Posts

OPEC’s Catch-22

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What’s in Today’s Report:

  • OPEC’s Catch-22 Explained
  • ISM Manufacturing PMI Analysis

Futures are modestly lower as the Trump-Xi “trade truce” continues to be digested this morning while the yield curve flattened further overnight, underscoring growth concerns.

The major underlying story this morning is the yield curve as the 2’s-10s spread compressed to new lows overnight (13bp) and the 2’s-5’s actually inverted.

Economically, EU PPI was 4.9% vs. (E) 4.5% in Oct. but the recent plunge in energy prices has investors largely shrugging off the “hot” print.

Today is likely to be a fairly quiet day ahead of tomorrow’s National Day of Mourning for President George H.W. Bush although there are two potential catalysts to watch: Motor Vehicle Sales (E: 17.2M) and New York Fed President Williams speaks shortly after the open (10:00 a.m. ET).

What the Trade Truce Means for Markets

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What’s in Today’s Report:

  • What The U.S./China Trade Truce Means for Markets
  • Four Keys to A Bottom Updated:  Getting Closer, but Not There Yet
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Growth and Jobs)

Futures and global markets are surging (up more than 1%) as Trump and Xi agreed to U.S./China trade war truce.

As was generally expected, the U.S. will not raise tariffs on China to start 2019 and both sides have agreed to a three month negotiation period.

Economic data was good as EU and UK Manufacturing PMIs both beat estimates

Today there is one important economic report, the November ISM Manufacturing PMI (E: 57.2) and it needs to be a “Goldilocks” reading to help fuel this early rally.  We also get three Fed speakers (Williams (9;15 a.m. ET), Brainard (10:30 a.m. ET), Kaplan (1:00 p.m. ET)) but none of them should move markets.

Bottom line, tech and industrials are the key sectors to watch today, and outperformance from both will be needed for stocks to hold these big, early gains.

Trump/Xi Meeting Preview

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What’s in Today’s Report:

  • G-20 Preview:  The Good, the Expected & the Ugly

Futures are modestly lower on positioning ahead of the G-20 and due to disappointing foreign economic data.

Regarding the G-20, there was no new news overnight, and the expectation remains for a trade war “truce.”

Economic data was disappointing.  Chinese Nov. Manufacturing PMI dropped to 50.0 vs. (E) 50.2, the lowest since mid-2016.  EU inflation also underwhelmed as the core flash HICP rose 1.0% y/y vs. (E) 1.1% y/y.  So, despite some decent data this week, “ROW” (rest of world) economic activity remains underwhelming.

There are no economic reports today and just one Fed speaker, Williams (1:00 p.m. ET), but he won’t move markets.  So, markets should be in a general holding pattern ahead of the G-20 and I’d expect a quiet day.  That said, there has been a constant flow of headlines on the potential outcome of the Trump/Xi meeting, so we’ll continue to watch the headlines for any headline surprises that could cause volatility.

Sevens Report’s Tom Essaye appeared in Yahoo Finance on November 23, 2018

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Sevens Report’s Tom Essaye appeared in Yahoo Finance on November 23, 2018. His take on oil, market volatility, stocks and more. Watch the entire clip here.

Is Flat the New Inverted?

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What’s in Today’s Report:

  • Is Flat the New Inverted?

Futures are trading slightly lower this morning on an uptick in trade war fears following an otherwise quiet night.

After the close yesterday, the WSJ ran an interview with Trump where he said he was ready to move forward with increasing tariff rates (from 10% to 25%) in early 2019 and delaying the hike per China’s request was “highly unlikely.”

Today, there are a few potential catalysts on the schedule. Economically, there are three reports due out: S&P CoreLogic Case-Shiller HPI (E: 0.3%), FHFA HPI (E: 0.3%) and Consumer Confidence (E: 136.5).

Meanwhile on the Fed front, Clarida speaks ahead of the open (7:45 a.m. ET) while Bostic, George, and Evans speak on a panel in NY this afternoon (2:30 p.m. ET).

With Powell’s speech later this week still a major focus of the market, the Fed chatter will be watched closely while the market will remain very sensitive to any further rhetoric on the trade front (the other big event being the G20) after Trump’s comments yesterday afternoon.

Sevens Report’s Tom Essaye quoted in Nasdaq on November 20, 2018

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Sevens Report’s Tom Essaye quoted in Nasdaq on November 20, 2018. Read the full article here.

Sevens Report’s Tom Essaye quoted in CNBC on November 21, 2018

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Sevens Report’s Tom Essaye quoted in CNBC on November 21, 2018. Read the full article here.

 

Sevens Report’s Tom Essaye quoted in MarketWatch on November 21, 2018

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Sevens Report’s Tom Essaye quoted in MarketWatch on November 21, 2018. Read the full article here.

 

 

Is the Corporate Bond Bubble Bursting?

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What’s in Today’s Report:

  • Pullback Update: Why we think the 2650-2850 trading range is still intact.
  • Is the Corporate Bond Bubble Bursting?

Futures are enjoying a modest oversold bounce following a generally quiet night.

Italy will be in focus today as the European Commission will issue a decision on the resubmitted budget and rejection is likely.  Positively, however, there were some reports Italy would be open to negotiation on the proposed budget, and that helped fuel the bounce this morning.

There were no notable economic reports overnight.

Today should be a generally quiet day as travel picks up for the Thanksgiving holiday.  But, that said, there are three notable economic reports this morning: Durable Goods (E: -2.5%), Jobless Claims (E: 215k), Existing Home Sales (E: 5.21M).  Bottom line, tech remains key in the short term.  If Nasdaq and FDN can bounce, stocks can recoup some of the week’s losses.

Everyone please have a happy and safe Thanksgiving!

Four Keys to a Bottom (Some Progress Achieved)

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What’s in Today’s Report:

  • Four Keys to a Bottom – Some Progress Achieved
  • Weekly Market Preview (Busy Despite the Holiday)
  • Weekly Economic Cheat Sheet (All About Flash PMIs and Housing).

Futures are marginally lower following a very quiet weekend as markets digest the Thursday/Friday rally.

There were no new developments on the Fed or U.S./China trade over the weekend so markets will start this week looking for something to further the recent positive momentum on both topics.

Economically, Japanese exports slightly missed estimates at 8.2% vs. (E) 9.0% but that’s not moving markets.

As mentioned, markets will be looking daily for any comments that reinforce the dovish comments from Fed Vice Chair Clarida on Friday and apparent improvement in U.S./China trade (Trump was positive on this Friday afternoon).  But that said, today should be pretty quiet as there is just on economic report, Housing Market Index (E: 68.00), and one Fed speaker, Williams (9:40 a.m. ET, 10:45 a.m. ET, 3:15 a.m. ET).