Latest on U.S./China Trade (Is a Deal in Place?)

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What’s in Today’s Report:

  • Latest on U.S./China Trade (Is a Deal In Place?)
  • Positive Signs from the Bond Market?
  • Weekly Market Preview (Jobs & The ECB)
  • Weekly Economic Cheat Sheet

Futures are modestly higher thanks to reports that the U.S. and China are extremely close to a new trade deal.

The WSJ reported the U.S. and China are aiming to sign a new trade deal on March 27th that will include the removal of all tariffs, although the article cautioned it’s not a done deal at this point.

Economically, data was weak again as British Construction PMI (50.6 vs. (E) 52.5) and EuroZone PPI (3.0% vs. (E) 3.2%) missed estimates.

There are no economic reports today so focus will remain on U.S./China trade and any official confirmation (from the U.S. or Chinese government) of the positive articles that hit overnight.

Tom Essaye Quoted in MarketWatch on March 1, 2019

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Tom Essaye, president of the Sevens Report, said, “To be sure, there are arguments that industrials could keep up their current pace of growth, at least in the short term. Investor optimism toward a U.S.-China trade deal, as well as the belief that global growth will…” Read the full article here.

A Make Or Break Month Ahead

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What’s in Today’s Report:

  • Why March Will Be A Make Or Break Month For The 2019 Rally
  • The Q4 GDP Report – Why It Wasn’t As Strong As It Seemed

Futures are moderately higher thanks to strength in Asia and generally in-line economic data.

Chinese shares are up 1% because index firm MSCI announced it will increase the weighing for mainland Chinese stocks to 20% from the current 5%.

Economically, global Feb manufacturing PMIs largely met estimates as the EU number rose to 49.3 vs. (E) 49.2. while the British reading was in-line at 52.0.

Today focus will be on data as we get two important economic reports.  First, the Fed’s preferred measure of inflation, the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) is released, and that year over year number needs to stay around 2% to continue the “dovish Fed” narrative.  Later, we get the Feb. ISM Manufacturing PMI (E: 55.0) and it needs to meet expectations to help offset some of the poor data from February (retail sales, etc.).

Tom Essaye Appeared on Cheddar on February 27, 2019

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U.S. Trade Representative, Robert Lighthizer, urged caution on China while testifying before Congress. Tom Essaye, Founder of the Sevens Report Research, joined Cheddar to discuss the contradicting narratives coming from President Trump, market and…Watch the entire interview here.

Two Important Takeaways from Yesterday’s Testimonies

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What’s in Today’s Report:

  • Yesterday’s Most Important Testimony (It Wasn’t Cohen)
  • Is All the Good News Priced in Already? (Two Important Observations)
  • Why Did Treasury Yields Surge Yesterday?

Futures are modestly lower again this morning following more disappointing Chinese economic data and the collapse of the U.S./North Korea summit.

Global growth remains a concern as the Chinese Feb. manufacturing PMI missed estimates, dropping to 49.2 vs. (E) 49.4.  Japanese IP and Retail Sales also missed estimates.

The U.S./North Korea summit ended early and without a substantive agreement, and while that’s not a direct impact on stocks, it’s adding to the generally negative mood this morning.

Today there will be focus on the Preliminary Q4 GDP (E: 2.2%) but keep in mind that’s now a very old number.  Tomorrow’s global manufacturing PMIs are a much more important number for the markets going forward.  Today we also get Jobless Claims (E: 225k) which have been trending higher lately, and markets will want to see that trend reversed.

A New Risk For Bond Portfolios?

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What’s in Today’s Report:

  • Powell’s Senate Testimony Takeaways (Not a Dovish Catalyst Near Term)
  • Did the Fed Quietly Make A Long Term Policy Change? (It Means Higher Inflation Could Be Coming)

Futures are marginally lower following the escalation of tensions between India and Pakistan.  Outside of geo-politics, it was a quiet night.

Pakistan reportedly shot down two Indian fighter jets and carried out air strikes in Kashmir in the biggest uptick in tensions between the two nuclear nations in decades.

