Fed Tipping Toward December Rate Hike, Minutes Show Federal Reserve officials meeting last month anticipated it “could well be” time to raise short-term interest rates at a December policy meeting after keeping them pinned near zero for seven years.

(…) “Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting,” the October meeting minutes said. (…)

Futures markets are pricing a 68% probability of a quarter-percentage-point increase in rates at the December meeting, up from near 50% right after the October meeting.

The minutes stated “some” Fed officials felt in October it was already time to raise rates. “Some others” believed the economy wasn’t ready. The wording meant that minorities on both sides of the Fed’s rate debate are pulling in different directions, with a large center inside the central bank inclined to move. (…)

At the same time, the Fed minutes included several new signals that after the Fed does move rates higher, the subsequent path of rate increases is likely to be exceptionally shallow and gradual. (…)

“It is probable that the return to ‘normal’ interest rates will be gradual. As a business manager or as an investor, I think these are key messages I would be taking from our Fed statements,” Robert Kaplan, president of the Federal Reserve Bank of Dallas, said Wednesday in comments in Houston. (…)

U.S. Housing Starts Fall 11% in October  New-home construction sank in October, as builders dialed back construction of apartments and condominiums that drove demand through much of the summer.

Housing starts fell 11% from a month earlier to a seasonally adjusted annual rate of 1.06 million in October, the Commerce Department said Wednesday. Starts of single-family homes, which make up nearly two-thirds of the market, fell 2.4%. Construction of multifamily units, including apartments and condominiums, plunged 25.1%.

New applications for building permits, a bellwether for future home construction, rose 4.1% to a seasonally adjusted annual rate of 1.15 million. Single-family permits rose to their highest level since December 2007, and were up in every region but the Northeast. (…)

Starts have averaged 1.12 million over the past three months, versus an average 1 million in 2014. (…) (Charts from Bespoke Investment)

Ford Wage Deal Is at Risk of Failing More than half of the 75% of Ford’s union members who voted have rejected the deal

(…) The lack of support is unexpected given the economics of the deal. The Ford contract is the richest of the three UAW contracts drawn up with Detroit auto makers this year, and offers a $10,000 in upfront signing and profit-sharing bonuses, $9 billion in new U.S. investments and pay raises that will be phased in over time. (…)

The union negotiated twice with Fiat Chrysler Automobiles NV before getting an agreement its membership would approve. A ratification vote at General Motors Co. for a separate labor pact has been on hold for two weeks because a smaller group of skilled trade workers voted against the proposal. (…)

The union’s efforts to ratify the contract suffered a setback Tuesday when workers at two large plants in Kentucky rejected the deal. Combined, the two plants have 4,900 Ford workers, enough to cast doubt over whether the union will have enough support to get the contract approved. (…)

Several workers interviewed by The Wall Street Journal say the labor proposal doesn’t go far enough to roll back concessions made by the union to help the No. 2 U.S. auto maker survive during periods of financial distress. (…)

Japan Exports Fall for First Time in Over a Year Exports slide 2.1% from a year earlier in October, the first decline since August 2014

(…) Exports to China dropped 3.6%, the third straight month of decrease. Shipments of auto parts and electronic components both suffered double-digit declines. Exports to the wider Asia region, including China, also fell 3.6%, the sharpest drop in more than a year.

Export volumes also slid 4.6%, offering another worrying sign of weakness, falling for the fourth straight month, according to the Ministry of Finance.

Japan’s trade balance—the amount by which exports exceed imports—came to a ¥111.5 billion surplus in October, the ministry said. This was the first surplus in seven months, with a 13.4% drop in imports the main factor helping push the balance into the black. Economists polled by the Nikkei and The Wall Street Journal had forecast a ¥270 billion deficit.

China Cuts Small Bank Funding Costs in Step Toward Rate Corridor

(…) The People’s Bank of China cut its seven-day Standing Lending Facility interest rate to 3.25 percent for local financial institutions, according to a statement posted Thursday on the central bank’s social media account. The overnight SLF rate was reduced to 2.75 percent for some local financial institutions. (…)

China Hopes to Fire Up Economy With Cheaper Gas China’s steep cuts to domestic natural gas prices are the latest sign of Beijing’s desire to prop up the country’s economic growth, even if that comes at the expense of major state-owned enterprises.

(…) The NDRC said Wednesday it was cutting benchmark city-gate prices by 0.70 yuan (11 cents) per cubic meter for nonresidential users of gas—such as factories—beginning Friday.

