Chinese PMI Soars Higher!
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In This Issue.

* Global growth hopes return!.

* A$ gets double boost!

* Gold pushes higher!.

* More bad data for Japan!.

********************************************

And now. Today's A Pfennig For Your Thoughts.

Chinese PMI Soars Higher!

Good Day. And a Tom Terrific Tuesday to you! And of course, welcome to November. Let's get this month started and finished! I'm going to break it up with a quick trip to my little place in S. Florida next week, hopefully that will help me deal with the month. Well, how was your Halloween? Ours was low-key, not many Trick-or-Treaters in our part of the subdivision. Our part has all the "originals" to the subdivision, and therefore we are the old geezers now, with grownup kids, etc. And I didn't even hear a good joke, but I did hear lots of lame ones.. Really lame. I used to supply my kids with an arsenal of jokes for Halloween. I guess that's a lost art now.. Just makes something up that's lame and go on down the road.. I kind of get the feeling that going door to door Trick-or-Treating will become a thing of the past, since people do these trunk-or-treat things now. The Rolling Stones greet me this morning with their song: Wild Horses.

Well, we have some moving markets this morning already, and they have been put in motion by a stronger than expected PMI (manufacturing index) from China. The Rocktober Chinese PMI printed at 51.2, beating the expectations for 50.4 reading that had been flat the previous two months.

This print show the fastest pace of improvement since March 2011! And

really has the goosed the global growth campers' optimism this morning.

And piling on with a smaller boost to the Global Growth picture was a strong PMI print from India overnight. India's Rocktober PMI jumped to a

22-month high of 54.4, from the 52.1 in September! Are we seeing

something happening with Global Growth folks? It sure appears to be that way, but remember what I always say. One month's data doesn't make a trend, and we've been left at the altar several times these past 8 years with one and done data reports.

But today, it's all sunshine, rainbows and lollipops for the currencies, and metals. Gold is up $11 in the early morning trading, and the euro has pushed up to 1.10. And of course, the currency that I call the proxy for Global Growth, the Aussie dollar (A$), was given a double boost with the China/ India PMI news, and the non-move in rates by the Reserve Bank of Australia (RBA) last night. Late last week, I was worried that the A$ was about to sink further, and today, that fear worry has subsided.

I'm surprised the price of Oil isn't soaring too based on all this Global Growth hoopla this morning. But I guess there are just too many questions about what OPEC is going to do regarding the agreement to freeze production. The cartel just ended two-days of talks, without any further development or news, and now it all gets shifted to November 30th, when they meet again for finalize everything. Will it actually be finalized? Or will the walls come crashing down on their agreement, and bring the price of Oil with it? I told you when the agreement was first announced that I didn't believe it would have staying power, as these countries all cheat on each other with regards to production, but I would have been pleasantly surprised to see go on to have staying power, just to help the financialization of Oil problems..

Gold, as I said above, is up $11 in the early morning trading today, after adding just $2.30 to its price yesterday. So, for those of you just arriving for class after all these years, if Global Growth is somehow on a recovery path, then that would mean inflation pressures will follow, and inflation is something that gets the commodities like Gold all lathered up. So, that's one reason for Gold's strong move today. But here's something that I think will go a very long way toward changing how physical Gold is priced. Get out your journals because this is going to be start of something BIG, folks.

China Daily reported over the weekend that the Shanghai Gold Exchange

(SGE) and the Dubai Gold & Commodities Exchange (DBCE) had signed an agreement that makes the DBCE the first foreign exchange to use the SGE's renminbi-denominated Gold benchmark. The SGE is in talks with other exchanges to do the same thing. And don't for a minute think this is small potatoes.. The SGE is the world's largest physical bullion exchange, and the renminbi-denominated Gold benchmark, which is also known as Shanghai Gold, was just launched in April of this year, is China's vehicle to obtaining more of a say in the price of Gold. Did you get that? I'll repeat it. this is China's vehicle to obtaining MORE OF A SAY IN THE PRICE OF GOLD.

