Merkel's Support Fades, as does the Dollar's

The US dollar, which finished last week on a firm note, is under pressure to start the new week that features Bank of Japan and Federal Reserve meetings.  The slighter stronger August CPI reading helped lift the greenback ahead of the weekend, but investors continue to see a low probability of a Fed hike this week. 

Do the Capital Markets have a Political Limit?

In our age of disparity, it may be easy to accept that all time is not equal.  Touch a hot surface; time seems to move slowly.  Time doing an enjoyable activity goes by lickety-split.  

Another inequality of time is inflection points.  These are non-linear jumps, breaks in time series or investors’ reaction function--how they respond to news.  Is bad fundamental news good for stocks and bonds?  Is a stand pat Fed bad for the dollar?  Is easing by the BOJ positive or negative for the yen?

Hanjin's Ships are Stranded, but Why?

The collapse of South Korean company Hanjin Shipping has left ships, cargo and crews stranded around the globe. It highlights the complex consequences of a shipping company going bankrupt, with Hanjin’s creditors and customers waiting to see whether the business can be saved.

The Fed Meeting is Overshadowing European Politics

Yellow lights are flashing.  Bonds remain heavy despite a weak spate of data that would seem to remove nearly any chance that Fed will hike rates next week.  The implications of the disappointing retail sales data indicates that estimates for Q3 GDP will be revised lower. 

This quarter does not seem to be the breakout that had appeared to be the case previously.  The output from industrial sector, which accounts for a little less than GDP fell in August, and the July gains were shaved in revision.  

The Day's Data/Events Likely not to Push the Needle

Looking at the diary, today is the most important day of the week. The Bank of England and the Swiss National Bank meet.  The UK reports retail sales.  EMU reports CPI figures.  The US reports retail sales, industrial output, and two September Fed surveys.  Yet the economic updates are unlikely change sentiment ahead of next week FOMC and BOJ meetings.

Less of a Problem than You May Have Heard

There has been much discussion in the US presidential campaign about immigration, especially from Mexico.  Trump has proposed a wall for the 2000-mile border.  Different types of fences are on about a third of the border as it stands today. 

However, as this Great Graphic, from Pew Research shows, Mexican immigrants may have been a problem previously, but for the past decade (2005-2014) more Mexicans have left the US than entered (hat tip to Philip Bump).

Searching for Stability

The markets are trying to catch their collective breath after yesterday's dramatic moves.  The sharp slide in US equities may have weighed on Asian markets, but losses are mild. Still, the MSCI Asia-Pacific Index was off 0.8%, the fifth consecutive losing session. European bourses are slightly firmer, but appear to be awaiting the US open for stronger directional cues.   

Maxed Out Monetary Policy

The market has not changed its mind.  Following Brainard's comments yesterday the market had downgraded the chances, which were already modest, of a Fed hike next week.  The September Fed funds futures is unchanged on the day.  The implied yield of 41 bp matches the 50-day moving average.