Sectors Insulated from the Trade War

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What’s in Today’s Report:

  • Context for U.S.-China Trade: Identifying Sectors Insulated from Trade Risks

U.S. stock futures are bouncing with EU shares this morning as the outlook on trade improved modestly overnight.

China’s retaliatory tariff deadline of June 1st and Trump’s indecision on the next round of tariffs were received as incremental positives, helping risk assets rise this morning.

The German ZEW Survey, EU Industrial Production, and the NFIB Small Business Optimism Index did not offer any surprises and are largely being shrugged off by investors so far this morning.

Trade is obviously going to continue to dominate the headlines amid the recent resurgence of volatility but there is one economic report to watch today: Import & Export Prices (E: 0.7%, 0.6%) and one Fed speaker: George (12:45 p.m. ET).

Tom Essaye Interviewed with Yahoo Finance on May 13, 2019

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Tom Essaye interviewed with Yahoo Finance. A very timely chat on tariffs, fear within the market, what to expect with this market volatility and more…Watch the full interview here.

Tom Essaye Interview with Yahoo Finance

 

Latest on Trade (Why Are Stocks Down?)

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What’s in Today’s Report:

  • Latest on Trade – Why Are Stocks Down This Morning?
  • Market Set Up Beyond Trade (Two Problems)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Wednesday is an Important Day)

Futures are down more than 1% as markets digest the U.S./China trade situation.

Nothing specifically bad happened over the weekend on U.S./China trade, but Friday’s talks ended without a clear next step and that’s weighing on markets.

Additionally, Friday’s afternoon rally came despite any concrete,  positive catalyst, so we are seeing those gains reversed and then some.

There are no economic reports today and just two Fed speakers, Rosengren (9:05 a.m. ET) and Clarida (9;10 a.m. ET), and neither should reveal anything new.

So, focus will be on the trade headlines and tea leaves.  Anything that points to a specific next step (a date or event) in the U.S./China trade negotiation should help stocks rebound, while a continued lack of a concrete next step will increase market anxiety the longer it goes on.

Trade War Update (After Tariff Increases)

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What’s in Today’s Report:

  • Tariff/Trade War Update

Futures are marginally weaker as the U.S. increased tariffs on Chinese imports, as expected.

Positively, the trade talks will continue today, and the consensus market outlook remains that a deal does get done, likely in the next few weeks.

Away from trade, economic data was solid.  Japanese Household Spending, British GDP and UK Industrial Production all beat estimates.

Today most of us will spend the day watching for any trade related headlines, and there are likely to be plenty.  But, barring a total breakdown in negotiations, trade shouldn’t be too big of a negative on markets today.

Away from trade, we also get the most important economic data point of the week:  CPI (E: 0.4%).  PPI was more firm than it seemed, and if CPI is also firm then that will reduce the possibility of a preventative Fed rate cut, which will be another headwind on stocks.  Finally, there are multiple Fed speakers today: Brainard (8:30 a.m. ET), Bostic (9:05 a.m. ET), Williams (10:00 a.m. ET) but none should move markets.

Tom Essaye Quoted in CNBC on May 9, 2019

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Tom Essaye Quoted in CNBC on May 9, 2019. “Small caps are most sensitive to overall economic growth. I think small caps are declining because…” Click here to read the full CNBC article.

U.S. President Donald Trump and Chinese President Xi Jinping

Inflation Update (It’s More Important Than Trade)

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What’s in Today’s Report:

  • Inflation Update (This Is More Important Than the Trade Drama)
  • EIA Analysis and Oil Update

Futures are decidedly weaker this morning following more hawkish trade rhetoric from President Trump overnight.

At a rally in Florida Trump said China “broke” the deal and reiterated his tariff threats.  Importantly though, nothing changed as far as actual negotiations and the Chinese trade delegation still arrives today.

Economically Chinese CPI generally met expectations at 2.5% yoy vs. (E) 2.6%.

Today the market will be held hostage again by trade headlines, but beyond the trade headlines there are two notable economic reports.

First, Jobless Claims (E: 215K) have risen lately and we’ll want to see that roll back over soon, otherwise it could be a negative signal on the jobs market.  Second, PPI (E: 0.3%), while not as important as tomorrow’s CPI, could still move markets given inflation’s new-found importance. Finally, there are three Fed speakers, Powell (8:30 a.m. ET), Bostic (10:45 a.m. ET) and Evans (1:15 p.m. ET), but none of them (including Powell) are expected to move markets.

Another VIX-Driven Air Pocket?

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What’s in Today’s Report:

  • The Latest in the Trade Drama
  • Is this the Start of Another VIX-Driven Air Pocket?

U.S. stock futures are decidedly in the red again this morning tracking Chinese shares lower as trade tensions continue to dominate global markets.

There were however, no notable trade developments overnight.

Economically, Chinese Imports rose 4.0% vs. (E) -0.4% while German Industrial Production rose 0.5% vs. (E) -0.5%, both of which were incremental, macro positives.

Today, there are no economic reports due to be released but the Fed’s Brainard speaks at 8:30 a.m. ET, and the EIA will release weekly inventory data at 10:30 a.m. ET which could move energy markets and, in turn, influence stocks.

Additionally, there is a 10 Yr. T-Note auction at 1:00 p.m. ET and if high demand pressures yields to new lows for the week, expect that to become another headwind on stocks.

Tom Essaye Interviewed with Yahoo Finance on May 6, 2019

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Tom Essaye joined Yahoo Finance’s Zack Guzman and Heidi Chung to discuss how Trump’s tariff threat could influence global markets. Click here or the video below to watch the full interview.

Yahoo Finance video clip

 

Tyler Richey, co-editor of the Sevens Report Quoted in MarketWatch on May 6, 2019

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Tyler Richey, co-editor of the Sevens Report said “As the developments have been digested today, the flurry of Trump tweets are being seen more as a negotiating tactic that has the potential to…” Click here to read the full MarketWatch article.

the base for Saudi Aramco's Natural Gas Liquids plant and oil production

When Is the Dovish Fed Good for Stocks?

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What’s in Today’s Report:

  • When Is the Dovish Fed Good for Stocks? It’s the Difference Between “Aggressive” and “Appropriate”

Stock futures are trading lower by 0.50% this morning as trade tensions escalated further late Monday with several U.S. trade officials confirming plans to hike tariffs Friday.

Overnight, it was reported that Chinese Vice-Premier Liu He would still come to the U.S for negotiations this week but for just 2 days rather than the originally planned 4 which was seen as an incremental negative.

Economically, German Manufacturers’ Orders rose 0.6% vs. (E) 1.0% in March which weighed modestly on EU shares.

Looking into today’s session, trade news will still dominate the markets however there are a few other catalyst to watch including March JOLTS data (E 7.215M) and one Fed speaker: Kaplan (7:00 a.m. ET).