The trade deficit in the U.S. narrowed more than forecast in September

The trade deficit in the U.S. narrowed more than forecast in September as a drop in the dollar pushed exports to the highest level in two years.

The gap shrank 5.3 percent to $44 billion, smaller than the $45 billion median estimate of economists surveyed by Bloomberg News, Commerce Department figures showed today in Washington. Exports increased 0.3 percent on foreign demand for aircraft, generators and foods, and imports fell.

A flagging dollar is making American goods cheaper overseas as demand in emerging economies propels international sales for U.S. exporters line General Electric Co. Foreign products, in turn, are becoming more expensive for U.S. buyers, signaling the trade deficit will keep narrowing in coming months and contribute to gross domestic product for the first time in a year.

“Exports are probably going to be supported by the weaker dollar,” said Ed Kashmarek, an economist at Wells Fargo Securities LLC in Minneapolis, who projected the gap would drop to $44.1 billion. “The weaker dollar is also going to detract a little bit from imports.”

The number of Americans filing initial jobless claims last week fell to the lowest level in four months, reinforcing evidence the U.S. labor market is healing, figures from the Labor Department today also showed. Applications for jobless benefits declined by 24,000 to 435,000 in the week ended Nov. 6, lower than the median forecast in a Bloomberg News survey.


Britain had student riots after tuition was tripled and still does not cover costs.

World Markets:
It is likely the EURO will come under pressure now and the dollar will rebound because Spain and Ireland still have major problems. QE1 had little effect on the dollar and there is little reason to suspect Qe2 will have much more. The main effect is to raise inflation expectations so that businesses must put their cash back to work.



Goldman expects oil price surge in 2012 as world economies all grow in unison.

Economic Calendar
Wholesale Inventories Sep rose 1.5% after rising 0.8% last month and then shifting 0.4% from this month back on to last month. In other words they want us to believe that the federal government is so incompetent that their methodology errors are 50% of the thing they are trying to measure. Most competent organizations can keep errors to less than 10% of what they are measuring or else they go out of business. The USA should fire the department that generates the figures and bid the work to private companies.

Yesterday
MBA Mortgage Applications 11/05 +5.8% -5%
Initial Claims 11/06 - 435K declined from 457K, good
Continuing Claims 10/30 - - 4301 declined from 4340, good
Trade Balance Sep -44B Imbalance declined from -46.3B, good
Export Prices ex-ag. Oct 0.7% rose from 0.3%, good
Import Prices ex-oil Oct 0.3% remained same 0.3%, OK
Crude Inventories 11/06 -3.3M declined further -2M, inflation is considered good now
Treasury Budget Oct -140B deficit declined from -176.4B, also good

This week:
Nov 12 9:55 AM Mich Sentiment Nov -
Market Outlook Nov 11, 2010
Market shows topping

Since Oct 28, 2009 our market cash flow index has shown cash flow out of the market and the flow out hit its peak the third week of May. Cash has recently been flowing in but has stopped again and on a cash flow adjusted basis the recent highs in the market averages did not surpass the previous high and it is still as low as during the free-fall following Lehman's collapse. Therefore it tells us this mini-bear market is still active. It would be a bad idea to short commodities even though we do expect another market decline soon. We expect the FED to be successful and for deflation to end this year. We would buy at cyclic lows and be wary of shorting the market other than to balance out alpha trades where quality is bought and weak companies in the same sector are sold short.


World Markets
Asian markets were mixed last night. China's market was up 1%, Hong Kong up 0.8%, India down -1.4%, and Japan up 0.3%.

European markets are down this morning in a range of about -0.1% to -0.8% about half way through their day.

US pre-market futures were down about -0.6% at 9:30 AM EST.