If It Pecks Like A Duck, You’ll Be Driven Ever Crazier

The threatened rate increase – which just about everyone has had enough of discussing – is like getting pecked to death by ducks. You become so insensate at the constant noise and poking that eventually you throw your hands up and surrender.

So, let’s look beyond that for a moment. There are other great riddles in the markets today to contend with.

China's October exports fell nearly 7.00% from a year ago, dropping for a fourth consecutive month, while imports slipped almost 19.00%, leaving China with a record high trade surplus of $61.64 billion, said the General Administration of Customs of that country.

On that news, the Shanghai and Tokyo equities exchanges rose robustly, the former by 1.6%, the latter by nearly 2.00% on the session.

Why this would happen is a complete mystery. Analysts are talking up even deeper declines in manufacturing and trade.

And investor advisory note from note from Bank Of America Merrill Lynch issued today said, "We believe the underlying trend in trade growth continues to weaken, which reflects persistent weakness in both global demand and fixed asset investment in China. Despite the hope of a potential turnaround in property sector and better fiscal support for infrastructure in the fourth quarter, the trade data suggest investment momentum probably has yet to pick up. The smaller drop in import prices also serve as a good reminder that terms of trade gains will likely narrow going into 2016, as commodity demand stabilizes at low levels.”

That should take your breath away.

The Europeans and Americans seemed much less satisfied with the performance by China. U.S. and European stock prices are off between 1.00% and 1.50% on the day.

Contradictorily, China’s energy sector rose while prices for West Texas Intermediate crude and the benchmark Brent North Sea fell 0.80% and 0.45% respectively. There is some speculation China wants to buy up more oil for its reserves, but, if industry appraisals are right, the Chinese have no capacity left to speak of.

Gold tried to struggle off its three-month lows and is barely succeeding. That struggle will be a tough one because the U.S. dollar will remain very strong despite the slight breather the greenback is taking today.

Let’s circle round back to the interest rate cut that has been all but promised for December.

Is it possibly that important? It has struck us for some time that a series of rate boosts is something we all should be watching carefully for. On the other hand, only stronger business activity would prompt a second, third or fourth rate rise.

While we like to think of ourselves as non-ideological, there is an argument to be made that when a new recession comes (and it will), the Fed has to have some tools in its shed to combat come what may. It may sound odd to condone raising rates just so they might be lowered, but given the lackadaisical Congress, we need something to deploy.

Wishing you as always, good trading,