TradeTheNews.com Weekly
Market Update: Political and Trade Troubles in Washington Discounted by Bullish
Markets
Fri, 24 Aug 2018 16:06 PM EST
US stock indices made a run at historic highs this week. Hopes for movement in
the NAFTA and China trade negotiations, abatement of the recent US dollar
strength, a continued benign interest rate environment as well as a thin summer
trading were most often cited for the melt up. The view on the US consumer
remained vibrant, getting support from historically strong earnings reports
from several high profile US retailers. Target’s CEO declared the consumer
environment was the best of his career. The momentum waned somewhat mid-week
after President Trump’s former campaign Manager was found guilty on various
counts, and his former personal lawyer Michael Cohen took a plea while his
lawyer insinuated he has further information related to the Russia election
hacking investigation.
The US went ahead and slapped tariffs on another $16B in Chinese goods amid low
expectations for progress as trade negotiations resumed in Washington.
Meanwhile US/Mexico trade talks fell short of an agreement, but will continue
next week. Both the Fed and ECB released minutes from their most recent
meetings and the commentary did little to lift Treasury yields from the lows of
the month. The US curve flattened further with the 2-10 yield spread narrowing
toward 20 basis points for the first time this cycle. On Friday Fed Chairman
Powell reiterated the case for gradual rate hikes, and hinted that tightening
may slow when the ‘neutral’ rate is reached even if the economy is still strong
because there is no sign of inflation accelerating. Stocks pushed aside the
political and trade troubles and ended higher: the S&P500 gained 0.9% on
the week to set a new record high, while the DJIA added 0.5% and the Nasdaq
surged 1.7%.
In corporate news this week, a swath of retailers released earnings, with mixed
results. Target posted its best quarterly comps figure in 13 years. Lowe's cut
its outlook after announcing plans to close every one of its 99 Orchard Supply
stores. Gap investors took profits after the clothier affirmed its FY outlook.
Williams Sonoma jumped on an earnings beat, but L Brands slipped to its lowest
level in seven years on disappointing guidance. Footlocker slid on a comp sales
miss, and Hibbett Sports reported a surprise loss and cut guidance. Online
brokers took a hit after JPMorgan announced an investing app with free or
discounted trades and no-fee access to stock research. There were reports that
Saudi Arabia had abandoned its Saudi Aramco IPO, but the Saudis responded that
the government remains committed to the plan but will do so at a time of its
own choosing. PepsiCo announced it would acquire carbonated beverage machine
maker Sodastream for $144/share in cash in a deal valued at $3.2B. And mobile
game developer Zynga got a boost from an agreement with Disney to produce
free-to-play Star Wars videogames.
MONDAY 8/20
SODA To be acquired by PepsiCo for $144/shr in cash valued at $3.2B
(US) President Trump: not thrilled with what Fed Chief Powell is doing so far,
should be more accommodating - press interview
(US) President Trump: does not anticipate much coming out of meeting with
Chinese delegation regarding trade talks this week - press interview
(TR) President Trump: will give no concessions to Turkey over detained US
pastor; not concerned about any economic fallout for Europe over Turkey
sanctions - press interview
