“Going forward, the main driver of prices will be time, specifically how long the Saudi…” said Tom Essaye, founder of Sevens Report, said in a note on Tuesday. Click here to read the full article.
“Going forward, stabilization in the U.S./China trade war is now the most important key to broader market stabilization,” said Tom Essaye, founder of The Sevens Report, in a note. Click here to read the full article.
What’s in Today’s Report:
Stock futures are solidly higher this morning after Hong Kong’s Carrie Lam announced the withdraw of the extradition bill that was the major catalyst for the recent protests. The news sparked a near 4% rally in the Hang Seng Index.
Composite PMI data for August was also better than expected with the Chinese figure rising to 51.6 from 50.9 while the EU headline firmed to 53.5 from 53.2 in July helping ease concerns about the health of the global economy.
Looking into today’ session, there are two economic data points to watch: Motor Vehicle Sales (E: 16.8M) and International Trade (E: -$53.5B) however investors will be primarily focused on the very busy schedule of Fed speakers: Williams (9:30 a.m. ET), Kaplan (10:00 a.m. ET), Bowman and Bullard (12:30 p.m. ET), Kashkari (1:00 p.m. ET), and Evans (3:15 p.m. ET).
Investors will be looking for any further insight into how accommodative the Fed will be in the coming months, specifically how likely a 50 bp cut at this month’s meeting is (current expectations are low, so a dovish surprise would be well received by stocks).
Beyond the Fed speak, the trade war is still the major influence on the broader markets right now and investors continue to wait for updates on the next round of trade talks that are supposed to take place in the coming days.
What’s in Today’s Report:
It’s a mixed morning in the global financial markets as equity indexes are largely directionless while safe-haven assets have a mild bid after a mostly quiet night of news.
Longer duration Treasuries are outperforming so far today which is resulting in the 10s-2s Treasury yield spread inverting to new cycle lows, below –2 basis points as of this writing.
Economically, Chinese Industrial Profits rose +2.6% in July from –2.4% in June while Q2 German GDP met estimates at +0.4% year/year, but neither release materially moved markets.
Looking into today’s session, there are no Fed speakers, but several economic reports to watch: S&P CoreLogic Case-Shiller HPI (E: 2.3%), FHFA House Price Index (E: 0.3%), and Consumer Confidence (E: 130.0).
There is also a 2-Yr Treasury Note auction today (1:00 p.m. ET) and if demand is soft (so yields rise), it could further invert the yield curve and cause another wave of recession fears as we saw earlier this month.
Lastly, another round of U.S. – China trade talks were scheduled for today although there have been no updates on the topic. So any positive news regarding those talks will be well received by investors, while if they end up not actually taking place, that will weigh on stocks and other risk assets today.
What’s in Today’s Report:
S&P futures are down roughly 10 points as the recent melt-up rally continues to be digested ahead of key inflation data in the U.S. while trade headlines were negative overnight.
Trade sentiment deteriorated over the last 12 hours as expectations of a G20 deal are fading while protests in Hong Kong over an extradition bill pressured the Hang Seng to fall nearly 2%.
Economically, Chinese CPI and PPI met estimates overnight while Japanese Machine Orders rose 5.2% vs. (E) 0.5% helping the Nikkei outperform with a loss of just 0.35%.
Today’s focus will be on inflation data due out ahead of the bell: CPI (E: 0.1%). There are no other notable reports due to be released and no Fed officials are scheduled to speak today.
The digestive tone will likely continue as the blistering rally of the last week was overdone however the “pain trade” remains higher and if the CPI print is soft, we could see another run back to and potentially through 2900 in the S&P today.
“The unpredictability of the administration regarding tariffs/trade combined with a late cycle economy and a Fed seemingly on hold makes a 16x multiple…” says Tom Tom Essaye. Click here to read the full article.
Markets are urging the Fed to cut interest rates. Will it listen? “That is a very clear message that the bond market believes interest rates are too high,” Tom Essaye, the founder of Sevens Report Research, told FOX Business. Click here to read the full article.
Tom Essaye quoted in ETF Trends. “There can be no clearer message than that to the Fed: Rates are too high. This is the bond market’s equivalent of a bullhorn screaming it in Powell’s face.” Click here to read the full article.
Tom Essaye quoted in Axios on May 30, 2019. “The 2019 rally has been driven by 1) A dovish pivot by the Fed (no more hikes), 2) An expected U.S.-China trade deal, 3) Stable U.S. and global economic growth and…” Click here to read the full article.
The Federal Reserve has been on cruise control thus far in 2019 with respect to interest rate policy, opting to keep the federal funds rate untouched. However, the bond markets are screaming for a rate cut, according to Sevens Report Research. Click here to read the full article.
