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The first virtual Chinese-US summit, Tuesday, shadowed the markets as investors eyed easing tensions between the two world’s biggest economies. US President Joe Biden said that he had a “good meeting” with Chinese counterpart Xi Jinping, in which the two leaders discussed tariff and economic competition among other issues after years of what some observers called ‘trade war’ and tensions under Trump’s administration.
The US trading session closed with US stocks, the US dollar, and US bond yields surging on the back of positive more than expected US economic released Tuesday.
Optimism is a key word in the financial and trading markets, on Tuesday, following the figures of the important Retail Sales Report. Positive readings covered exports, imports, manufacturing, capacity utilization, and the housing market, which reflect a significant advance in the performance of the US economy.
Bitcoin fell around $60,000 on Tuesday, after it had been hit by a blend of bearish factors, including the US infrastructure bill that imposes tougher rules on cryptocurrencies trading taxes and a new warning from China to firms regarding mining.
Economic Data
U.S. industrial production rebounded in October as automakers, stung by supply chain problems, posted strong increases and the adverse effects from a hurricane that struck the nation’s energy complex in the Gulf of Mexico faded.
Industrial production rose 1.6% last month after a 1.3% plunge in September, the Federal Reserve reported Tuesday. The gain was double what had been expected.
Industrial output in October was also helped by an 11% jump in production of motor vehicles and parts, after two months of declines caused by severe supply chain shortages of the semiconductors needed as component parts.
The American Petroleum Institute (API) reported a small inventory build in crude oil that was just enough to keep the market from panicking because of declining inventories. This week, the API estimated the inventory for crude oil to be 655,000 barrels.
Similarly, the Retail Sales Index, excluding auto sales, increased in the same period by 1.7%, compared to the previous monthly reading of 0.7%, exceeding market expectations that indicated 1.00%.
The US retail sales rose last October by 1.7% compared to the previous reading, increasing 0.8%, over market expectations of 1.4%.
The monthly and annual readings of the Export and Import Price Indices also rose last October, displaying largest spike since May 2021, adding to the positive trend that has prevailed.
US Capacity Utilization was able to beat estimates in October and also rose to 76.4%, compared to the previous reading of 75.2%, which exceeded expectations that indicated 75.9%.
The US National Association of Home Builders said, Tuesday, that builder confidence in the new home sales market increased in November for the third successive month despite several challenges builders are encountering in the construction market as the NAHB/Wells Fargo Housing Market Index rose 3 points from its October level
Other Developments
US Treasury yields rose to fresh record highs due to the rising degree of optimism in the markets following successive batches of US data. the US dollar was encouraged to touch a 16-month high, boosted by the sharp surge of US Treasury yields.
The British pound has a very busy week as traders digest employment data, Tuesday, inflation on Wednesday and retail sales on Friday.
Economists expect 3.9% UK inflation for October, strengthening rate hike by BoE’s December meeting to suggest some scenarios for the GBP/USD pair.
San Francisco Fed President Mary Daly called for the Federal Reserve to be patient regarding interest rate hikes despite high inflation.
In a speech before the Commonwealth Club of California, Daly said that patience is the boldest and best action and that it would be better to wait for more clarity on the economy and inflation data than it would be to raise interest rates pre-emptively. Raising rates now would not fix high levels of inflation as Daly indicated.
The Bank of Canada is still expecting economic easing to be absorbed in the middle quarters of 2022, but that does not necessarily mean in the second quarter according to statements by a key deputy governor on Tuesday, potentially dashing traders and investors; hopes across the market concerning an early rate hike.
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