Markets digest Saudi oil attack and Fed’s split decision

TradeTheNews.com  Weekly Market Update: Markets digest Saudi oil attack and Fed’s split decision

This week’s trade opened engulfed in a significant geopolitical scare after a largescale attack on Saudi Arabia’s oil infrastructure over the weekend. Oil prices jumped nearly 15% on Monday as Saudi and US officials were quick to point the finger at Iran. Crude prices retreated significantly by midweek as it became clearer that production losses would most likely be recovered much more quickly than initially thought, and President Trump indicated the US would remain measured regarding any kind of response. Oil prices ultimately gained 8% on the week and the US once again ratcheted up financial sanctions on the Iranian regime amid tense rhetoric from both sides.

The Saudi news didn’t dramatically spill over to other asset classes. Stocks opened lower but rebounded to stay within shouting distance of this summer’s all-time highs as focus shifted to a raft of central bank decisions. The US Fed followed through on Wednesday and cut rates 25 basis points, as expected, while coming up short of promising another cut before the end of the year. As usual, Powell left that door open at the press conference by acknowledging if things were to deteriorate faster than their models suggest future rate cuts and a potential return to balance sheet expansion would clearly be on the table. The views among FOMC members remained disparate with the number of dissenters rising from 2 to 3, with Bullard sounding a dovish dissent asking for a bigger cut. Fed officials were also forced to confront a spike in overnight lending rates on Monday and Tuesday leading to handwringing that lending markets were having trouble functioning efficiently. The NY Fed did a series of repo operations to bring the fed funds rate back in line with the targeted fed funds band and most market watchers viewed the spike in overnight rates largely due to technical reasons like quarter end tax payments amid high coupon issuance. The BOE and BOJ left both asset purchases and rates on hold as markets expected while Norway surprised markets by hiking rates to stem weakness in its currency. Friday saw additional monetary stimulus tweaks from the PBOC while India’s government cut corporate tax rates significantly resulting in a boon to the Indian stock market.

US economic data was generally firmer than expectations headlined by strong housing data. The Philly Fed reading also topped expectations but came with a notable jump in the prices paid component. US and Chinese officials met in Washington late in the week amid continued speculation that renewed Chinese purchases of US agriculture along with softening by the US administration towards Huawei could keep the two sides on a path towards higher level talks next month. On Friday a Chinese agricultural delegation left early canceling trips to key US farm belt states, walking back some optimism seen around this week’s talks. Also in Washington, the USMCA seemed to crawl towards consideration by Congress amid reports Democrats were becoming increasingly frustrated by their inability to have a say in the ongoing negotiations with the Trump administration on the trade pact. Brexit talks continued between UK and EU officials with some signs negotiators were finally broaching details on potential workarounds to the thorny Irish backstop issue, inducing continued buying in the British Pound. For the week, the S&P lost 0.5%, the DJIA slipped 1%, and the Nasdaq dropped 0.7%.

In corporate news this week, talks between General Motors and the UAW broke down, resulting in idled plants and furloughed employees across the US and Canada. Airline shares moved a leg lower early in the week after the attacks in Saudi Arabia caused a spike in oil prices. US Steel, Nucor, and Steel Dynamics all issued Q3 profitability guidance below consensus, citing softening prices. Corning cut its guidance for Display Technologies and Optical Communications segments for Q3 and FY19, forecasting lower than expected demand and capital spending from clients. FedEx missed on its top and bottom line for the quarter and also cut its earnings outlook, with management blaming the weakness on the trade war. Commerzbank announced plans to cut an additional 4,300 jobs and 200 bank branches as it launches a new strategic program. Microsoft shares caught a bid after the company boosted its dividend and authorized a $40B share buyback.


