China to Loosen, US to Tighten

China’s inflation reading came in a tad cooler than expected, spotlighting the persistently weak demand conditions in that country that have been a worry for the markets lately. The country’s consumer price index increased +1.3% for October from the year-earlier period vs. estimates of +1.6% and the prior month’s +1.4% reading.

In addition to weak demand, the dis-inflationary trend reflects over-capacity in a number of economic sectors, though weak commodity prices have been in play as well. On the positive side, this gives the Chinese authorities more flexibility in its easing policy, with the central bank widely expected to cut bank reserve requirements in the coming days.

[Check out: Worth Wray on China's Failed Plan to Blow Stock Market Bubble and Attract Global Investors]

Unlike the Peoples Bank of China’s posture, the US Fed is gearing up to start tightening policy. The odds of the first rate hike arriving at next month’s FOMC meeting have increased notably following Friday’s reassuring read on the US labor market, though many Fed officials had been pointing towards a December lift-off even before the jobs reading came out.

The Fed has been going out of its way to emphasize how slow and deliberate it plans to be in future interest rate increases. But the start of the tightening process is nevertheless adding to market uncertainty.

In corporate news, we got better than expected results from D.R. Horton (DHI), while Beazer Homes (BZH) came up short on the revenues side. Orders grew an impressive 19% at D.R. Horton while backlog increased 10% from the year-earlier period. - See more at:

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