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August 30, 2018

China Tariff Threat Scares Risk Assets Despite Strong Inflation Data

 

Consumer Spending Remains Solid, Inflation Hits Target

This morning a report from the Commerce Department presented a strong case for more US economic growth in the second half of the year.  Personal spending amongst American households rose by a seasonally adjusted 0.4% during July, matching expectations and extending the prior month’s robust jump.  The figure was driven largely by consumers increasing purchases at restaurants and hotels and was supported by a 0.3% growth in personal income.  Compared to July 2017, consumer spending climbed 2.8% -- the...

August 29, 2018

Stocks Rally in Response to GDP Data, Trade Negotiation Progress

 

GDP Sees Upward Revision

This morning the Commerce Department reported its second and penultimate estimate of Q2 GDP growth at 4.2% -- a 0.1% increase from the initial reading.  Much of the strength was attributed to nonresidential fixed investment, which rose 6.2% vs. the 5.4% observed in the prior estimate.  The consumer spending component remained robust at an annualized 3.8% gain, albeit revised slightly lower from the +4.0% initial level.  The personal consumption expenditure recorded a 3.8% rise, down from the +4.0% posted in the first estimate.  ...

August 28, 2018

Yields Continue Higher with Trade Talks

 

Don’t Forget About Canada

Today Canadian Foreign Minister Chrystia Freeland arrived in Washington, DC to join the negotiation table with US and Mexican trade officials.  The Trump administration has signaled it will give until Friday for a successful integration of Canada into the US and Mexico’s agreed upon trade plans.  If unable to do so, both the US and Mexico have committed to moving ahead with a bilateral agreement excluding Canada.  “Hopefully they’ll come on board but if not, we’ll move on with Mexico,” Treasury Secretary Steven Mnuchin stated...

August 27, 2018

Trade Talks Between US and Mexico Advance

 

US and Mexico Move Closer to New (don’t call it) NAFTA

Risk assets gained favor today after the announcement this morning that the US and Mexico had come to an agreement to rewrite portions of the North American Free Trade Agreement.  A formal deal could be announced as soon as this Friday and will include resolutions on a number of contentious trade areas including:

  • Locations for the building of automobiles across the continent

  • Requirements around the sourcing for the materials used for new cars

  • Wage and...

August 24, 2018

Powell's Comments in Jackson Hole Drive Markets

 

Jackson Hole, Powell Comments

Speaking at the Fed’s annual symposium in Jackson Hole, Fed Chairman Jerome Powell reassured investors by expressing confidence in the state of the U.S. economy and by indicating the Fed is likely to continue with a gradual approach to rate hikes.  Powell’s speech had been anxiously awaited following critical comments throughout the week from President Trump about recent Fed policy action.  Powell has the unenvious job of having to avoid stunting the economic expansion by raising rates too quickly, while at the same time...

August 23, 2018

Powell Set to Speak at Jackson Hole as US-China Tariffs Build

 

Stocks Slip with Tariffs, Political Drama

US equity markets trended lower today as a fresh round of tariffs ($16 billion) between the US and China were officially enacted despite ongoing trade talks between the two nations.  The geopolitical tensions added to the ongoing legal cloud hanging over Washington and drove major indices 0.1%-0.3% lower on the day.  US Treasurys held within a tight range for the majority of the session, and yields/swap rates finished 1-3bps higher across the curve in a bear-steepening pattern.  The US dollar gained 0.6% against...

August 22, 2018

FOMC Minutes Yield No Surprises, Trump and Trade in Focus

 

FOMC Minutes Signal Near Term Hike, Highlight Trade Concerns

Today the Fed released the minutes from its July 31-Aug. 1 meeting in which the Committee made the decision to hold its benchmark borrowing rate at a target range of 1.75%-2.00%.  The primary items discussed in the meeting had no significant surprises for the financial markets and included:
 

  • Removal of the word “accommodative” from the description of its monetary policy, with many members feeling it will “no longer be appropriate”

  • Acknowledgement by...

August 21, 2018

Trade Uncertainty Eases While Political Drama Dominates the Close

 

Risk Assets Gain on Hope Trade Tensions Will Ease

All three major US equity indices closed higher on the day, as investors were optimistic on the possibility  that the trade tensions between the US and China would ease.  The NASDAQ had the best day of the three gaining 0.49%. The DJIA and the S&P 500 climbed 0.24% and 0.21%, respectively, with the S&P hitting a new record high.  US Treasuries maintained a steady selloff throughout the trading session before paring a portion of the losses following the Cohen/Manafort announcements.  Yields/swap rates...

August 20, 2018

Market Moves Forward Despite Geopolitical Concerns

 

Optimism Dominates

All three major US equity indices closed higher on the day, with investors confident that, in spite of trade wars and other geopolitical tensions, the market will continue to march higher.  The DJIA and the S&P 500 climbed 0.35% and 0.24%, respectively, while the DJIA eked out a slight gain at +0.06%.   US Treasuries rallied 2-4 bps across the curve, with the 10yr US Treasury Note closing at a yield near 2.82%, 4bps lower than where it closed on Friday.  In foreign exchange markets, the US Dollar (USD) fell 0.3% vs both the Euro (EUR...

August 17, 2018

Easing Trade Concerns Boost Risk Assets

 

Trade War Concerns Easing

Risk assets posted a second consecutive day of gains, boosted by the news of refreshed trade talks between the US and China along with comments from Mexico’s economy minister Ildefonso Guajardo, who stated his hopes to resolve the outstanding bilateral issues with NAFTA by next week.  All three major US stock indices finished the week on a high note, with the DJIA advancing 0.4% while the S&P 500 (+0.3%) and Nasdaq (+0.1%) posted more modest gains.  US Treasurys held within a tight range throughout the trading session, with the...

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