SUN 9/15
GM UAW union rejects offer from General Motors, to go on strike starting at midnight; Unifor supports strike action
*(CN) CHINA AUG RETAIL SALES Y/Y: 7.5% V 7.9%E; YTD Y/Y: 8.2% V 8.3%E
*(CN) CHINA AUG INDUSTRIAL PRODUCTION Y/Y: 4.4% V 5.2%E; YTD Y/Y: 5.6% V 5.8%E

MON 9/16
(SA) Saudi Aramco reportedly could go weeks without the majority of production at Abqaiq facility (world’s largest crude stabilization facility, which processes 7M bpd) - press
(SA) Saudi Arabia: Initial investigations have indicated that the weapons used in the attack on oil refineries were from Iran; investigation is still ongoing to determine the source of the attack; UN and international experts will be invited to observe
GLW Cuts guidance for Display Technologies and Optical Communications segments for Q3 and FY19; seeing lower than expected demand and capital spending from clients

TUES 9/17
(IR) Iran supreme leader Khamenei: If U.S. repents & returns to JCPOA it withdrew from, then it can join & talk with Iran among other members of the deal. Otherwise no negotiation will take place between Islamic Republic& U.S. officials at any level, whether in New York or anywhere else.
*(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: -19.9 V -15.0E (lowest since May 2010) ; EXPECTATIONS SURVEY: -22.5 V -38.0E
*(US) AUG INDUSTRIAL PRODUCTION M/M: 0.6% V 0.2%E; CAPACITY UTILIZATION: 77.9% V 77.6%E
(SA) Saudi Arabian oil output will return to normal levels sooner than initially believed, according to sources with knowledge of Saudi oil operations - press
*(SA) SAUDI ENERGY MIN: OIL EXPORT SUPPLY HAS RESUMED AS BEFORE; PRODUCTION CAPACITY WILL BE FULLY BACK ONLINE BY END OF SEPT AT 11M BPD - PRESS
(IL) Israel news organizations release election exit polls; election appears too close to call
FDX Reports Q1 $3.05 v $3.17e, Rev $17.0B v $17.1Be

WEDS 9/18
*(US) AUG HOUSING STARTS: 1.364M V 1.250ME; BUILDING PERMITS: 1.419M V 1.300ME
(US) President Trump tweet: I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran
*(US) FOMC CUTS TARGET RANGE BY 25BPS TO 1.75-2.00% (AS EXPECTED); SUSTAINED EXPANSION LIKELY, UNCERTAINTIES ABOUT ECONOMIC OUTLOOK REMAIN
X Guides Q3 -$0.35 v -$0.11e, adj EBITDA $115M (previously declined to guide); expects 2.5K headcount reduction at U.S. Steel Europe
T Reportedly exploring separating from DirecTV unit; could consider spinoff or combination with Dish - press
*(AU) AUSTRALIA AUG EMPLOYMENT CHANGE: +34.7K V +15.0KE; UNEMPLOYMENT RATE: +5.3% V 5.2%E
*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED

THURS 9/19
DGE.UK Issues Q1 Trading update: affirms outlook - AGM statement
(JP) Bank of Japan (BOJ) Gov Kuroda: reiterates Japan's economy expanding moderately as trend - post rate decision conference
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED
*(UK) AUG RETAIL SALES (EX-AUTO/FUEL) M/M: -0.3% V -0.3%E; Y/Y: 2.2% V 2.3%E
*(EU) ECB ALLOTS €3.396B IN TLTRO-3 Operation v €20-100Be
*(UK) BANK OF ENGLAND (BOE) SEPT MINUTES: VOTED 9-0 TO KEEP INTEREST RATE UNCHANGED AT 0.75%; could respond either way in case of no-deal Brexit
*(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 12.0 V 10.5E
(UK) EU's Juncker: Prepared to get rid of the so-called backstop from a withdrawal agreement, so long as "the objectives are met - all of them"- Sky News interview
(JP) Japan Investors Net Buying of Foreign Bonds: ¥476.0B v ¥727.2B prior week; Foreign Net Buying of Japan Stocks: -¥971.9B v -¥161.5B prior week

