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July 2, 2019

10-Year Treasury Yield Back Below 2%

 

Tariffs on an additional $4 billion dollars worth of EU goods are being considered as a result of the WTO aircraft investigation. The announcement was delivered by the Office of the US Trade Representative and stands to increase the planned tariffs on the EU to $21 billion per year in goods. Ultimately, the tariffs would be driven by the outcome of a World Trade Organization case -- a disagreement over unfair subsidies for aircraft manufacturers  that dates back more than 10 years. The EU has already publicly responded with its readiness to “promptly” retaliate...

July 1, 2019

US-China Trade Truce Boosts Risk Assets

 

US and China agreed to resume trade talks over the weekend. After hitting an impasse two months ago, President Trump and Chinese Preside Xi Jinping managed to find common ground during a private meeting alongside the G-20 summit in Japan on Saturday. Much of the acquiescence came on the part of Trump, who agreed to suspend new tariffs on Chinese goods and remove trade restrictions on Huawei Technologies Co. In return, Xi signaled that China would buy more products (amount undisclosed) from US farmers. Ultimately, the major trade conflicts between the world’s two...

June 28, 2019

Rates Flat, Equities Rise to End 1st Half of Year

 

U.S. equities close higher, ending best start to the year in over two decades. The S&P 500 ended an active session up 0.6%, extending its month-to-date gain to 6.9% and its year to date gain to 17.3%. The increase over the first six months of the year is the strongest since 1997 and has come despite an uptick in volatility and uncertainty around trade and global growth. Despite the robust performance of the equity market, gold, which is traditionally a safe haven asset, rose 10.8% in the month of June alone.

 

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June 27, 2019

Equities Bounce Back, Rates Fall on Eve of G20

 

US equities reverse four day losing streak, finish higher on eve of G20. The G20 summit has been the focus of markets all week, and today was no exception. U.S. equities rose 0.19% on the day after the South China Morning Post reported that the two sides were close to agreeing to a truce to prevent any further tariffs. Not all was rosy on the trade front through as the Wall Street Journal reported that China will ask the U.S. to remove the Huawei ban as a precursor to any trade negotiations. The stakes are high for the upcoming two day meeting. President Trump has...

June 26, 2019

Bond Rally Takes a Breather, Equities Fall for Fourth Day in a Row

 

US equities close lower for fourth day in a row as G20 meeting approaches. Treasury Secretary Steve Mnuchin said this morning that trade talks were “90% complete,” initially leading to a rally in US stocks before they reversed course to close slightly down on the day. The S&P 500 closed down 0.12% while the Dow Jones Industrial Average closed down 0.04%. The G20 summit, which begins Friday and continues Saturday, will be an important catalyst for markets which have focused on US-China trade talks for months now.

 

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June 25, 2019

Rates Fall Further Still on Powell Remarks and Weak Consumer Confidence

 

Fed Chair Powell suggests risks to global growth have risen in recent weeks, sending rates lower still. Chair Powell said that the risks to businesses and farmers are increasing amid concerns around trade tensions, giving markets the latest indication that the Fed could move to reduce rates as soon as the next FOMC meeting. Powell added that the FOMC believes that “an ounce of prevention is worth more than a pound of cure,” yet another indication that the Fed is embracing “insurance cuts” as a way to support domestic growth. Treasury yields and swap rates ended a...

June 24, 2019

Rates Fall, Equities Mixed Ahead of Fed Speakers and G20 Summit

 

President Trump signs executive order authorizing new sanctions against Iran. President Trump added that the new sanctions would prevent top officials from accessing financial instruments, the White House’s latest attempt to discourage a re-nuclearization of the country. President Trump added that the sanctions were a “strong and proportionate response to Iran’s increasingly provocative actions.” The continued tensions between the US and Iran has not yet been felt significantly in equity markets as the VIX or “Fear Index” subdued at 15.26.

 

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June 21, 2019

Manufacturing and Services PMI's Disappoint as Fed Officials Lobby for Rate Cuts

 

 

Oil prices continue to rise as President Trump says he was “cocked & loaded” before calling off missile strikes against Iran. The President added that he called off the strikes after recognizing that they would be a disproportionate response to the downing of a US drone. US crude rose over 1% in response to the continued escalation of tensions. Gasoline futures also rose sharply after a major fire at a large refinery in Philadelphia. Crude is now up to $57.66/barrel after falling to nearly $50/barrel in late June.

 

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June 20, 2019

Equities Rise to Record as 10 Year Yield Briefly Dips Below 2%

 

Iran shoots down U.S. drone in international waters, escalating brinkmanship between Washington and Tehran. The incident was branded as a “very big mistake” by President Donald Trump who also refused to specify what action the U.S. would take in response, saying simply “you’ll find out.” Crude oil jumped higher worldwide, pushing through the recent highs established last week after multiple tankers were attacked in the region. U.S. crude rose 5.80% to close at $56.88/barrel.

 

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June 19, 2019

Fed Holds Rates Unchanged, Leaves Door Open for Future Cuts

 

FOMC leaves rates unchanged, but Fed statement and Powell press conference set stage for July rate cut. The market largely expected a shift in tone, namely the removal of the word “patient” from the FOMC’s statement. That said, the Fed’s comments today signaled an even more dovish stance than the market expected, citing rising “uncertainties” and adding that the Fed would “act as appropriate to sustain the expansion”. Markets also got an updated “Dot Plot” today which shows the median interest rate forecast of Fed officials into the future. While the Dot Plot...

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