Daily Market Color

Robust GDP Data Signals Economic Growth Amid Presidential Shakeup

Friday’s economic data was headlined by the release of better-than-expected third quarter US GDP growth data, advancing at the strongest rate in two years and fueled principally by a rise in exports.  The US economy expanded at an annualized rate of 2.9% in the third quarter, beating median forecasts of 2.6% and a significant improvement over the 1.1% average in the first half of 2016.  The largest portion of the unexpected rise was attributed to soybean exports, which saw a substantial Q3 uptick triggered by increased demand in South America following widespread flooding.  In addition, personal consumption expenditures, while slightly below projections, managed to rise at a solid 2.1% rate, as durable goods led the way with a 9.5% increase.  With the next FOMC meeting scheduled for next week, the overall GDP growth indication provides further evidence of sustained economic progress, albeit at a pace that is far from “overheating”.  Fed fund futures point towards a less than ten percent likelihood of a rate hike next week with the presidential election on the horizon, but maintain over 70% likelihood for the December meeting.

The race to the White House impacted markets today following a report that the FBI will be reopening its investigation into Hillary Clinton’s private server e-mail activity.  Stock markets erased gains from earlier in the session as investors pulled back money with the possibility of a potential Trump presidency re-gaining momentum.  The Mexican peso similarly tumbled, shedding more than 1% against the dollar and remaining strongly correlated with Clinton’s odds in the election as it has been over the past few months. 

Oil is down along with equities today, as OPEC members met in Vienna with the intention of mapping out a plan to effectively limit production.  Tomorrow the group will be joined by representatives of other oil producing nations such as Brazil and Russia in an effort to expand the global reach of the agreement.  Recent concerns over a requested exemption from the pact by Iraq have driven crude oil below $50/barrel this week and produced the first weekly drop in prices since mid-September.  This weekend’s meeting stands as an important precursor to the official OPEC meeting on November 30th, at which time a definitive plan could be put into action.

All three major US stock indexes are currently trading down 0.1% to 0.5%, while Treasury yields/swap rates halted yesterday’s rise and are flat to down 2 basis points.  WTI crude oil dropped 2% throughout the session while Brent crude fell 1.5%.

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