FRI 9/20
(DE) Germany agrees on emissions trading system in Climate Deal; To be financed without new debt - German press
CBK.DE Releases cornerstones of new strategic programme Commerzbank 5.0; to cut an additional 4,300 jobs and 200 bank branches
(US) New York Fed Nowcast: raises Q3 forecast to 2.2% from 1.6%; raises Q4 forecast to 2.0% from 1.1%
(US) Fed Reports Q2 Financial Accounts: Household Change in Net Worth: $1.830T v $4.691T prior
(CN) MONTANA FARM BUREAU: CHINA DELEGATION HAS CANCELED ITS FARM VISIT TO MONTANA; AG OFFICIALS TO RETURN TO CHINA SOONER THAN EXPECTED

Markets buoyed by renewed optimism that trade and Brexit deals can materialize

TradeTheNews.com Weekly Market Update: Markets buoyed by renewed optimism that trade and Brexit deals can materialize
Fri, 13 Sep 2019 16:11 PM EST

US stock indices continued to churn back up towards this summer’s highs after last week’s apparent bottoming in interest rates gathered momentum. The major impetus once again was perceived de-escalation in the US/China trade war. Lower level officials are set to meet next week after both sides offered concessions and the rhetoric took on a decidedly softer tone. Hotter than expect August US CPI data and better than expected retails sales figures also caused some rethinking about how easy it will be for Fed Chairman Powell to attain consensus to cut rates at the FOMC meeting next Wednesday. Meanwhile the ECB unveiled a series of stimulus measures including a relaunch of quantitative easing, but the news was largely expected and there appeared to be real dissension among some key Northern ECB officials which mitigated the market’s reception of Draghi’s dovish presser on Wednesday.

The pound moved up almost 400 pips this week on hopes the UK will find some way around the Irish backstop issue; this after Parliament was suspended but PM Johnson was unable to obtain enough MP votes for a new election. The Euro maintained an upward bias following the ECB decision and Draghi’s renewed call for fiscal authorities to take on more responsibility in supporting economic growth. The OPEC+ Joint Ministerial Monitoring Committee (JMMC) met and producers pledged even more stringent compliance, but did not discuss further production cuts which resulted in modest giveback in crude prices. By Friday government bond yields had risen the highest levels in roughly a month and the US curve had steepened significantly. The Dow was riding an eight day winning streak and the S&P cash market came within 10 handles of the July all-time high. The continued drift up in US indices was accompanied by intense rotational flows out of high-beta, higher-growth winners into deep value groups that have drastically underperformed. For the week, the S&P rose 1%, the DJIA added 1.6%, and the Nasdaq gained 0.9%.

In corporate news this week, some major financial firms, including Wells Fargo, Citi and JP Morgan, trimmed their net interest income outlook for the year as rates begin to fall. Oracle released some disappointing earnings a day earlier than scheduled due to Co-CEO Hurd’s announcement he would take a medical leave of absence. Alcoa disclosed plans to restructure amid global headwinds by implementing a new operating model and cutting executive positions. Moody’s cut Ford Motors’ unsecured rating to junk, pointing to weak future cash generation and a ‘lengthy and costly’ restructuring plan. Apple announced release dates for new iPhone 11 and Apple Watch Series 5 products and laid out pricing plans for its Apple Arcade and Apple TV+ services at an investor event. A report emerged that the FTC has opened a probe into Amazon’s marketplace over potential competition concerns. Wendy’s shares dropped after the fast food chain adjusted its outlook on plans for a national rollout of its breakfast menu. CSX management provided some cautious commentary to investors, noting more softness than expected in the coal sector and a ‘confusing’ outlook for intermodal demand. Restoration Hardware posted an earnings beat and outlook raise, despite the increase in tariffs and some foreboding macro trends.


