TradeTheNews.com Weekly
Market Update: Trade war opens on new front
Fri, 31 May 2019 16:13 PM EST
The holiday shortened week opened amid light volumes and continued hand ringing
by investors. The US/China trade war showed no signs of letting up with
rhetoric on each side only amplifying a growing narrative that not much should
be expected if and when Trump and Xi meet at the G20 in late June. Economic
data continued to decelerate, particularly outside of the US. Chinese PMI data
deteriorated for the first time in 3-months and German CPI figures weakened. A
raft of US retail earnings were nothing to cheer about either, raising doubts
about the health of what to this point has been a resilient US consumer. By
Wednesday investors were fleeing risk assets like stocks and commodities
resulting in continued flows into the relative safety of government bonds and
gold. Major US indices dipped back below their 200-day moving averages and
interest rates retreated further. WTI crude futures dropped below $55 for the
first time since February.
Those investors who pared back on risk assets were rewarded on Friday when the
Trump administration announced a surprise move to slap tariffs on Mexico. The
White House emphasized the move was intended to prod the Mexican government to
help fight an illegal immigration, but the President himself said he also
aspired to see more jobs and business move back to the US. The Mexican peso
dropped 3% on the news while stocks with perceived Mexico exposure like autos
got drubbed. A number of prominent Republican politicians and business trade
groups came out in opposition to the tariffs as the wrong policy for the task.
Interest rates continued to plumb lower this week. The US 10-year Treasury
yield slid to a 2-year low below 2.15% and the German Bund to a new record
negative rate below -0.20%. Copper and oil fell while Gold prices rose sharply
after the Mexico tariff announcement. Wall Street forecasters began
incorporating multiple Fed rate cuts into their models for later this year
which mirrored movements seen across futures markets. The Nasdaq dropped
2.4%,the DJIA fell 3%, and the S&P lost 2.6%, its biggest weekly drop since
December.
In corporate news this week, Global Payments and Total System Services
confirmed they would combine in a $21B all-stock merger of equals, notching yet
another deal within the busy fintech space. Cypress Semi shares rose on a
report that the company is working with advisers to explore strategic options,
including a sale, though the company had no comment. Beyond Meat shares
extended their meteoric rise on reports that KFC has held meetings with plant-based
meat producers over the launch of a potential vegan version of fried chicken.
Friday saw press reports speculate that both Amazon and cable companies could
have interest in wireless spectrum and or assets that are likely to become
available from required divestitures needed to get regulatory approval of the
Sprint/T-mobile deal.
SUNDAY 5/26
(CN) China releases plan to increase number of hydrogen filling stations in
Yangtze River Delta region from 6 to 500 by 2030 - Chinese Press
TUESDAY 5/28
NIO Reports Q1 (CNY) Net -2.42 v -3.20 y/y, Rev 1.63B v 1.54Be
*(EU) EURO ZONE MAY BUSINESS CLIMATE INDICATOR: 0.30 V 0.40E
TSS Confirms To be acquired by Global Payments for ~$119.86/shr in all share
transaction valued at ~$21.5B
(IT) EU's Moscovici: Going to exchange views with Italy, not favoring sanctions
for the country
(DE) German Chancellor Merkel said to believe that her chosen successor (CDU
party leader Kramp-Karrenbauer) is not up to the job; vows to stay in position
until 2021
*(US) MAY CONSUMER CONFIDENCE: 134.1 V 130.0E (highest since Nov)
(US) May Dallas Fed Manufacturing Activity: -5.3 v 6.2e
WDAY Reports Q1 $0.43 v $0.41e, Rev $825.1M v $814Me
(CN) China National Development and Reform Commission (NDRC) Spokesperson:
China will give priority to domestic needs for rare earth, not ruling out using
rare earths in trade dispute with US - SCMP
WEDNESDAY 5/29
*(DE) GERMANY MAY UNEMPLOYMENT CHANGE: +60K V -8KE (1st rise in 2 year);
UNEMPLOYMENT CLAIMS RATE: 5.0% V 4.9%E
(US) Nevada reports April casino gaming Rev $936.5B, -1.8% y/y; Las Vegas strip
Rev $481.9M, -3.5% y/y
*(US) MAY RICHMOND FED MANUFACTURING INDEX: 5 V 7E
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 1.75%; AS
EXPECTED
(US) Association of American Railroads weekly rail traffic report for week
ending May 25th: 528.0K, -6.7% y/y (has fallen for 15 consecutive weeks)
(IR) Iran supreme leader Khamenei: repeats we will not negotiate with US,
especially regarding Iran's military capabilities
(IL) Israel to hold new elections on Sept 17th after Netanyahu fails to form
coalition govt
THURSDAY 5/30
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €5.25B VS. €4.25-5.25B INDICATED
RANGE IN 5-YEAR, 7-YEAR AND 10-YEAR BTP BONDS
*(US) Q1 PRELIMINARY GDP ANNUALIZED Q/Q: 3.1% V 3.0%E; PERSONAL CONSUMPTION:
1.3% V 1.2%E
(IT) Italy Dep PM Salvini (League): Ready to end Italy coalition government
unless Five-Star Party supports my tax plan
GPS Reports Q1 $0.24 v $0.31e, Rev $3.70B v $3.76Be
COST Reports Q3 $2.05 v $1.83e, Rev $34.7B v $34.9Be
(US) Pres Trump said to be preparing to threaten Mexico with new tariffs as
part of effort to force country to crack down on Central American migrants -
Wash Post
(US) US President Trump: US to impose 5% tariff on all goods from Mexico.
Tariffs will gradually increase to 25% "until illegal immigration problem
is remedied"
FRIDAY 5/31
(DE) GERMANY MAY CPI SAXONY M/M: 0.3% V 0.9% PRIOR; Y/Y: 1.4% V 1.9% PRIOR
BUNDS Safe haven flows has German 10-year yield testing record lows of -0.20%
(DE) GERMANY MAY PRELIMINARY CPI M/M: 0.2% V 0.3%E; Y/Y: 1.4% V 1.6%E
(US) APR PERSONAL INCOME: 0.5% V 0.3%E; PERSONAL SPENDING: 0.3% V 0.2%E
(US) Atlanta Fed cuts Q2 GDP forecast to 1.2% from 1.3% prior
