Consumer Confidence

So much for the US consumer confidencing [sic] his way up to buying houses and other stuff. even with 2000x leverage. According to the Conference Board, October Consumer Confidence, plunged from a downward revised 45.4 to 39.8, the lowest since March 2009. The forecast looked for an increase to 46.0. Current conditions were even more horrendous, dropping to 26.3. And with crude on its way back to $100 (thank you Dudley) and gas back to $4.00, this number is not going higher any time soon. But wait, there's more: the jobs plentiful dropped from 5.5 to 3.4, jobs hard to get also dropped from 50 to 46.1, and the cherry on top is that 1 Year inflation expectations are, well, anchored at 5.8% versus 5.7% previously.

The only thing that continues to matter is headlines, as alpha continues to be dead and buried under 6 feet of noise. For those who care, however, here is the actual data in today's fact-based docket.

• Strong European corporate earnings results from the likes of BP and Deutsche Bank supported equities
• There was market talk of a potential reserve requirement ratio cut by the PBOC, however no action has materialised so far in the session
• SNB's Hildebrand said that the SNB will defend the CHF floor with full determination and will buy currencies in unlimited quantity if needed
• Italian transport minister said that a collapse of the Italian government is possible. Also, the Italian Northern League leader, Bossi, said a government crisis is possible
• According to summit draft conclusions, Eurozone leaders will call on the ECB for it to continue buying distressed countries’ bonds in the secondary market under current exceptional circumstances

• German lawmakers win full say on EFSF (Reuters)
• Spain Slipping on Deficit Increases Chances of Contagion (Bloomberg)
• China faces tight power supply this winter (China Daily)
• Greece, China sign memorandum of cooperation (Kathimerini)
• Gov. Corbett launches state takeover of Pa. capital, declares fiscal emergency (WaPo)
• In Cautious Times, Banks Flooded With Cash (NYT)
• An apocalyptic end to world’s biggest bubble (MarketWatch)

A relatively subdued overnight session which has seen the futures spike only modestly from their lows, on yet another forced squeeze in the EURUSD which hit a high of 1.3960 after hitting a low of 1.3877 around 3am Eastern, has seen a rumor of a Chinese Reserve Ratio cut as one of the main drivers of action, which has also pushed gold to over $1660 and silver to $32. If validated, and if China is indeed welcoming inflation with open arms, counterintuitively following the completely irrelevant PMI beat, look for these two to resume their antigravitational glidepath. As for other key developments watched by the market, here is a succinct overview from Bloomberg.

You mean, aside from the relentless headline barrage? Why yes, in a vivid reminder of what used to happen when actual fact-based events mattered, here is a complete summary of the key events in the coming week.

• The main focus of the market remained on the EU leaders' summit this weekend and next Wednesday, where participants look ahead for further details on the implementation of the EFSF
• News overnight that the EU leaders are considering to increase the lending capacity of the EFSF to USD 1.3trl boosted risk-appetite
• Fitch managing director, Riley, said that the rating agency has no plans to downgrade France, and the upcoming EU summit outcome is unlikely to trigger review of the Italian and Spanish ratings
• ECB's Nowotny said that the ECB discussed cutting interest rate in its last meeting. Also, IFO’s economist Abberger said that the ECB will likely cut interest rate towards 1%, however the timeframe is unclear
• According to German government sources, Eurozone members could tap IMF credit lines without the EFSF involvement

• France Likely to Lose Top Rating: S&P (Bloomberg)
• BNP urges EFSF to issue credit default swaps (FT)
• China municipalities to issue bonds (FT)
• Europe forced into second summit (FT)
• EU Said to Consider Wielding $1.3 Trillion to Break Impasse (Bloomberg)
• Hilsenrath: Fed Is Poised for More Easing (Hilsenrath)
• Fed debate about more easing heats up (Reuters)
• Obama Nominates Former Fed President Hoenig for FDIC Vice Chair (Bloomberg)
• ECB Said to Weigh Bigger Loans for More Collateral Disclosure (Bloomberg)
• Banks face penalties in return for bail-outs (FT)

Someone forgot to tell the US Consumer that "Europe is fixed" and that "nobody has heard of Die Welt" according to Jim Cramer, who incidentally said back in May 2008 "how anyone can think housing will get worse from here is beyond me." Because according to the only non-biased and hence non-market moving consumer confidence poll, that of Bloomberg, October Economic Expectations dropped to -45 after -34. Not much to explain here: this was the lowest print since February 2009. As Bloomberg economist Brusuelas says, "Consumer confidence may be better predictor of direction of economy than spending."

Ugly numbers speak volumes on how Fed policies hurt the economy. But those policies enable Congress and the White House to run up deficits that make the Eurozone look benign.

The most concise summary of bullish and bearish events in the past week and commentary

There is good and bad news in today's economic data release: on one hand retail sales in September beat expectations at 1.1%, on expectations of 0.7%, and up from an upward revised 0.3% in August. Retail sales less autos was a modest beat at 0.6% on expectations of 0.3%, although the previous number was revised substantially higher from 0.1% to 0.5%. Yet confirming that the bulk of the "beat" was in auto and associated gas sales, was that Retail Sales ex Autos and Gas (duh) came at 0.5% on expectations of 0.4%. Basically, surging subprime loans to autopurchasers and the resulting increase in gasoline sales was the reason for this "surprise" beat. And as for the bad news, import prices jumped to 0.3% in September, on expectations of -0.4%, a surge from August's revised -0.2%. And while fuel imports had dropped in August -1.4%, in September these jumped to a positive 0.1%, showing just how big the monthly sensitivity to any moves in the energy complex are. In other words, should inflation persist, don't expect for retail sales, which we expect to decline to recent deleveraging at the consumer level, to persist.

It appears Operation Twist was not enough for all...

• SOME FED OFFICIALS SOUGHT TO RETAIN OPTION OF QE3, MINUTES SAY
• SOME FED OFFICIALS SAW QE3 AS 'MORE POTENT TOOL' TO SPUR GROWTH.
• TWO FOMC MEMBERS FAVORED `STRONGER POLICY ACTION' LAST MONTH

Remember Golidlocks:

• MANY FOMC MEMBERS SAID INFLATION RISKS `WERE ROUGHLY BALANCED'
• FOMC MEMBERS SAW `RELATIVELY LITTLE RISK OF DEFLATION'

All you need to read.

• Market participants keep a close eye on the outcome of the EFSF ratification by the Slovak parliament. In the latest news, Slovak lawmakers have adjourned the EFSF session until 2pm local time
• The Troika Commission said Greece will miss its 2011 target, however it will get the new aid tranche when the Eurogroup and IMF approve results of their review, most likely in early November
• According to sources, haircuts of 40%-60% on Greek bonds are under consideration, however the debate is over whether the haircut should involve the ECB and EU governments
• ECB's Nowotny and Trichet said that the EFSF will not be leveraged with ECB funds
• Strength in the USD-Index weighed upon EUR/USD, GBP/USD and commodity-linked currencies