TradeTheNews.com Weekly
Market Update: Fed hints of rate cuts soothe concerns over widening trade war,
weaker data, and probes of tech giants
Fri, 07 Jun 2019 16:06 PM EST
Trade and politics remained the overriding constraint to risk appetite heading
into the week, but big tech regulation concerns resurfaced this week, adding to
the ‘wall of worry.’ Reports emerged that the US regulators were considering a
fresh look at antitrust issues at Google and Facebook, sending the Nasdaq spiraling
lower on Monday. On top of that global economic data continued to disappoint
amid lingering trade tensions, forcing interest rates lower while pulling
forward Fed rate cut expectations. Talks between the US and Mexico were
reportedly constructive, and President Trump said he sees a good chance of
making a deal, but maintained the threat of imposing a 5% tariff on
cross-border trade starting Monday, despite resistance from the Chamber of
Commerce and many Republicans in Congress.
The US/China trade spat persisted, though there were some murmurings of early
preparations for Trump/Xi talks at the G20 and perhaps again later this summer.
Those reports, along with Chairman Powell and other Fed officials hinting that
they stand ready to “act as appropriate to sustain the expansion” amid growing
uncertainty surrounding trade and global growth, helped stock markets rebound
sharply mid-week. A chorus of dovish Fed speak was accompanied by India and
Australia rate cuts and Thursday’s ECB announcement which again lowered growth
and inflation forecasts while pushing back expectations for the next ECB rate
hike by another seven months. A big miss on US nonfarm payrolls in Friday’s
employment report added to speculation that the Fed will ride to the rescue
with up to three rate cuts later this year, and stocks closed out the week on a
high note, with the S&P gaining 4.4%, the DJIA up 4.7%, and the Nasdaq
adding 3.9%.
In corporate news this week, Fiat withdrew its offer to merge with Renault,
citing resistance from French government regulators. The FTC and DOJ reportedly
are divvying up scrutiny of large tech firms, with the FTC taking the
regulatory lead looking into Facebook and Amazon, while the Justice Department
will focus on Apple and Google. The House Judiciary Committee is also opening
its own probe of practices at the large tech firms. Salesforce beat consensus
and raised its EPS outlook, noting increased momentum for its MuleSoft
platform. Stitch Fix shares jumped after strong active client numbers boosted quarterly
revenue growth. Tiffany’s comparable store sales and margins disappointed, and
the jewelry retailer adjusted its outlook lower. Skyworks cut its Q3 outlook,
citing the impact of Commerce Department actions against Huawei. Barnes and
Noble agreed to be taken private by Elliott Advisors for $6.50/share in a deal
valued at $683M after months of speculation about the struggling bookstore’s
future. Google bought big data analytics platform Looker for $2.6B in cash in a
move to compete in the business intelligence software space.
MONDAY 6/3
*(ES) SPAIN MAY MANUFACTURING PMI: 50.1 V 51.3E
*(UK) MAY PMI MANUFACTURING: 49.4 V 52.2E (1st contraction in 34 months)
AMD and Samsung announce strategic partnership in ultra low power, high
performance graphics technologies
*(US) MAY ISM MANUFACTURING: 52.1 V 53.0E; PRICES PAID: 53.2 V 51.0E
*(US) APR CONSTRUCTION SPENDING M/M: 0.0% V 0.4%E
FB Reportedly FTC to take regulatory lead on review Facebook competition
practices, as US regulators divvy up scrutiny of large tech firms - press
FB FTC reportedly has opened an antitrust review of Facebook practices -
press
*(US) FED'S BULLARD (DOVE, VOTER): INTEREST RATE CUT MAY BE WARRANTED SOON ON
TRADE AND INFLATION RISKS
AAPL Justice Dept said to have been given jurisdiction for potential
investigation of Apple as part of broad study of tech companies by antitrust
regulators - press
(US) SEMI: Q1 Worldwide Semiconductor Manufacturing Equipment Billings: $13.8B
v $17.0B y/y; -8% y/y; -19% q/q
TUESDAY 6/4
*(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.25%;
AS EXPECTED (1st rate move since Aug 2016, resuming the easing cycle, record
low rate)
TIF Reports Q1 $1.03 v $1.01e, Rev $1.00B v $1.02Be; Raises Quarterly dividend
5.5% to $0.58 from $0.55 (indicated yield 2.57%)
(CN) China Ministry of Commerce (MOFCOM): Reiterates stance that US-China trade
dispute should be solved via dialogue and based upon mutual trust - press
(IT) Italy Dep PM Di Maio: confirms he and Dep PM Salvini have spoken and
reached agreement to work together
(US) VP Pence schedules speech on US-China relations for June 24th, just days
before potential Trump-Xi meeting - CNBC
(US) World Bank cuts 2019 global growth forecast from 2.9% to 2.6% on trade
concerns
CRM Reports Q1 $0.93 v $0.61e, Rev $3.74B v $3.68Be
SWKS Cuts Q3 $1.34 v $1.50e, Rev $755-775M v $825Me (prior $1.50, Rev
$815-835M), reflects impact of Commerce Dept actions against Huawei
WEDNESDAY 6/5
EU Commission: Confirms preparation of disciplinary process against Italy over
public debt (as widely speculated)
*(UK) MAY SERVICES PMI: 51.0 V 50.5E (2nd straight expansion)
(DE) GERMANY MAY FINAL SERVICES PMI: 55.4 V 55.0E (confirms 71st month of
expansion)
*(US) MAY ISM NON-MANUFACTURING INDEX: 56.9 V 55.4E
*(US) MAY ADP EMPLOYMENT CHANGE: +27K V +185KE (lowest since Mar 2010)
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY GREW AT MODEST PACE FROM
APRIL THROUGH MID-MAY; NOTES 'SLIGHT IMPROVEMENT' IN GROWTH FROM PREVIOUS
PERIOD
(US) Association of American Railroads weekly rail traffic report for week
ending June 1st: 478.7K, -6.1% y/y (has fallen for 16 consecutive weeks)
THURSDAY 6/6
(CN) China Commerce Ministry (MOFCOM) report: US benefits a lot from bilateral
trade and should create conditions for more balanced trade - CCTV
*(IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY 25BPS TO 5.75%; AS
EXPECTED
(US) US Pres Trump: Reiterates Mexico has made progress in tariffs talks but
needs to do more; talks are also ongoing with China
*(EU) EURO ZONE Q1 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.2% V 1.2%E
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED;
pushes back forward guidance by another 6 months; provides TLTRO-3 details
*(US) Q1 FINAL NONFARM PRODUCTIVITY: 3.4% V 3.5%E; UNIT LABOR COSTS: -1.6% V
-0.9%E
(US) Fed Reports Q1 Financial Accounts: Household Change in Net Worth: $4.691T
v -$3.73T prior
(MX) US said to be considering delaying Mexico tariffs as implementation date
approaches; Mexican officials seek more time for talks - press
FRIDAY 6/7
*(US) MAY CHANGE IN NONFARM PAYROLLS: +75K V +175KE
*(US) MAY UNEMPLOYMENT RATE: 3.6% V 3.6%E (matches lowest level since 1969)
(US) Atlanta Fed cuts Q2 GDP forecast to 1.4% from 1.5% prior
(US) APR CONSUMER CREDIT: $17.5B V $13.0BE