I'll just remind everyone that back in 2008, I first wrote about China signing a currency swap agreement with Argentina, and went out on the limb saying that this would be the first of many that China signed with other countries to gain a wider distribution of their currency. Most people thought I was out back behind the barn smoking something, but I wasn't, was I? No! In fact I hit that one bang on! Well, this is the same thing folks. China is going to spread their renminbi-denominated Gold all over the world, and when they do, they will take over the pricing of physical

Gold. The paper Gold players won't have a say any longer. Good riddance

to them, eh? But, it's going to take a few years for this all to take place, so just remember when it all comes to fruition, who told you about it first!

So, we go from the seashells and balloons of the A$ and Gold this morning to the deep, dark, depression of Japanese yen. Yen has moved to the 105 figure this morning, and it appears that the so-called Shanghai Accord that supposedly called for yen, euro and renminbi strength VS the dollar, as crumbled, as yen and renminbi have really gone south for the winter, and the euro looked last week like that's where it was headed too.. The latest data in Japan isn't helping yen. Well, the "good news" for Japan just keeps coming. NOT! On Monday, Japan printed their September Retail Sales, and the report was not a pretty sight. Japanese Retail Sales for September fell -1.9% year on year. It marked the 7th consecutive month of

declines in Retail Sales.. September's number was unchanged from

August's -1.2% drop. So, there was nothing here to celebrate about, and is the reason that yen took another hit.

So, I don't know if you been watching Bond Yields rise recently, but if you have, you've noticed that it's not just Treasury yields rising, bond yields all over the globe have been rising, thus another sign that the bond traders see something going on with Global Growth. Or. when my spider sense tingles, I get this feeling that the bond traders see something other than Global Growth going on. I'm getting a clear picture of what it is yet, but it's not good for bonds. Could it be that bond traders all over the Globe, are beginning to see the end of the line for QE? (bond

buying?) European Central Bank (ECB) President, Draghi, let the "taper"

word slip a month ago, Sweden is talking like they are nearing an end, and so on. Without Central Bank interference in the bond buying, yields could certainly rise, and should rise!

The U.S. Treasury 10-year yield is 1.85%, still not even in the furthest stretch of an imagination, "high" but it certainly had a bad Rocktober, gaining the most in one month in yield, since June 2015. Remember, when bond yields rise, the price of the bond drops, and vice versa.

Well, this is interesting. I've told you about the CFA surveys that they print on their newsletters. (I'm not even close to being considered a CFA, but Chris Gaffney is, and so I get the newsletter!) Well, their current survey is a question about the U.S. economy, so I participated. They asked, " Do you think the U.S. will experience a recession in 2017" of

course I said yes. And then they give you the breakdown.. 46% of the

responders said "no, U.S. growth will slow but remain positive", 21.2% said, "no, the U.S. will experience sustained or improving growth", 15.9% said, "yes, the U.S. will experience a mild recession, and just 11.5% including me, said, "yes, the U.S. will experience a harsh recession".

Then there are 5.3% who are on the fence, and "don't know". (I thought they were CFA's!)

So, add all that up and 67.2% say, 'no recession", and just 27.4 say, "yes, recession". So, once again, I'm in the minority. the underdog.. and I like that! In fact I revel in the ideal of me being different in my opinion from others! What are your thoughts on this? But before you think you know for sure, think about the fact that it has been 8 years since we had a "technical recession" (I believe that we've always been in a depression of sorts, but that's not "technical") and that's for the most part this non-technical recession period has lasted longer than the usual time between recessions. I think the average expansion time is 57 months.

This one is way past that time.

The U.S. Data Cupboard yesterday printed the Personal Income and Spending, which they've changed Spending to Outlays to make it sound better.. But I'll keep calling it what it is.. Spending, and Spending was strong in September rising 0.5%, however, Personal Income only rose 0.3%, below the expectations.. and below spending! Spending more than we make, leads to rising debt levels for households. But don't let that get in the way of the rate hike campers thinking that this indicates the U.S. economy is on the growth tracks, and rates are going higher.

