Posts

Trade Truce

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What’s in Today’s Report:

  • Is A Trade Truce a Bullish Gamechanger?  No.  Here’s Why.

It’s green on the screen and futures are 1% higher as optimism for a U.S./China trade truce surged after the close.

President Trump said talks went “very well” yesterday and will meet Liu He in the White House at 2:45 p.m. today and a trade “truce” with no more additional tariffs is expected.

Economically, the only notable number was German CPI, which met expectations at 1.2% yoy.

Markets will be focused on any trade headlines as that’s clearly the most important topic today.  From a timing standpoint, I’d expect some sort of announcement on the outcome of the negotiations between lunchtime and the close, as Trump is meeting with He at 2:45 p.m.  At this point, a trade truce with some elimination of pending tariff increases is fully expected and anything less would be a disappointment.

Away from trade, we get Import & Export Prices (E: -0.1%, 0.0%) as well as Consumer Sentiment (E: 92.0), but unless the later is very bad, neither number should move markets.  There are also several Fed speakers today including Kashkari (8:00 a.m. ET), Rosengren (1:15 p.m. ET) and Kaplan (3:00 p.m. ET) but none of them should move markets.

If There’s No Trade Deal Should We Rotate to Value?

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What’s in Today’s Report:

  • If There’s No U.S./China Trade Deal, Should We Rotate to Value?  No.  Here’s Why.
  • EIA/Oil Market Update

Futures are flat following conflicting U.S./China trade headlines as the “noise” on this topic reaches a peak as senior-level talks begin today.

Positively, the Trump administration appears ready to grant permanent waivers for U.S. companies to send non-sensitive components to Huawei.

Negatively, the South China Morning Post said the lower-level talks earlier this week didn’t go well.

The U.S./China headlines will dominate markets today and tomorrow.  Broadly speaking, a trade “truce” that results in no more additional tariffs (and hopefully removes the tariffs expected to go into effect) is still the market expectation.  Regarding the conflicting headlines, the easiest way to cut through the noise is this: If the Chinese delegation leaves before Friday night, that’s bad.  If they leave after, that’s good.

Is the Trade War A Bearish Gamechanger Now?

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview (All About U.S./China Trade)
  • Weekly Economic Cheat Sheet

Futures are modestly higher after positive U.S./China trade comments by President Trump.

Trump stated early this morning that China “called” and conveyed a desire to get back to the negotiating table.

It’s unclear exactly what Trump means (Chinese officials say no call has happened between the U.S. and China today) but the generally optimistic tone is helping to reverse some of Friday’s declines.

Today any U.S./China trade-related headlines will move markets but it’ll take more than just vague commentary by officials to undo the damage done to markets and investors’ psyches on Friday.

Economically, Durable Goods (E: 1.1%) will be released later this morning and it’s an important number, as any potential economic slowdown will emanate from reduced business spending and investment.  The bottom line, a solid number here will help economic sentiment.

Tom Essaye Appeared on Cheddar on February 27, 2019

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U.S. Trade Representative, Robert Lighthizer, urged caution on China while testifying before Congress. Tom Essaye, Founder of the Sevens Report Research, joined Cheddar to discuss the contradicting narratives coming from President Trump, market and…Watch the entire interview here.