Inflation data support rate hike case

US stocks ended mostly lower on Tuesday as falling oil prices and terror fears after a soccer match in Germany was canceled on bomb scare undermined investor confidence. The S&P 500 closed down 0.1% at 2,050.44 as seven of the ten main sectors fell with utilities stocks leading the decliners. The Dow Jones Industrial Average ended up 0.04%. The dollar strengthened as economic reports supported the case for December rate hike with inflation in October increasing for the first time after two consecutive monthly declines, posting 0.2% rise on month. The increase was in line with expectations, as was the 1.9% year-over-year rise in core price inflation which excludes volatile food and energy prices. Live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six currencies, ended up 0.2% at 99.62. Investors will be watching closely the minutes of Federal Reserve October meeting that will be released at 20:00 CET today. Bullish minutes could provide additional boost to the dollar and push the stocks lower. However, industrial production declined 0.2% in October, while the manufacturing sector grew 0.4% after two straight monthly declines. The fall in industrial production will negatively impact fourth quarter GDP growth. Today at 13:00 CET Mortgage Applications will be released in US. At 14:00 CET Federal Reserve Banks of Cleveland, New York and Atlanta presidents Loretta Mester, William Dudley and Dennis Lockhart will participate in "Federal Reserve Perspectives" discussion before the Clearing House Annual Conference. At 14:30 CET October Building Permits and Housing starts will be released. At 18:00 CET Federal Reserve Bank of Dallas President Robert Kaplan will speak on economy in Houston.
European stocks advanced for the second consecutive session on Tuesday supported by expectations of additional stimulus by the European Central Bank. The euro declined, hitting a seven month low against the dollar. The Stoxx Europe 600 rallied 2.9%, and Germany's Dax 30 index added 2.4% as exporters gained, benefiting from weaker euro which makes euro-zone exports more competitive. ECB chief economist Peter Praet said the central bank would consider whether there is a need for additional monetary stimulus given low inflation pressures in medium term and heightened uncertainty. The news that Greece reached a deal with its international lenders on home foreclosures reform that will allow to start receiving funds from the bailout loan was another positive factor. In economic news ZEW survey from Germany showed economic sentiment improved in November after declining for seven straight months. Today at 11:00 CET September construction output will be released in euro-zone.
Nikkei ended up 0.1% today with weaker yen supporting gains in exporters. Tomorrow at 03:00 CET Bank of Japan monetary policy statement will be released and Governor Kuroda will give a press conference.
Chinese stocks are falling today despite data showing Chinese home prices rose 0.1% for first time in over a year in October on an annual basis. Copper prices are falling on fears demand for the metal will continue falling with slowdown in China’s economic growth.
Oil futures prices are rising today after American Petroleum Institute report late Tuesday said US crude stockpiles fell unexpectedly last week by 482,000 barrels due partly to higher refinery runs. Prices fell yesterday on expectations the data would show US oil inventories rose for an eighth straight week. Today at 16:30 CET official data on US crude oil inventories will be released by the Energy Information Administration.