Today's Data Cupboard has the Rocktober ISM (manufacturing index) and. the beginning of a two-day FOMC meeting. Get the board games out! We've got to do something with our time for two-days! Of course, like I said yesterday, the Fed could show the markets that every meeting counts, by hiking rates tomorrow, but that's not likely to happen, instead they'll use this meeting to grease the tracks for a December rate hike. Or will they? You've got to check out the FWIW section today for an answer to that question. or kind of an answer, I guess!

To recap. China prints a stronger than expected PMI, and the Global Growth campers come out to play, pushing the currencies, led by the A$, higher, and commodities higher, led by Gold. The price of Oil isn't participating in this rally, as the cloud hovering over them by the Nov. 30th finalization of the freeze agreement is quite dark, and could be full of storms, right now. Gov't bonds all over the globe are seeing yields rise.

What do the bond traders see? Yen continues to weaken and has gone to 105 overnight after a very weak Retail Sales figure, and in the U.S. we continue to spend more than we make.

For What It's Worth. Well, I promoted this above, so I hope it doesn't disappoint, but this was on the Bloomberg this morning and is about how 3 of the Fed's primary dealers are saying that investors should bet against the bond-market consensus of a rate hike in December. It can be found

here:

http://www.bloomberg.com/news/articles/2016-10-31/three-of-fed-s-own-primary-dealers-warn-hikes-on-hold-until-2017

Or, here's your snippet. "Three of the Federal Reserve's own primary dealers are warning bond traders that a growing consensus the central bank will raise interest rates by year-end is misguided.

While none of the 23 banks that trade with the Fed expect a hike at the conclusion of Wednesday's meeting, HSBC Holdings Plc, Royal Bank of Canada and Royal Bank of Scotland Group Plc remain steadfast that policy makers will choose to hold off on raising rates at the Fed's Dec. 14 meeting as well.

History would seem to be on the trio's side. Officials began the year anticipating they'd raise rates four times, only to repeatedly pare projections amid disappointing economic data. Yet a second-half uptick in growth and hawkish rhetoric from policy makers has prompted traders to price in more than a 70 percent chance that the Fed will pull the trigger by December. While they reserved the right to amend their calls over the next six weeks based on new data, economists at all three banks said the Fed needs to see clearer signs the economy is on the upswing and inflation is quickening before hiking."

Chuck again. Yes, I believe that the FOMC should be cautious about the December rate hike. Slow growth here in the U.S. is still the norm, and another rate hike, even though it will keep the Fed Funds rate still below 1% at 0.75%, could be the straw that breaks the economy's back. I'm just saying.

Currencies today 11/1/16. American Style: A$ .7675, kiwi .7175, C$ .7465,

euro 1.10, sterling 1.2247, Swiss $1.0152, . European Style: rand

13.5525, krone 8.2220, SEK 8.9555, forint 279.70, zloty 3.9180, koruna 24.5655, RUB 63.19, yen 105, sing 1.3895, HKD 7.7549, INR 66.73, China 6.7721, peso 18.82, BRL 3.1935, Dollar Index 98.20, Oil $46.29, 10-year 1.85%, Silver $18.13, Platinum $985.84, Palladium $627.75, and Gold.

$1,284.30

That's it for today. When I was in the public school system of St. Louis, I use to dislike this day after Halloween so much, because my neighbors went to the Catholic school, and this was a holiday for them! All Saints Day, as I recall.. UGH! Funny, how I can remember stuff like that, but completely forget what I came into a room for! It was a beautiful night out last night here, though. Usually, it's a bit chilly to sit outside and give out candy, but not last night.. The World Series resumes tonight in Cleveland for Game 6 and maybe Game 7. One of my fave bands, The Allman Brothers, take us to the finish line today with their song: Statesboro Blues. I'm going to the country, don't you want to go, if you can't make it baby, you're sister Lucille said she wants to go! I see the sun rising, so that means it's time to get this out the door! I hope you have a Tom Terrific Tuesday!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com





Posted 11-02-2016 2:35 AM by Chuck Butler
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