SUN 9/8
(CN) China Aug Trade Balance: $34.8B v $44.3Be
*(JP) JAPAN FINAL Q2 GDP Q/Q: 0.3% V 0.3%E; ANNUALIZED Q/Q: 1.3% V 1.3%E

MON 9/9
AA Announces new operating model; to eliminate its business unit structure and consolidate sales, procurement and other commercial capabilities at an enterprise level; Expects to report Q3 charge
WRK To reconfigure North Charleston, SC, paper mill; to boost annual EBITDA by $40M
*(US) JULY CONSUMER CREDIT: $23.3B V $16.0BE
F Moody's cuts Ford's unsecured rating one notch to junk status; cuts to Ba1 from Baa3; outlook Stable
WEN Plans to launch breakfast across the U.S. system in 2020; Cuts outlook after $20M in breakfast investments; to hire 20K new crew members

TUES 9/10
2330.TW Reports Aug (NT$) Rev 106.1B v 91.1B y/y
*(UK) JULY AVERAGE WEEKLY EARNINGS 3M/Y: 4.0% V 3.7%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.8% V 3.7%E (fastest pace since the 2008-09 global financial crisis)
*(UK) AUG JOBLESS CLAIMS CHANGE: +28.2K V +19.8K PRIOR; CLAIMANT COUNT RATE: 3.3% V 3.2% PRIOR
*(US) JULY JOLTS JOB OPENINGS: 7.217M V 7.331ME
*(US) PRES TRUMP FIRES NATIONAL SECURITY ADVISER JOHN BOLTON
09/10 AAPL CEO: Apple TV+ streaming service to be available Nov 1st, priced at $4.99/mo for family service; Arcade to be available on Sept 19th at $4.99/mo; Announces iPhone 11 featuring improved cameras; iPhone 11 Pro to feature 3 cameras on the back
(DE) Germany Chancellor Merkel: must continue to reduce debt-to-GDP ratio below 60%; govt stands by its goal for a balanced budget

WED 9/11
(US) California Senate passes employment bill on gig workers, as speculated (expected to impact app based jobs)
(CN) CHINA FINANCE MINISTRY UNVEILS 1ST LIST FOR TARIFF EXEMPTIONS FOR US GOODS; effective on Tuesday, Sept 17th
AMZN Reportedly FTC has opened an antitrust probe over Amazon's online marketplace - press
OPEC Sept Monthly Report: Cuts both 2019 and 2020 global oil demand growth forecasts again
*(US) AUG PPI FINAL DEMAND M/M: +0.1% V 0.0%E; Y/Y: 1.8% V 1.7%E
(US) Reportedly Pres Trump is again considering a capital gains tax cut - press
(US) California Gov Newsom: still seeks to reach deal with Uber and Lyft on 'gig' worker bill; best interest of the state is to remain at bargaining table
(EU) ECB sources: ECB to cut some growth projections; sees both 2019 and 2020 GDP expansion not much above 1%
ORCL Reports Q1 $0.81 v $0.81e, Rev $9.22B v $9.29Be; authorizes $15B buyback (8% of market cap); CEO Mark Hurd to take a leave of absence for health-related reasons
*(CN) US PRESIDENT TRUMP TO DELAY TARIFF INCREASE TO 30% (PRIOR 25%) ON $250B OF CHINA GOODS TO OCT 15TH (PRIOR OCT 1)
(JP) Japan Investors Net Buying of Foreign Bonds: ¥724.4B v +¥1.49T prior week; Foreign Net Buying of Japan Stocks: -¥161.3B v -¥89.5B prior week

