Mind the Gap: US vs. EM

What’s in Today’s Report:

  • Mind the Gap: US vs. EM
  • Tariff Update

Futures are drifting mildly lower as investors digest yesterday’s gains while Asian shares played catch up o/n to the not-as-bad-as-feared trade developments that spurred yesterday’s US rally. Otherwise it was a very quiet night.

Economically, British inflation data was firmer than expected as CPI rose to 2.7% vs. (E) 2.4% Y/Y boosting UK yields and the pound, and slightly weighing on the FTSE.

Oil is down modestly after the API showed a +1.2M bbl build late Tuesday vs. (E) -2.1M for the EIA report today.

Today, there will be a few moving pieces in focus including one economic release early: Housing Starts (E: 1.240M), trade talks with Canada (although China remains the main focus), and Emerging Market price action (there is a rate decision in Brazil today).

Some retracement to yesterday’s solid US rally should not be shocking, but as long as tech shares hold up, sentiment towards the trade war doesn’t deteriorate, and volatility in EM doesn’t spike, the general positive trend back towards all-time highs in US stocks should continue in the near term.

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