It’s now clear that Chinese officials won’t allow a disorderly default, and that’s really all global markets care about…money manager Tom Essaye, president of Sevens Report Research wrote. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately higher as the rally continued overnight as China injected more liquidity into their economy.
Chinese officials injected another 17 billion yuan into the economy to prevent any liquidity issues, as it’s now clear that Chinese officials won’t allow a disorderly default (and that’s really all global markets care about).
Economic data disappointed as both the EZ and UK flash composite PMIs missed expectations (EZ PMIs fell to 56.1 vs. (E) 58.9 while UK PMI dropped to 54.1 vs. (E) 54.7).
Focus today will be on economic data, specifically the Flash Composite PMI (E: 55.5) and Jobless Claims (E: 309K). Markets will want to see both numbers confirm what the Philly Fed and Empire survey implied last week, namely that the surge in COVID cases was a temporary and limited headwind on the economy. If that’s the case the rebound in stocks should continue.
What’s in Today’s Report:
Markets are trading with a risk-on tone this morning after some positive Evergrande developments while focus continues to shift to the conclusion of today’s Fed meeting.
Evergrande announced overnight that the company would not default on a bond payment due tomorrow (but details were vague) while the PBOC injected 120B yuan of liquidity into the system helping ease financial conditions overnight.
Today there is one economic report due out early: Existing Home Sales (E: 5.90M), but the primary market focus will be the FOMC Meeting Announcement (2:00 p.m. ET) followed by the Fed Chair Press Conference (2:30 p.m. ET).
With regard to the Fed, any outcome that meets our “What’s Expected” or “Dovish If” outcomes from yesterday’s FOMC Preview will likely trigger a further relief rally while a “Hawkish If” scenario has the potential to spur another wave of elevated volatility with a high likelihood of stocks testing Monday’s lows.
This [supply constraints] will be a more substantial risk to the rally we’ll need to watch for…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.
What’s in Today’s Report:
Stock futures are trading modestly lower while most overseas markets declined overnight amid lingering concerns about the Delta variant’s impact on growth as well as the threat of a hawkish shift in tone from the ECB this week.
Economically, Japanese Q2 GDP was revised up to 1.9% vs. (E) 1.6% y/y which helped the Nikkei buck the trend and rally nearly 1% overnight.
Today, there are a few potential market-moving catalysts beginning with the July JOLTS report (E 10.0M). Then there are two Fed speakers to watch: Williams (1:10 p.m. ET) and Kaplan (6:00 p.m. ET). Finally, there is also a 10-Year Treasury Note Auction at 1:00 p.m. ET.
Bottom line, markets have become more “on edge” this week as the balance between economic growth trends and subsequent Fed policy outlook has become less certain.
So any combination of economic data deteriorating, the outlook for Fed policy getting more hawkish, or interest rates accelerating too quickly will continue to weigh on equities and other risk assets this week.
What’s in Today’s Report:
Stock futures are trading at all-time highs this morning as dovish, risk-on money flows continue into the end of the month following mixed economic data overseas.
Economically, China’s Manufacturing PMI fell to 50.1 vs. (E) 50.2 in August while inflation data in Europe was slightly firmer than estimates but the outlook for global central bank policy remains notably accommodative and that is a positive for equities and other risk assets.
Today, there are two reports on the housing market in the US: Case-Shiller Home Price Index (E: 1.7%) and FHFA House Price Index (E: 1.8%) before the more important Consumer Confidence (E: 123.0) report is released shortly after the open.
Beyond those economic data points, there are no other material catalysts as no Fed officials are scheduled to speak and there are no Treasury auctions this afternoon.
Bottom line, momentum remains positive for stocks into the end of the month however a soft Consumer Confidence number or negative COVID headline could serve as an excuse for profit taking and cause a reversal of the early morning gains today.
The key for markets is how quickly the Fed removes the accommodation, because that…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.
The odds that the market makes a material move one way or another are…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
The key for markets is how quickly the Fed removes the accommodation, because that dictates…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.
