Overview: Investors are on pins and needles today. Oil prices are trying to stabilize after WTI’s outsized 7% fall yesterday, its largest in three years.  Global equities are heavier, dragged down by energy, but also larger than expected Q3 contractions in Japan and Germany, and a mixed bag of Chinese data that showed possible stabilization of the industrial sector though weaker consumption. The economic data, the drop oil, and equities are weighing on yields, but Italy’s confrontation with the EC is spurring a rise in Italian yields. Meanwhile, there is high drama in UK politics as the cabinet will approve the agreement worked out with the EC, and the issue is at what cost (resignations?). It is not clear that the government has the support in Parliament. The US dollar is higher against most of the major and emerging market currencies, but it is not enjoying the momentum that had carried it to new highs for the year at the start of the week.

Asia Pacific

There are two headwinds on the Chinese economy. There are both domestic factors, like the past tightening of financial conditions, and foreign pressures (tariffs) that are drags. If official efforts to strengthen the economy, investors should expect a mix of data that shows the stabilization of the industrial sector with consumption lagging. And that is exactly what was reported earlier today.  Industrial output rose 5.9% a bit more than September’s 5.8%. Fixed asset investment rose 5.7% in October, up from 5.4%. Retail sales slipped eased to 8.6% from 9.2%. It is the weakest since May, and some suggest it may have been held back as some consumers waited for the Singles Day sales (11/11). The yuan is firm but in narrow ranges. After the US dollar tested CNY6.97 in the last couple of sessions, briefly traded below CNY6.95 today.

Japan’s economy contracted 1.2% at an annualized pace in Q3 and 0.3% on the quarter, which was a bit more than expected. Exports (-1.8%), business investment, and consumption all fell in the quarter. This is largely a function of the natural disasters that hit. Data from early Q4, like the PMI and vehicle sales, suggest the world’s third-largest economy is already recovering. For the fifth session, the dollar remains in a narrow JPY113.50-JPY114.20 range. There are $1.3 bln in options struck JPY113.90-JPY114.00 that will expire today.