THURS 9/12
OPEC-Non-OPEC Joint Ministerial Monitoring Committee (JMMC) statement: Important for all members to fulfill compliance of agreed upon production cuts
(EU) ECB CUTS DEPOSIT RATE BY 10BPS TO -0.50%; AS EXPECTED; restarts QE; revises forward guidance
*(EU) ECB ANNOUNCES STIMULATIVE MEASURES: Relaunching QE at €20B/month; revises forward guidance (both with no specific end date)
*(US) AUG CPI M/M: 0.1% V 0.1%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E; CPI NSA: 256.558 V 256.586E
KR Reports Q2 $0.44 v $0.41e, Rev $28.2B v $28.4Be
(EU) ECB's Draghi: Conducted a thorough assessment; reiterates stimulative statement on rates, QE and guidance- Prepared Remarks
(EU) ECB's Draghi: rationale for today's measures: protracted slowdown is more marked than expected; persistence of downside risks - Q&A
(CN) Trump advisers reportedly mulling an interim China trade agreement to postpone tariffs; discussions are preliminary and Pres Trump has yet to approve the offer - press
*(CN) SENIOR ADMIN OFFICIAL TELLS CNBC THAT THE WHITE HOUSE IS 'ABSOLUTELY NOT' CONSIDERING AN INTERIM CHINA DEAL
*(US) TREASURY $16B 30-YEAR BOND REOPENING DRAWS 2.270%; BID TO COVER 2.22 V 2.13 PRIOR AND 2.28 AVERAGE OVER LAST 8
*(US) AUG MONTHLY BUDGET STATEMENT: -$200.3B V -$200.0BE (Budget gap hits $1.07T in first 11 months of 2019)
AVGO Reports Q3 $5.16 v $5.11e, Rev $5.52B v $5.50Be; believes semiconductor solutions segment has bottomed out
(UK) Northern Ireland DUP Party reportedly could agree to Northern Ireland accepting some EU rules after Brexit as part of deal to replace backstop - UK's Times
(CN) Pres Trump: would rather get a 'whole deal' with China rather than an interim deal; I guess I'd consider an interim trade deal with China

FRI 9/13
(US) AUG ADVANCE RETAIL SALES M/M: 0.4% V 0.2%E; RETAIL SALES (EX-AUTO) M/M: 0.0% V 0.1%E
(US) SEPT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 92.0 V 90.8E
(US) New York Fed Nowcast: raises Q3 forecast to 1.6% from 1.5%; affirms Q4 forecast at 1.1%

Barron's Weekend Summary

Barron's Weekend Summary: Cover story on how to fix the global retirement crisis; Feature positive on three cheap momentum stocks DHI, MCK, T 

Cover story: By 2050, one out of every six people—or 1.6 billion—will be over the age of 65, according to the UN’s latest estimates, creating a major problem for graying countries that must find fiscally sustainable ways to support longer life spans without bankrupting governments, overburdening the young, or abandoning those who need care; Japan is at the leading edge of the trend, forcing it to tackle the challenge head on, while China has more time. 

Tech Trader: Positive on ATVI: Company’s King division just released the 5,000th level for Candy Crush Saga, and well over half a billion unique users have played the game since its 2012 launch, making it the fifth-biggest revenue generator in mobile gaming. 

Trader: “While good low-volume performance used to be a leading indicator of economic and general stock market weakness, in more recent years it has become a ‘contrarian indicator’ like other measures of investor sentiment,” says Jim Paulsen of Leuthold Group—and that augurs well for stocks during the next six months; Pension expenses could rise because interest rates are falling, a small negative for corporate earnings, but the impact on each sector of the market will differ widely; BA investors have largely focused on when the troubled 737 MAX jet will return to service, but like with most issues related to the plane, the process may not be as simple as investors would hope. 

Profile: Bob Bergson, manager of the Northern Small Cap Core fund, uses a factor-based approach to give investors exposure to the broader small-cap universe—minus the worst of the worst (top 10 holdings: WWD, EXPO, HAE, MMS, FCFS, PRI, COUP, IDA, PLNT, FIVE). 

Interview: Jens Nordvig, a top-ranked currency strategist on Wall Street before he founded Exante Data, a macro research consulting firm, talks about the dollar, the trade war, and the euro. 

Features: 1) Positive on DHI, MCK, T: Barron’s searched for inexpensive stocks with some recent price momentum, looking for flawed companies that are showing signs of improvement but that aren’t perpetual turnaround candidates that never seem to do better; 2) Accepted accounting practices allow companies at times to present numbers that, while accurate, may not provide the clearest picture to investors—which means investors need to learn to ask the right kinds of questions and look in the right places in the financial statement; 3) “Eight years after a radical pension overhaul, Italy is still trying to find the right formula to satisfy its citizens’ retirement expectations while meeting European Union fiscal requirements.” 