Economic data was spare as Euro Zone money supply slightly missed estimates (3.9% vs. (E) 4.0%).

Today the media headlines will focus on the Cohen testimony and the Trump/Kim summit in Vietnam, but neither event will impact markets.

So, we’ll remain focused on Powell’s House Financial Services Committee Testimony (10:00 a.m. ET) to see if there are any more clues about balance sheet reduction, and we’ll also watch Pending Home Sales (E: 0.9%) for any signs of stabilization in housing.

What a Trade Deal Means for the Rally

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What’s in Today’s Report:

  • What a U.S. – China Trade Deal Means for the Rally

Futures are down modestly and international shares were broadly lower overnight as the recent rally in global stocks is being digested after a mostly quiet start to the week.

The German GfK Consumer Climate report was in-line with estimates at 10.8 for the month of March which offers at least some mild hope for an EU economic rebound in Q1.

Today, investors are going to be primarily focused on Fed Chair Powell’s testimony before Congress that begins at 10:00 a.m. ET with his prepared remarks due to be released at 9:45 a.m. ET.

While Powell cannot take a much more dovish tone than he already has so far in 2019, it is important he at the very least stays as dovish, as any hawkish shifts in rhetoric could spook markets, especially given how far stocks have rallied in recent weeks.

There are a handful of economic releases that are also due out this morning that could move markets: Housing Starts (E: 1.255M), S&P CoreLogic Case-Shiller HPI (E: 0.4%), FHFA House Price Index (E: 0.4%), and Consumer Confidence (E: 125.0).

Seven Macro Catalysts

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What’s in Today’s Report:

  • Seven “If’s” That Will Move This Market

Money flows are decidedly risk-on this morning thanks to renewed optimism about U.S.–China trade negotiations after an otherwise very quiet weekend.

Late yesterday, President Trump officially delayed the March 1st tariff deadline sending US stock futures up 10-15 points at the electronic open and shares in mainland China up over 5%.

There were no notable economic reports or other market moving catalysts overnight.

Looking into today’s Wall Street session, there are two economic reports due out this morning: Chicago Fed National Activity Index (E: 0.13) and Dallas Fed Manufacturing Survey (E: 3.0). These two releases are not usually watched closely by investors but they were especially bad in late 2019 and contributed to the heavy selling in December, so if they “whiff” again, we could see stocks come for sale.

There are no Fed officials scheduled to speak today which will leave the market primarily focused on any new developments or details regarding trade negotiations with China. Note that the March 1st deadline was delayed indefinitely and there were no other material developments regarding trade over the weekend so investors will be looking for any further indication on the next steps towards a deal.

A New Prognosis from Dr. Copper?

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What’s in Today’s Report:

  • Is  Dr. Copper’s Prognosis for the Markets Just Change?
  • Economic Data (Yesterday Was Not a Good Day)
  • Energy Update

Futures are recouping yesterday’s losses not because of what happened overnight (which was nothing) but instead of what might happen today.

Trump & Chinese Vice Premier He will meet at 2:30 ET and markets hope more progress on a deal is signaled.

Additionally, markets hope Fed officials (specifically Williams and Clarida) give more clarity on the end of QT at a Fed conference later this afternoon.

As mentioned, there are no economic reports or notable earnings today so focus will be on the Trump/He meeting and the various Fed speakers making comments today:  Williams (10:15 a.m. ET), Bullard (1:30 p.m. ET), Clarida (1:30 p.m. ET), Harker (1:30 p.m. ET).  For those events to power stocks meaningfully higher, we’ll need to see hints that a U.S./China deal would reduce current tariffs, and a clear indication that QT will end in 2019.

Tyler Richey, co-editor of the Sevens Report Quoted in MarketWatch

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Gold erases weekly gain as prices drop after ECB decision

“A firming dollar and sharply rising bond yields” were also reasons why gold saw such a big drop Thursday. Gold rallied too far too fast on the dovish shift in the…” said Tyler Richey, co-editor of the Sevens Report. To read the full article click here.