Morning Call For Friday, Oct. 20

OVERNIGHT MARKETS AND NEWS

Dec E-mini S&Ps (ESZ17 +0.21%) this morning are up +0.23% at a new record high on optimism that the Trump administration will be able to enact its tax reform plans after the Senate adopted a fiscal 2018 budget resolution by a 51-49 vote. Final approval of the measure will enable a special procedure that allows Republicans to pass a subsequent tax code rewrite without Democratic support. European stocks are up +0.29% on carry-over support from the rally in U.S. stocks along with comments from ECB Governing Council member Nowotny who said the ECB should gradually end QE. Asian stocks settled mostly higher: Japan +0.04%, Hong Kong +1.17%, China +0.25%, Taiwan -0.29%, Australia +0.18%, Singapore +0.17%, South Korea +0.74%, India closed for holiday. Japan’s Nikkei Stock Index closed higher for a 14th day and matched the longest winning streak on record. A slide in the yen to a 3-month low against the dollar boosted Japanese exporter stocks and the overall market found support ahead of Sunday’s elections in Japan where Prime Minister Abe’s Liberal Democratic Party is expected to retain its two-thirds majority in parliament.

The dollar index (DXY00 +0.16%) is up +0.23% after he U.S. Senate passed a fiscal 2018 budget resolution. EUR/USD (^EURUSD) is down -0.36% after ECB Governing Council member Nowotny said the ECB should be slow to end its bond purchases. USD/JPY (^USDJPY) is up +0.65% at a 3-month high.

Dec 10-year T-note prices (ZNZ17 -0.25%) are down -11 ticks at a 2-week low as a rally in stocks to new record highs dampens demand for T-notes.

ECB Governing Council member Nowotny said that “it will be dangerous to make an abrupt full stop” in asset purchases and that “the ECB will take the foot off the gas pedal slowly.”

German Sep PPI rose +0.3% m/m and +3.1% y/y, stronger than expectations of +0.1% m/m and +2.9% y/y and the largest increase in 5-months.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) Sep existing home sales (expected -0.9% to 5.30 million, Aug -1.7% to 5.35 million), (2) Cleveland Fed President Loretta Mester (non-voter) takes part in a panel discussion on the global regulatory structure at a global finance and technology conference in New York, (3) Fed Chair Janet Yellen speaks at the National Economists Club in Washington D.C., (4) USDA Sep Cattle on Feed.