Posts

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

The Trade War and Market Multiples

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What’s in Today’s Report:

  • Tariff Update – What Does It Mean for Multiples
  • The “Doctor” Doesn’t Lie

The trade war continues to dominate the markets as the designation of China as a currency manipulator by the U.S. Treasury caused a sharp selloff in stock futures last night. But the PBOC intervened to “fix” the yuan back below $7/CNY which helped global markets stabilize overnight.

German Manufacturers’ Orders jumped 2.5% vs. (E) 0.6% in June but the details showed a continuation of soft demand in the Eurozone, offsetting the headline strength.

The trade war, and any further developments on the topic, will remain the market’s main focus today however there are a few other potential catalysts to watch.

Economically, the June JOLTS Report (E: 7.293M) will be released mid-morning and then shortly after lunch, there is a 3-Yr Treasury Note Auction (1:00 p.m. ET) which will be important because Treasury auctions have been moving the stock market lately.

Lastly, there is one Fed speaker: Bullard at 1:05 p.m. ET and investors will be listening closely for any clues as to what the Fed’s policy plans are into the end of the year.

What More Tariffs Mean for Markets (Lower Market Multiple)

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What’s in Today’s Report:

  • What the Tariff Threat Means for Markets (Lower Market Multiple)
  • Jobs Report Preview

Futures are modestly lower following a steep global sell-off as markets digest Thursday’s tariff threat and the “less dovish than hoped for” Fed, ahead of the jobs report.

Chinese authorities threated retaliation should the tariffs go into effect on September 1st, further escalating trade tensions, although no specifics were given.

Economically, Euro Zone retail sales beat estimates, although revisions were negative so it wasn’t a strong beat.

Today the big event is the Employment Situation Report, and expectations are as follows:  Jobs: 156K, UE Rate: 3.6%, Wages: 0.2%).  The last thing this market needs at this point is a “Too Hot” number that reduces expected Fed rate cuts, or a “Too Cold” number that increases worries about economic growth.  So, from a stock standpoint, the best case in a jobs number between 150k-200k (the higher the better) with tame wage growth and stable unemployment.  If we get that “Goldilocks” number it’ll help markets stabilize.

Fed Preview: What to Expect

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What’s in Today’s Report:

  • FOMC Preview

Asian markets rallied modestly overnight after the BOJ met expectations while Brexit angst continues to weigh on EU stocks and U.S. futures as investor focus turns to the Fed.

Economic data did not move markets overnight and trade talks between the U.S. and China don’t begin until later today so there were no material developments on the trade war front.

The FOMC Meeting, which is clearly the biggest event of the week, begins this morning and that will likely lead to a sense of “Fed paralysis” in the markets before tomorrow’s announcement and Powell’s press conference however there are still a few important catalysts to watch today.

Economically, the Fed’s preferred measure of inflation: Core PCE Price Index (E: 0.2%) within the Personal Incomes and Outlays report will be the most important report to watch (it is due out before the bell), but there are a few other releases to watch as well: S&P Case-Shiller HPI (E: 0.2%), Consumer Confidence (E: 125.0), and Pending Home Sales (E: 0.3%).

On the earnings front, we will get second quarter results from: MA ($1.82), PG ($1.06), MO ($ 1.10) before the open, and AAPL ($2.10), AMD ($0.08), ALL ($1.48), CHRW ($1.21) after the bell this afternoon.