European Trader: Positive on Balfour Beatty: London-based infrastructure company “could provide a solid foundation for investors looking to diversify internationally,” and shares seem to be overly discounting negative scenarios, such as the company’s U.S. housing business. 

Emerging Markets: The International Monetary Fund must soon decide whether to lend Argentina another $5.4B—and a decision to not open the coffers could turn an emergency into a catastrophe on the ground, and signal failure for the biggest bailout in the fund’s history. 

Commodities: “U.S. benchmark oil has outperformed the global benchmark this year, leading prices in recent weeks to the narrowest spread in more than a year—and analysts say the move isn’t about the trade war.”

Streetwise: Positive on LULU, NKE, VFC: Amid shifting consumer taste, the “athleisure” trend is here to stay and not a fad, says columnist Jack Hough, which is good for shareholders of the big players in the sector, and a problem for “office fashion” companies such as RL, HBI, and PVH.

Investors risk appetite returns as bond yields stabilize and trade talks to move forward

TradeTheNews.com Weekly Market Update: Investors risk appetite returns as bond yields stabilize and trade talks to move forward
Fri, 06 Sep 2019 16:10 PM EST

US stock markets returned to within just a few percentage points of all-time highs this week as Treasury yields appeared to have bottomed, at least for now. The news flow was decidedly positive as momentum gathered regarding several of the key narratives that held back investors' willingness to add risk in August. Italy was set to swear in a new government next week while UK MPs seem to have found a way to avoid a 'no deal' Brexit in Oct, to the chagrin of PM Boris Johnson. The US and China continued to talk with deputy-level meetings now confirmed by both sides for later this month in Washington which will hopefully result in principal-level meetings in Oct. Markets reacted extremely positively as both sides dialed back the rhetoric significantly, allowing for optimism heading into these next rounds of negotiations.

US manufacturing data continued to soften after the ISM reading followed overseas economies into contraction territory for the first time since 2016. Recession hand-wringing was held in check, though. Another solid US employment report, albeit below market expectations, and a modest bounce in overseas services data suggested to some the recent plunge in yields was likely an over-reaction to global recessionary fears. The Fed still appears destined to cut rates when they meet later this month but the most aggressive rate cut projections were tempered as risk appetite improved and Treasury yields moved up. Some ECB officials looked to lessen market expectations ahead of next week's expected stimulus announcement. Chairman Powell did little to change Federal Reserve expectations when he spoke in Switzerland on Friday, noting the Fed was not expecting a recession and opted not to provide anything new on his thinking on rates ahead of the Sep FOMC meeting. The US 10-year yield bounced some 13+ basis points from Tuesday’s post ISM low, helping the US 2/10-year spread finish the week in positive territory. Cable jumped to a one-month high and gold prices rolled over from recent highs. For the week the S&P gained 1.7%, the Dow rose 1.5% and NASDAQ added 1.8%

In corporate news, airlines released guidance for the rest of the year, with JetBlue cutting its revenue outlook, United and Delta affirming their forecasts, and Alaska raising its RASM expectations. Lululemon crushed quarterly estimates and raised its outlook yet again, noting a 15% growth to same-store sales powered by 35% growth in menswear revenue. American Eagle reported a miss on its quarterly SSS, citing underperformance in certain seasonal categories and a delayed start to back-to-school. Ciena jumped initially after announcing an earnings and rev beat, but then shares reversed when it gave a weaker FY20 gross margin outlook. Slack posted solid results but shares slumped on a slightly weaker earnings forecast as competition worries persist. Halliburton guided its Q3 to the low end of forecasts amid maturation of the US shale sector and cutbacks at oil and gas customers. Starbucks tempered 2020 EPS projections, pointing to one-time tax benefits that will be a headwind to earnings growth in the next year. Tyson cut its earnings outlook for a bevy of reasons, which weighed on the food processing space.

