“The market still expects a phase one deal that (most importantly) removes the threat of any further escalation in the trade war. But unless there is a material positive surprise, phase one is not going to include material existing tariff reductions…” said Tom Essaye, founder of The Sevens Report, in a note.
“The sooner … phase one is signed (regardless of the details) the better, because both sides want a deal, so the longer it’s delayed, the more the market will begin to…” Tom Essaye, founder of market research firm Sevens Report Research, wrote in a note to clients. Click here to read the full article.
“Historically speaking the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere from six-to-18 months from today…” Tom Essaye, founder of The Sevens Report, said in a note this summer. Click here to read the full article.
What’s in Today’s Report:
Global markets are trading with a moderate risk-off tone this morning as the trade war weighs on sentiment.
It remains unclear whether the U.S. will offer relief on existing tariffs as part of the “phase one” trade deal with China (which has been priced into stocks in recent weeks), or just cancel the scheduled December tariffs, which would be a disappointment.
Meanwhile, on the economic front, Eurozone Industrial Production was largely overlooked because of trade angst but the release was not as bad as feared (0.1% vs. E: -0.3%) further easing recession concerns in Europe.
There were other headlines overnight including escalating protests in Hong Kong which saw the Hang Seng underperform (down nearly 2%) and chatter about the public impeachment hearings in Washington today but neither are materially affecting U.S. stocks at this point as the market’s main focus remains the trade war.
Looking into today’s session, there is one economic report to watch: CPI (E: 0.3%) before focus will turn to Powell’s testimony before Congress on the state of the economy at 11:00 a.m. ET. Later in the day, there are two other Fed officials scheduled to speak before the closing bell: Barkin (12:30 p.m. ET) and Kashkari (1:30 p.m. ET).
Bottom line, there are a lot of headlines this morning but the trade war remains the single most important influence on this market so if expectations for tariff removal continue to fade, stocks are likely to trade with a heavy tone.
“The last 24 hours have seen a bit of whiplash in the U.S./China trade drama, as a potentially negative headline yesterday has been more than offset by a positive one this morning. But “it’s fair to say that at these levels…” said Tom Essaye, founder of The Sevens Report, in a note to clients. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher following news of a new Brexit agreement.
The EU and Britain have agreed to a new Brexit deal that solves the Northern Ireland border issue. However, it remains unclear if the deal can get through Parliament, and remember that Parliament killed the last Brexit agreement between Britain and the EU
Economically, British Retail Sales slightly missed estimates (flat vs. (E) 0.2%) but that’s not moving markets.
Today focus will be on earnings (some notable reports include MS: $1.10, PM: $1.35 and UNP: $2.29).
Additionally, there are several economic reports including (in order of importance): Philly Fed (E: 7.1), Industrial Production (E: -0.2%), Jobless Claims (E: 210k) and Housing Starts (E: 1.3M). Broadly speaking, the stronger the data, the better for stocks.
“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.
