TradeTheNews.com Weekly
Market Update: European Political Upheaval and Trump Trade Spat No Problem for
Humming US Economy
Fri, 01 Jun 2018 16:04 PM EST
Investors returned from the US holiday break to find markets under siege from
threats in the European political apparatus. Italy looked headed for another
election and Spanish PM Rajoy’s fate looked bleak sparking a risk off rally out
of stocks into the core European and US Treasury bonds. The president stoked
trade war concerns when he suggested they were moving forward with the process
that will result in $50B in tariffs on additional Chinese products ahead of
talks in Beijing . The administration doubled down on Thursday slapping steel
and aluminum tariffs on partners in Europe and North America. The decision
sparked swift backlash and counter tariffs announcements from friends on both
sides of the Atlantic, but the market reaction was relatively muted. By Friday
the political winds laid down after Italian politician obtained approval for a
populist government to take the reins and Spain saw socialist leader Sanchez
ascend to PM.
US indices briefly tested the 50-day moving average on Tuesday before
navigating through global trade headlines for much of the week. Friday’s
stronger than expected May employment report and solid ISM data gave investors
increased confidence that the US economy has gained momentum and is unlikely to
be deterred by geopolitics. The US 10-year yield careened towards 2.75% in the
Italy induced safe have flows before backing up above 2.9% post jobs report.
The Dollar largely stabilized at higher levels as European inflation figures
showed some signs of life but questions remain on how the political winds in
Europe will affect ECB thinking. Crude oil prices consolidated near 1.5 month
lows ahead of this month’s highly anticipated OPEC producers meeting. For the
week the S&P rose 0.5%, the Dow backtracked 0.5% and the NASDAQ gained
1.6%.
In corporate news, a report early in the week that Apple was set to employ only
OLED screens in its future iPhone models sent OLED names higher, though
analysts quickly cast doubt on the feasibility of such a move. Michael Kors
shares slipped after reporting and guiding its SSS flat, despite beating on top
and bottom line guidance. GM rose on a report that SoftBank Vision Fund planned
to invest $2.25B in its GM Cruise self-driving unit. American steel names saw
late-week strength on the US administration's implementation of tariffs against
major allies. May US auto sales topped expectations, continuing to be buoyed by
SUV and pickup demand. And Petrobras shares sputtered Friday on news that its
CEO resigned in response to the government’s move to lower diesel prices amid
trucker strikes.
SUNDAY 5/27
(IT) Italy President Mattarella said to have blocked the formation of a new
government amid concerns that the coalition could hurt the country's membership
in the Euro; Italy President and Cottarelli expected to meet on Monday - US
financial press
(CN) PBOC RAISES OPEN MARKET OPERATION (OMO ) RATE ON 28-DAY REVERSE REPO BY
5BPS TO 2.85% FROM 2.80% (AS EXPECTED)
MONDAY 5/28
(IT) ITALY DEBT AGENCY (TESORO) SELLS €1.75B VS. €1.25-1.75B INDICATED RANGE IN
ZERO COUPON MAR 2020 CTZ; AVG YIELD: +0.35% V -0.275% PRIOR; BID-TO-COVER:
1.86X V 1.58X PRIOR
(ES) Spain Ciudadanos Party leader Rivera (opposition): Legislature is over;
