TradeTheNews.com Weekly
Market Update: Cooldown of trade rhetoric allows relief rally
Fri, 30 Aug 2019 16:06 PM EST
US stocks broke a four-week losing streak on optimism the US and China are at
least still talking, despite another round of tariffs about to go into effect
on Sunday. Markets seemed to be heartened by China merely noting that it
remains “in effective contact” with the US. Beijing was also seen to be
exercising continued restraint over the situation in Hong Kong, though some
protest leaders were arrested on Friday, raising the possibility that the
weekend could see a wider crackdown. For his part, President Trump mostly
refrained from commenting on China this week, instead focusing his tweeted ire
on the Federal Reserve, as well as scolding “weak companies” for blaming their
poor results on tariffs rather than bad management.
Economic data continued to be mostly favorable for the US, highlighted by the
second reading on Q2 GDP remaining at a solid 2%, though Friday saw a crack in
consumer confidence as the University of Michigan confidence reading had its
biggest monthly drop in over six years. European data experienced more
weakness, including German monthly CPI data coming in below already low
expectations. Given that data, markets were somewhat surprised by the ECB’s
Knot suggesting that expectations for the ECB policy decision in September are
“overdone” and that the central bank can hold off on resuming QE for the time
being. The UK political situation was complicated by PM Johnson getting the
Queen’s blessing to suspend Parliament for a month in order to enhance the
threat of a ‘no deal’ Brexit, but the EU did not appear to flinch despite the
swiftly approaching October 31 deadline. Italy’s PD and 5-Star parties made
progress on talks to form a new government, though some legislators worried
about the ‘ultimatum’ set by 5-Star leader Di Maio.
The 2-10 year Treasury yield curve remained inverted for most of the week,
briefly climbing out of inversion only late in the session on Friday. Crude
futures rose sharply mid-week on big inventory drawdowns in the API and DOE
data, only to plunge on Friday as Russia said it would produce more oil than
promised under the OPEC+ agreement. For the week, the S&P gained 2.8%, the
DJIA added 3%, and the Nasdaq rose 2.7%.
In corporate news this week, Best Buy shares dropped after reporting a miss on
revenue and narrowing its SSS outlook amid rising tariffs, though the retailer
raised its EPS guidance slightly. Tiffany & Co shares were volatile after
recording an earnings beat for Q2 but warning that Hong Kong protests and
declining store traffic from Chinese tourists were hurting sales. At the other
end of retail, discount chains Dollar Tree and Dollar General both easily beat
expectations and raised guidance. Workday lifted on a top and bottom line beat
and a boost to its subscription revenue outlook. Celgene divested its rights
for psoriasis medication Otezla to Amgen for $13.4B in connection with its
pending merger with Bristol Myers. Philip Morris confirmed it is in discussions
with Altria Group, Inc. regarding a potential all-stock merger of equals, with
a possible deal announcement coming within weeks. J&J and its peers lifted
after an Oklahoma court ruling on opioid liability was not as onerous as some
had feared.
MON 8/26
*(DE) GERMANY AUG IFO BUSINESS CLIMATE SURVEY: 94.3 V 95.0E; CURRENT ASSESSMENT
SURVEY: 97.3 V 98.8E
*(US) JULY PRELIMINARY DURABLE GOODS ORDERS: 2.1% V 1.2%E; DURABLES
EX-TRANSPORTATION: -0.4% V 0.0%E
*(US) AUG DALLAS FED MANUFACTURING ACTIVITY: +2.7 V -4.0E
TUES 8/27
*(DE) GERMANY Q2 FINAL GDP Q/Q: -0.1% V -0.1%E; Y/Y: 0.4% V 0.4%E
(CN) China State Council said to issue statement on plan to boost consumption -
financial press
(IT) Italy Senate PD leader Marcucci: progress has been made in govt deal talks
with 5-Star Party; prepared to accept Conte as PM
*(US) AUG RICHMOND FED MANUFACTURING INDEX: +1 V -2E
*(US) AUG CONSUMER CONFIDENCE: 135.1 V 129.3E
WED 8/28
*(UK) PM Johnson: Confirms he seeks suspension of a parliament citing that the
govt needs new fresh legislation for its domestic program
(US) Nevada reports July casino gaming Rev $1.02B, +2.9% y/y; Las Vegas strip
Rev $541.8M, +1.6% y/y
(UK) Privy Council: Queen Elizabeth has approved suspension of Parliament;
Parliament to be 'prorogued' from no later than Sept 12 until Oct 14th (as
speculated)
(IT) Italy's Five-Star party and PD party confirm deal to form new government
under continued leadership of PM Giuseppe Conte; no new elections needed -
press
(JP) Japan Investors Net Buying of Foreign Bonds: -¥911.9B v ¥499.8B prior
week; Foreign Net Buying of Japan Stocks: +¥3.9B v -¥359.6B prior week
THURS 8/29
(CN) China Commerce Ministry (MOFCOM) spokesperson Gao Feng: China and US are
in effective contact
*(DE) GERMANY AUG UNEMPLOYMENT CHANGE: +4.0K V +4.0KE; UNEMPLOYMENT CLAIMS
RATE: 5.0% V 5.0%E
*(EU) EURO ZONE AUG BUSINESS CLIMATE INDICATOR: +0.11 V -0.14E
BBY Reports Q2 $1.08 v $0.99e, Rev $9.54B v $9.57Be
*(DE) GERMANY AUG PRELIMINARY CPI M/M: -0.2% V -0.1%E; Y/Y: 1.4% V 1.5%E
*(US) Q2 PRELIMINARY GDP ANNUALIZED Q/Q: 2.0% V 2.0%E; PERSONAL CONSUMPTION:
4.7% V 4.3%E
(EU) ECB Pres nominee Lagarde: ECB has not hit the lower bound on interest
rates; ECB has a broad toolkit and must be ready to act - written responses to
EU Parliament
(EU) ECB's Knot (Netherlands): does not see need to resume QE program right
now; market expectations for ECB Sept decision are 'overdone'
WDAY Reports Q2 $0.44 v $0.35e, Rev $888M v $873Me
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50%; AS
EXPECTED
FRI 8/30
(EU) ECB's Rehn (Finland) on panel: Important to maintain strong monetary
stimulus; situation calls for an effective policy package
*(US) JULY PERSONAL INCOME: 0.1% V 0.3%E; PERSONAL SPENDING: 0.6% V 0.5%E
(US) JULY PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.4% V 1.4%E
(US) AUG CHICAGO PURCHASING MANAGER INDEX (PMI): 50.4 V 47.5E
*(US) AUG FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 89.8 V 92.3E (largest
monthly decline since Dec 2012)
(RU) Russia Energy Min Novak: Russia in August will cut output by less than
planned - Russia press