BHP.AU Reports FY18 Underlying Net $9.6B (continuing ops) v $9.2Be, Underlying
EBITDA $24.1B (includes Onshore US business) v $24.3Be, Rev $45.8B v $45.5Be
TUESDAY 8/21
JPM To unveil new investing app with free or discounted trades, portfolio
building tool, and no-fee access to stock research - CNBC
(US) Former Trump lawyer Cohen enters guilty plea at court hearing; says he
violated campaign law at direction of the 'candidate', sought to influence the
election
(US) Former Trump campaign chair Paul Manafort found guilty on eight counts
including tax fraud, bank fraud charges - press
(VE) 7.3 magnitude earthquake reported off northern coast of Venezuela
(MX) US said to announce 'handshake' NAFTA deal related to Mexico on Thursday
(Aug 23rd), says Politico; Mexico said to deny the existence of a deal related
to NAFTA, according to a separate report
WEDNESDAY 8/22
LOW Reports Q2 $2.07 v $2.02e, Rev $20.9B v $20.8Be; adjusts outlook, strategic
reassessment is ongoing to exit Orchard Supply Hardware
TGT Reports Q2 $1.47 v $1.40e, Rev $17.8B v $17.3Be
(US) USTR: no deal yet on NAFTA, there are still major outstanding issues
*(US) JULY EXISTING HOME SALES: 5.34M V 5.40ME (slowest pace in over two years)
*(US) DOE CRUDE: -5.8M V -2ME; GASOLINE: +1.2M V -1ME; DISTILLATE: +1.8M V
+1.5ME
ARAMCO.IPO Saudi Arabia reportedly abandons Aramco IPO and has dismissed
advisers - press
*(US) FOMC MINUTES FROM AUG 1ST MEETING: MANY OFFICIALS SAID ANOTHER RATE
INCREASE WOULD LIKELY SOON BE APPROPRIATE; OFFICIALS NOTE RATES MOVING CLOSER
TO ESTIMATES OF NEUTRAL
THURSDAY 8/23
*(FR) FRANCE AUG BUSINESS CONFIDENCE: 105 V 107E; MANUFACTURING CONFIDENCE: 110
V 108E
(FR) FRANCE AUG PRELIMINARY MANUFACTURING PMI: 53.7 V 53.5E (23rd month of
expansion)
*(DE) GERMANY PRELIMINARY MANUFACTURING PMI: 56.1 V 56.5E (44th month of
expansion)
*(EU) EURO AUG PRELIMINARY MANUFACTURING PMI: 54.6 V 55.2E (61st month of
expansion)
(US) National Hurricane Center (NHC): Hurricane Lane (Category 4) is the
biggest weather threat to Hawaii in decades (1959 and 1992 last time hurricanes
made landfall)
BABA Reports Q2 $1.22* v $1.29e, Rev $12.2B v $12.3Be
*(US) AUG PRELIMINARY MARKIT MANUFACTURING PMI: 54.5 V 55.0E (9-month low)
*(US) JULY NEW HOME SALES: 627K V 645KE
GPS Reports Q2 $0.76 v $0.72e, Rev $4.09B v $3.98Be
*(CN) CHINA PBOC CONDUCTS CNY149B 1-YEAR MEDIUM-TERM LENDING FACILITY (MLF) V
CNY383B PRIOR AT 3.30% V 3.30% PRIOR (2nd MLF operation this month)
(AU) Australia PM Turnbull reiterates stance that said will not stand for PM
and resigns as the leader of the Liberal party; Ruling Liberal Party voted 45
to 40 to hold leadership ballot for the party
(AU): Australia Treasurer Morrison to replace Turnbull as PM after winning
party leadership vote - Australia Media
FRIDAY 8/24
(DE) GERMANY Q2 FINAL GDP Q/Q: 0.5% V 0.5%E; Y/Y: 2.0% V 2.0%E
(CN) China PBoC said to resume counter-cyclical factor in Yuan mid-point fixing
mechanism - financial press
*(US) JULY PRELIMINARY DURABLE GOODS ORDERS: -1.7% V -1.0%E; DURABLES
EX-TRANSPORTATION: 0.2% V 0.5%E
*(US) Fed Chair Powell: Gradual hikes are likely appropriate if growth stays
strong; US economy is strong; does not seem to be elevated risk of overheating
- Jackson Hole symposium speech
(MX) Mexico Pres-elect Lopez Obrador reportedly holds position on oil policy
that is hindering new NAFTA agreement - press
(KR) Pres Trump asks Sec of State Pompeo to cancel North Korea trip at this
time due to lack of denuclearization progress; says China is not helping with
denuclearization process 'as they once were'