has abandoned his agreement with PM Rajoy (as expected) - speech
(EU) EU Industrial policy chief Bienkowska: Seeing the end of the road for
diesel cars, European Union consumers may do as much as regulators to propel
the the region's car sector into the electricity-powered age - press
TUESDAY 5/29
(CN) White House to proceed with plans to impose 25% tariffs on $50B worth of
imported goods from China - press
(US) MAY DALLAS FED MANUFACTURING ACTIVITY: 26.8 V 23.0E
CRM Reports Q1 $0.74 v $0.43e, Rev $3.01B v $2.94Be
WEDNESDAY 5/30
(FR) FRANCE Q1 PRELIMINARY GDP Q/Q: 0.2% V 0.3%E; Y/Y: 2.2% V 2.1%
(DE) GERMANY MAY CPI SAXONY M/M: 0.5% V 0.0% PRIOR; Y/Y: 2.2% V 1.6% PRIOR
(ID) INDONESIA CENTRAL BANK (BI) RAISES 7-DAY REVERSE REPO RATE BY 25BPS TO
4.75%; AS EXPECTED
(DE) GERMANY MAY UNEMPLOYMENT CHANGE: -11K V -10KE; UNEMPLOYMENT CLAIMS RATE:
5.2% (record low) V 5.3%E
(EU) EURO ZONE MAY BUSINESS CLIMATE INDICATOR: 1.45 V 1.29E; CONSUMER
CONFIDENCE (FINAL): 0.2 V 0.2E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €3.571B VS. €2.5-4.0B INDICATED
RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
(DE) GERMANY MAY PRELIMINARY CPI M/M: 0.5% V 0.3%E; Y/Y: 2.2% V 1.9%E
(US) MAY ADP EMPLOYMENT CHANGE: +178K V +190KE
(US) Q1 PRELIMINARY GDP ANNUALIZED Q/Q: 2.2% V 2.3%E; PERSONAL CONSUMPTION:
1.0% V 1.2%E
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATE UNCHANGED AT 1.25%; AS EXPECTED
(US) Conference Board May Total online job ads 4.70M v 4.75M m/m v 4.80M y/y;
New ads 1.87M v 2.01M m/m v 2.01M y/y
(US) Association of American Railroads weekly rail traffic report for week
ending May 26th: 565.5K, +4.4% y/y
(US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY ROSE AT A MODERATE OR BETTER
PACE IN ALL 12 FED DISTRICTS
(EU) US said to plan to go ahead with tariffs on European Union steel and
aluminum - press
(HK) Press speculates that Macau gaming Rev in May will be +15% y/y
THURSDAY 5/31
(FR) FRANCE MAY PRELIMINARY CPI M/M: 0.4% V 0.3%E; Y/Y: 2.0% V 1.9%E
GM SoftBank Vision Fund to invest $2.25B in GM Cruise, the company's
self-driving unit
(US) INITIAL JOBLESS CLAIMS: 221K V 228KE; CONTINUING CLAIMS: 1.726M V 1.73ME
(US) APR PERSONAL INCOME: 0.3% V 0.3%E; PERSONAL SPENDING: 0.6% V 0.4%E
(US) Nevada reports April casino gaming Rev $953.7M, +7.6% y/y; Las Vegas strip
Rev $499.5M, +5.1% y/y
(US) Commerce Sec Ross: Trump administration imposes metal tariffs on Canada,
Mexico and EU as of midnight (as speculated)
(US) APR PENDING HOME SALES M/M: -1.3% V +0.4%E; Y/Y: +0.4% V -4.3% PRIOR
(US) Atlanta Fed raises Q2 GDP forecast to 4.7% from 4.0% prior
(IT) Five Star official: League and Five Star parties have reached agreement on
coalition govt - press
COST Reports Q3 $1.70 v $1.68e, Rev $31.6B v $31.7Be
(JP) BoJ announcement related to daily bond buying operation; Trims planned
5-10 year JGB purchase to ¥430B v ¥450B prior
FRIDAY 6/1
(HK) Macau May Gaming Rev MOP25.49B, Y/Y: 12.1% v 17%e
(UK) MAY MANUFACTURING PMI: 54.4 V 53.5E (22nd month of expansion)
(US) MAY CHANGE IN NONFARM PAYROLLS: +223K V +190KE
(CA) Pres Trump tweets: "Canada has treated our Agricultural business and
Farmers very poorly for a very long period of time. Highly restrictive on
Trade! They must open their markets and take down their trade barriers! They
report a really high surplus on trade with us. Do Timber & Lumber in
U.S.?"
