Tuesday Morning Cheat Sheet: 3 Stories Moving Markets
It’s Tuesday, November 12, and U.S. stock futures fell in early trading following underwhelming corporate earnings and a pessimistic small business report.
1. Small business optimism
“Washington paralysis is never good news for the economy, so it was no surprise that while politicians were arguing over whether or not the government should remain fully operational, small-business optimism measures deteriorated,” said National Federation of Independent Business chief economist Bill Dunkelberg in October’s reading of the Small Business Optimism Index.
The headline index fell from 93.9 to 91.6, “largely due to a precipitous decline in hiring plans and expectations for future small-business conditions.” The index measuring hiring intentions fell 5 percent, or 4 points, and the index measure of expected capital outlays also fell. Fewer small businesses reported that they thought the economy was improving and that now was a good time to expand.
“Small employers are not fooled by headlines announcing record high stock market indices; everyday they live the economic realities of overregulation, increased taxes, weak sales and a government without any direction or plan for the future,” said Dunkelberg.
At 8:45 a.m., Dow futures were off 0.11 percent, S&P 500 futures were off 0.21 percent, and Nasdaq futures were off 0.25 percent.
2. India’s industrial production
India’s Central Statistics Office reported on Tuesday that its index for industrial production increased just 2 percent in September, well below economist expectations for an increase of 3.5 percent. September’s data punctuate a weak year to date for Indian industrial production. Manufacturing output in the first half of the year was only 0.1 percent higher than the year-ago period.
The HSBC India Manufacturing PMI report showed no change in manufacturing business activity in October. The PMI index was unchanged at 49.6, indicating that the sector was in contraction. Leif Eskesen, HSBC’s chief economist for India and ASEAN, said: “Order flows remain weak, despite a bounce-back in export orders after two months of decline. Moreover, businesses continue to cut back purchases and a rise in inventories suggest that output will remain subdued. Input price inflation accelerated further despite the weak growth backdrop, as the effects of the depreciated exchange rate continue to pass through. Saddled with additional costs, firms decided to lift output prices to protect margins. This suggests that the RBI has to continue its staring contest with inflation.”
A consumer inflation report also released on Tuesday showed annual inflation at 10.09 percent in October, above analyst expectations for a 9.9 percent increase.
The Mumbai Sensex closed the day down 1.02 percent at 20,281.91.
3. Chinese economic reform
China’s ruling Communist Party has officially relaxed its posture on market-driven economics. At the conclusion of a four-day policy meeting, the Communist Party of China acknowledged the market’s “decisive” and “basic” role as a mechanism to allocate resources. Premier Li Keqiang said that the party was receptive to allowing the market to play a bigger role in economic innovation and that there should be a better balance in China between business and government.
“The key is to let the government, market, and enterprises do their own job. What the government needs to do is to enhance supervision and management and to create a business-friendly environment,” said Wei Jianguo, vice chairman and secretary-general of the China Center for International Economic Exchanges, according to China Daily.
At the heart of some of the proposed reforms coming out of the meeting is a redistribution of power. China and the world have simply become far too complicated for a small ruling elite to manage effectively. “Delegating power is a smart choice, as this can improve the efficiency of the market and corporations and let the market decide what to do and where to go,” said Lu Mai, secretary-general of the China Development Research Foundation, according to China Daily. “But what is also important is enhanced management and supervision on some key hot issues, such as food safety and environmental pollution.”
In Hong Kong, the Hang Seng fell 0.73 percent to 22,901.41, and in Shanghai, the SE Composite climbed 0.82 percent to 2,126.77.
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