SUN 9/1
(CN) China Customs Tariff Commission of the State Council clarifies tariff increase on US goods; next round goes into effect on Sept 1st (today) on $75B in goods in 2 batches, second round to take effect on Dec 15th - Xinhua

MON 9/2
*(ES) SPAIN AUG MANUFACTURING PMI: 48.8 V 48.5E (3rd straight contraction)
*(UK) AUG PMI MANUFACTURING: 47.4 V 48.4E (4th straight contraction and lowest since July 2012)
416.HK Said to halt payouts on offshore preferred securities - US financial press

TUES 9/3
*(US) AUG FINAL MARKIT MANUFACTURING PMI: 50.3 V 50.0E (lowest since Sept 2009)
*(US) AUG ISM MANUFACTURING: 49.1 V 51.2E; PRICES PAID: 46.0 V 46.8E (lowest Manufacturing reading since Jan 2016)
*(US) JULY CONSTRUCTION SPENDING M/M: 0.1% V 0.3%E
(UK) UK Tory Party MP Phillip Lee defects to Liberal Democrats; Conservatives lose majority as a result
(IT) Italy's 5-Star Party membership votes to form a govt with Democratic Party (PD) - press
*(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 50BPS TO 2.00%; AS EXPECTED
(US) Fed's Bullard (dove, voter): calls for immediate 50bps cut; Fed policy rate is too high and would be better to get to right point now rather than in smaller steps

WEDS 9/4
(HK) Hong Kong Leader Lam to formally withdraw extradition bill - press
*(DE) GERMANY AUG FINAL PMI SERVICES: 54.8 V 54.4E (confirm 74th month of expansion)
(EU) EURO ZONE AUG FINAL PMI SERVICES: 53.5 V 53.4E (confirm 75th month of expansion)
*(UK) AUG PMI SERVICES: 50.6 V 51.0E (5th month of expansion)
*(DE) GERMANY SELLS €2.353B VS. €3.0B INDICATED IN 0.0% OCT 2024 BOBL; AVG YIELD: -0.88% (record low)V -0.79% PRIOR; BID-TO-COVER: 1.9X V 1.18X PRIOR
SBUX Cuts FY20 adj EPS outlook below 10% model (prior at least 13%); Affirms FY19 $2.80-2.82 v $2.83e; - GS conf
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMY EXPANDED AT A MODEST PACE; CONCERNS ABOUT TARIFFS AND TRADE POLICY CONTINUE
(UK) House of Commons passes the Brexit delay law; vote 327-299
(UK) PM Johnson proposes early general election on Oct 15th
(JP) Japan Investors Net Buying of Foreign Bonds: +¥1.5T v -¥910.3B prior week; Foreign Net Buying of Japan Stocks: -¥89.5B v +¥3.9B prior week
(CN) CHINA COMMERCE MINISTRY (MOFCOM): WILL HOLD TRADE TALKS WITH US IN EARLY OCT. IN WASHINGTON, DC [previously expected during Sept]

THURS 9/5
*(US) AUG ADP EMPLOYMENT CHANGE: +195K V +148KE (highest reading since April)
(US) Aug ISM Non-Manufacturing Index: 56.4 v 54.0e
*(US) JULY FINAL DURABLE GOODS ORDERS: 2.0% V 2.1%E; DURABLES EX-TRANSPORTATION: -0.4% V -0.4%E
(US) Treasury releases proposals for Fannie Mae and Freddie Mac: recommends end of conservatorship and preserving govt support in the housing market

FRI 9/6
*(EU) EURO ZONE Q2 FINAL GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.2% V 1.1%E
*(US) AUG AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 3.2% V 3.0%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) New York Fed Nowcast: cuts Q3 forecast to 1.5% from 1.8%; cuts Q4 forecast to 1.1% from 1.6%

September-October 2019 Market Outlook

September-October 2019 Outlook: Here We Go Again
Tue, 03 Sep 2019 12:30 PM EST

Perhaps its déjà vu, but the next few months could see significant new developments in global macro issues that were supposed to have been resolved months ago. The Brexit, now scheduled for October 31, was supposed to have occurred in March, and now may be delayed again. We were told a US/China trade deal was “90% completed” in June before Beijing backed off, and now nothing may come of it before the end of the year.

