US data continues to miscue, UK mortgages due

• US home sales and Dallas manufacturing
• Consumer confidence and retail sales due from US
• UK mortgage approvals could hit 5½ high

Yesterday’s news from the US was once again poor, adding to the ill-feeling the market has before Wednesday’s FOMC meeting. Pending home sales fell by 5.6% in September. Home buyers got cold feet as mortgage rates pushed to recent highs and Congress spat the dummy out. Combined with a weak manufacturing survey from the Dallas Fed (3.6 vs 10.0) for October you would have to say that the US economy was weaker than expected before the shutdown, let alone afterwards.

More and more members of the economic fraternity are starting to subscribe to our view that the ‘reset’ button has been hit by the Fed. This allows them to basically take their views of the US economy to where they had them 6 months ago – still looking for an improvement in growth, inflation and jobs markets. Wednesday’s meeting provides the FOMC an opportunity to outline a new timeline for asset purchase reductions although we are still unsure as to the full impact that the fiscal shutdown has had on US prospects.

US consumer confidence and retail sales are due this afternoon and the survey period for the former almost exactly mirrors the timeline of the shutdown. A sharp fall is expected, obviously, given the daily Gallup numbers we saw during the period of the furlough. The retail sales number unfortunately comes from September and will likely be artificially boosted by demand for the new iPhone, which was released during the month. If sales are strong across the board, however, then that will limit the negativity of the post-reset economy you would hope. Sales are due at 12.30 GMT with consumer confidence at 14.00.

Yesterday’s European session was quiet with the only real news of note coming from Italy and the UK. Italian business confidence improved,  following a cessation of political issues surrounding Berlusconi’s influence on the Italian government. UK CBI reported sales have disappointed today falling to +2 from +34 in September. This naturally fits in with our belief that the UK’s retail sector will struggle in Q4 of this year. EUR and GBP were relatively unaffected, however.

The latest round of lending figures from the UK come out this morning with mortgage approvals and measures of net consumer credit due. Mortgage approvals are expected at 66,000 in September – an amount that would be the highest since February 2008. Net consumer credit is also expected to have surged as consumers lump spending onto credit cards and loans in a bid to keep up their recent standard of living in the face of falls in real wages.