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Why the Hong Kong Protests Are Weighing on Stocks

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What’s in Today’s Report:

  • Why Did the Hong Kong Protests Cause a Drop in Stocks?

Futures are in the red and Treasury yields are extending the week’s declines amid continued unrest in Hong Kong, growing fears of a financial crisis in Argentina, and more broadly, rising concerns about the global economy.

The German ZEW Survey was terrible with Business Expectations hitting a 2011 low of -44.1 while the U.S. NFIB Small Business Optimism index was a modest upside surprise with the headline beating expectations at 104.7.

The most notable moves this morning are in the bond market where the 30-Yr Treasury is threatening to open with a record low yield below 2.10% while the 10s-2s spread fell below 5bp earlier this morning underscoring the risk-off money flows across asset classes. Gold is also notably up well over 1.5%, trading at fresh multi-year highs.

Today, the focus will remain on the crowded macro landscape as the market has been largely driven by overly cautious investor sentiment over the past few days however there is one economic report to watch ahead of the bell: CPI (E: 0.2%).

Bottom line, if headlines remain negative regarding Hong Kong, Argentina, and global growth, then it will be very difficult for stocks to rally today.

Tom Essaye Quoted in Newsmax on August 8, 2019

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“The worst of it may be over but, I’d be surprised if the pullback is over. I think we’ll go back and likely take a look at some of this week’s lows simply because the issues that have really been…” said Tom Essaye.

 

Tom Essaye Quoted in Bloomberg on August 8, 2019

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“The worst of it may be over but, I’d be surprised if the pullback is over. I think we’ll go back and likely take a look at some of this week’s lows simply because the issues that have really been the underlying causes…” Click here to read the full article.

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What’s Next for Markets

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What’s in Today’s Report:

  • What’s Next For Markets
  • Weekly Market Preview (Key earnings this week)
  • Weekly Economic Cheat Sheet (Important Growth Updates Wed/Thurs)

Futures are modestly lower following a quiet weekend as civil unrest in Hong Kong weighed on investor sentiment.

Protests in Hong Kong, which have been ongoing for weeks, intensified over the weekend as all flights out of Hong Kong have been canceled.  The turmoil is just adding to general geopolitical concerns and that’s pushing bond yields lower, which is why stock futures are down.  The 10 year Treasury yield broke below 1.70% this morning and is trading as of this writing at 1.68%.

Economic data was sparse over the weekend and there was no new news on U.S./China trade.  The next event in this drama is whether the September trade talks still occur (for now the answer is “yes” but that could change at any minute and if it does, stocks will drop).

Today the calendar is quiet as there are no economic reports and no Fed speakers, but any China related headlines will move markets.

Tom Essaye was Quoted in CNBC on August 5, 2019

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Copper, a barometer for the global economy, drops to a 2-year low on trade war fears

“The combination of a disappointing Fed and an escalating trade war appears to be too much for this fragile global economy. The summer breakdown in copper…” said the Sevens Report’s Tom Essaye. Click here to read the full article.

Copper Pipes

What’s Next for U.S.-China Trade?

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What’s in Today’s Report:

  • What’s Next in U.S.-China Trade

Futures have recovered from overnight losses that were spurred by a weaker than expected yuan fixing by the PBOC and are now higher with EU markets as easier than expected central bank policy overseas is helping offset trade war angst and Forex concerns.

The Reserve Banks of New Zealand and India, and the Bank of Thailand all eased policy more than expected overnight triggering dovish money flows across asset classes underscored by new highs in gold (+1% to over $1500/oz.) and a global bond rally.

Economically, German Industrial Production was -1.5% vs. (E) -0.4% which largely contradicted yesterday’s solid Manufacturers’ Orders print.

There are no economic reports to watch today but there is one Fed official scheduled to speak: Evans (9:30 a.m. ET) and there is a 10 Year Treasury Note auction at 1:00 p.m. ET which could move markets, especially considering the 10s-2s yield spread is testing the lows of the year this morning, below 10 basis points.

Aside from those events, investors will remain focused on any new developments regarding the trade war as the latest tariff announcement (last Thursday) was the main source of the recent spike in volatility.

Tom Essaye was Quoted in InvestmentNews on August 5, 2019

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Wall Street reactions to China trade escalation marked by fear, uncertainty

“It’s not good, obviously. I think that it really surprised a lot of people and I think it underscores that this is not a problem that’s going to be solved in the near-term…” said Tom Essaye, a former trader who founded “The Sevens Report” newsletter. Click here to read the full article.

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Tom Essaye was Quoted in UPI on August 5, 2019

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U.S. markets rebound after China moves to strengthen yuan

“Going forward, stabilization in the U.S.-China trade war is now the most important key to broader market stabilization,” analyst Tom Essaye said in a note to clients. Click here to read the full article.

 

Chinese soldiers march past the People's Bank of China

Tom Essaye was Quoted in CNBC on August 5, 2019

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Dow jumps 300 points as Wall Street rebounds from the worst day of the year

“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.

A bank employee counts US currency and Chinese currency notes at a bank on August 6, 2019

Tom Essaye was Quoted in Unseen Opportunity on August 6, 2019

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Is This the First Sign of a Chinese Meltdown?

“Going forward, stabilization in the U.S./China trade war is now the most important key to broader market stabilization…” wrote Tom Essaye, founder of The Sevens Report, in a note. Click here to read the full article.

Broken Tea Kettle