Though a price cut had been on the cards for months, the nearly 30% reduction in average city-gate benchmark prices for gas announced Wednesday by the National Development and Reform Commission—China’s top economic planner—was deeper than some analysts had forecast.

City gate prices refer to how much local gas distributors pay pipeline operators such as PetroChina Co. Those distributors should be able to pass on the lower prices to industrial gas consumers, in theory helping to stimulate China’s stalling manufacturing sector. The latest move won’t impact residential gas prices. (…)

Getting gas pricing right is important for Beijing, not least because it needs to encourage companies to switch away from using coal as part of efforts to clean up polluting industry. (…)

OIL: SAUDIS WANT TO “STABILIZE MARKET”

Saudi Oil Minister Says OPEC With Others to Stabilize Market

Saudi Arabia is working with other OPEC members and producers from outside the group to stabilize the market, Saudi Oil Minister Ali al-Naimi said.

The world economy is going through an unstable situation, al-Naimi said. Crude demand is expected to rise by 1 million barrels a day every year in this decade, and the world requires more investments in oil to compensate for decline rates, he said. The decline rate of recovery at the world’s oil fields is at about 4 million barrels a day, he said.

“Saudi Arabia is a very reliable supplier. We cooperate with OPEC and non-OPEC countries to stabilize the market,” al-Naimi said at a conference in Manama, Bahrain. “We need billions of dollars to continue exploration and producing oil and to invest in spare capacity to stabilize the market.”

(…) OPEC ministers are due to meet Dec. 4 to assess the market and decide on production levels.

Arab countries hold 57 percent of the world’s oil reserves, and that will grow on new discoveries, al-Naimi said. Arab countries need $700 billion of energy investments over the next 10 years, and oil consumption in the region is about 10 percent of the world’s demand, he said.

Sounds like a pretty important statement to me.

SENTIMENT WATCH

Square IPO Prices at $9 a Share, Less Than Expected Skeptical investors forced Square Inc. to sell shares in its initial public offering for less than the mobile payments startup had hoped, dealing another setback to the battered market for new technology-company stock.

The six-year-old company, founded and run by Twitter Inc. Chief Executive Jack Dorsey,priced at $9 a share late Wednesday, according to people familiar with the matter. That is beneath the projected offering range of $11 to $13 and even further below the $15.46 at which Square raised money last year from private investors. (…)

The number of U.S.-listed tech-company IPOs is down about 53% from this point last year through Wednesday morning, and the number of overall U.S.-listed IPOs had fallen 62%, according to data provider Dealogic. Two other tech IPOs priced Wednesday: online dating-service ownerMatch Group Inc. and email-security firm Mimecast Ltd.

Match priced its IPO at the bottom of its proposed $12 to $14 range, and Mimecast also priced its shares at the low end of its $10 to $12 range, according to people familiar with the deals. (…)

From the FT’s Lex column:

Square: Odd one out

It is all over. Tech bubble 2.0 has burst. Square has priced its initial public offering below the range, at only $9 compared with a proposed $11-$13. Not even Goldman Sachs could sell this thing. Call in the removal trucks. San Francisco is done.

Unless, a faint glimmer of hope: Square is not a tech company at all? It certainly quacks like a duck. It has Jack Dorsey as founder and chief executive — at least, when he is not busy at Twitter. It has cool-looking hardware and software. And all the financial features of a “unicorn”, the hyped private start-ups. It was bid up in a series of private fundraising rounds to $15.46 a share last year, or more than $6bn on a fully-diluted basis. Like other unicorns, late investors demanded serious protections, giving them more stock in the event of a lower IPO. Square, excluding out-of-the-money options, values the listing at $3.2bn. That gives the likes of JPMorgan and fellow late investors a lot more shares.

But despite appearances, Square is a loss-making financial services company, with an unsexy niche in the payments infrastructure. It does other stuff too — it has a food delivery app, for example — but 94 per cent of revenues comes from Square’s role as a “merchant aggregator”. It collates the transactions of 2m sellers and stands between them and the card networks. It is not so much disintermediating and disrupting as adding another layer.

Tech IPOs this year have been mediocre and there is scepticism about private valuations. Institutional investors say they would rather wait and see how a stock performs than take a hefty allocation at the IPO. But Match, the online dating company, which also priced on Wednesday evening, did so in its indicated range, albeit at the bottom. Pure Storage, the flash memory company, priced above its last private round, in the middle of its indicated range and, after a wobbly first day last month, has traded higher.

Uber, Dropbox, Snapchat and the other richly priced private tech companies must hope that Square is perceived as weaker because it is not offering the same prospects for innovation-led growth. Then the party can continue.