable to ease trade tensions. Two people familiar with the matter added that, after a 60-day public comment period, these trade measures could take effect by February next year.

Lost track of how much the U.S. or China has on the line? Make sure you read our U.S.-China trade war primer right here!

Risk-off flows hit U.S. equities once more:

  • Dow 30 index is down 245.39 points to 24,442.92 (-0.99%)
  • Nasdaq closed 116.92 points down to 7,050.29 (-1.63%)
  • S&P 500 index is down 17.44 points to 2,641.25 (-0.66%)

Commodities were also broadly lower:

  • WTI crude oil fell to $66.74 per barrel (-0.13%)
  • Gold also slid to $1,229.11 per troy ounce (-0.24%)

Mostly upbeat U.S. data

Uncle Sam’s latest economic figures turned out mostly in the green, keeping Fed tightening expectations in play – not really a plus for risk-taking either.

Personal spending advanced 0.4% as expected in September, even as personal income fell short with a 0.2% uptick versus the estimated 0.4% gain. August figures saw upgrades, with personal spending revised higher from 0.3% to 0.5% and personal income revised from 0.3% to 0.4%.

However, this also reveals that the pickup in personal income was the slowest in 15 months and that savings fell to their lowest level since December 2018. Analysts say that this is a sign that the impact of tax cuts has peaked and that higher borrowing costs are starting to creep in, casting doubts on whether or not the strong pace of consumer spending can be sustained.

Meanwhile, the core PCE price index or the Fed’s rumored preferred measure of inflation ticked up by 0.2% versus the 0.1% forecast in September. This brings the annual reading right smack in line with the 2% Fed target.

U.K. Autumn Forecast Statement

British Finance Minister Philip Hammond unveiled the latest budget for the U.K. during the HM Treasury’s Autumn Forecast Statement. This contained tax cuts for households and eased welfare curbs for poorer working families, as well as a new sales levy on big tech companies.

Hammond also assured that the period of austerity in the U.K. could end, provided that a Brexit deal can be struck with the EU. Talks have been anything but productive lately, so no pressure there. He stated:

“When our EU negotiations deliver a deal, as I am confident they will, I expect that the ‘Deal Dividend’ will allow us to provide further funding.”

Still, the Treasury aims to get as much as 400 million GBP per year with the revenue tax on tech giants like Google and Amazon. Of course a chunk of this will be used to finance higher spending on defense and infrastructure and adjustments in income tax thresholds.

Major Market Mover(s):


The dollar was able to stay well-supported throughout the session, lifted by risk-off action and sustained Fed tightening expectations.

USD/JPY advanced to a high of 112.54 then dipped to 112.46; EUR/USD fell to 1.1377; USD/CHF rose from .9995 to a high of 1.0025, and AUD/USD slipped to a low of .7049.


The lower-yielding yen managed to recoup some of its earlier losses thanks to the return in risk-off flows as the session rolled along.

AUD/JPY turned from 79.64 then fell back to 79.34; CAD/JPY retreated from 85.90 to 85.56; EUR/JPY fell from a high of 127.29 to 127.80, and NZD/JPY dropped to 73.32.


Sterling edged mostly lower on the release of the U.K. budget as Finance Minister Hammond unveiled a tighter-than-expected budget.

GBP/USD dipped from 1.2835 back to the 1.2800 mark; EUR/GBP kept climbing to .8901; GBP/CHF sank further to 1.2827, and GBP/JPY slid from 144.40 to 143.83.

Watch Out For:

  • 12:30 am GMT: Australian building approvals (3.9% rebound expected after earlier 9.4% slide)
  • 2:00 am GMT: RBA Assistant Gov. Bullock’s speech