The issues are the same, but circumstances are different, at least as far as the economic environment. The trade tensions have built up uncertainties and slowed growth, enough to trigger a reversal by central banks that had been charting their paths to normalizing monetary policy but have now resumed easing. The yield curve is has begun to flash warning signs – many inversions have occurred already, and in recent weeks the critical 2-10 year yield curve inverted for the first time, solidifying the signal that recession may be on the horizon.

The central market thesis is that the US will amicably resolve its trade disputes with China, Europe and other trading partners and central banks will stay cautious and keep their monetary policy supportive. Some key events over the next two months will reveal how accurate those expectations are:

September 1: 15% tariffs go into effect on $112B of Chinese goods

Despite reports that Chinese negotiators asked for a delay, new tariffs went into effect on September 1 on a wide variety of products including consumer goods like clothing, kitchenware, and footwear amounting to over $110B. The larger portion of tariffs on consumer goods, over $160B worth, have been delayed to December over White House concerns that they might have soured spending during the upcoming holiday season. A late August report that Chinese negotiators claimed to have made progress on restricting exports of fentanyl did not appear to have been enough to sway President Trump to show any leniency on the September tariffs, which he proclaimed to be ‘still on.’

The uncertainty over the US/China trade talks is running so high that each time the parties merely say they are still in contact the market takes it as if it’s a breakthrough. If that low bar persists, the announcement of a concrete date for new face-to-face talks could be the next shot in the arm for markets. For weeks the White House has been insisting that a fresh round of high-level in-person negotiations will occur in Washington in early September and for their part the Chinese have not dismissed the idea. However a firm date has not been set for this highly anticipated meeting and the latest reports say the September tariffs have eroded trust, leaving in doubt when any announcement will be forthcoming. Locking in a meet date will likely raise hopes that the negotiators are getting back toward the “90% complete” threshold that they claimed to reach earlier this year, but markets could get nervous as the days tick off the calendar in September without an announcement.

September 10: North Carolina special election

A special election for a House seat will be resolved on September 10 and it could have implications for the 2020 election. North Carolina's 9th District, anchored by Charlotte's suburbs, shouldn't be a toss-up: in 2016, candidate Trump carried it 54% to 42%, more than triple his statewide margin of victory. Yet the race is too close to call between Marine Corps veteran Dan McCready, a Democrat, and his opponent Republican state Senator Dan Bishop. A Democratic victory in the historically conservative district would be a bad omen for Trump’s reelection hopes. It might also affirm that Republican politicians foresee strong headwinds in next year’s general election – a substantial number of Republican Congressmen have already announced they will not seek reelection next year and such retirements are often a signal that the party in power anticipates a defeat in the next general election. At some point, the markets will recalibrate to the prospect of a Democrat occupying the White House in 2021 which may lead to some risk off behavior.

September 12: Democratic debate

Just two days later (9/12) the Democratic presidential hopefuls will hold another debate. The candidates on stage have been whittled down to ten and, and though its still early, Joe Biden and Elizabeth Warren appear to be pulling away from the pack as the most likely winners of the nomination. Biden is seen as the ‘safe’ candidate, relying on “electability” and personal character even though it appears he may have lost a step in his dotage. Warren is definitely a more radical candidate, and if she should pull ahead in the Democratic polls it could spook markets at some point. She could also push China into the arms of President Trump – her platform on trade is even more protectionist than Trump’s, demanding compliance with high environmental and labor standards, and might incent China’s leaders to choose a deal with the current Administration as the lesser of two evils.

September 12: ECB policy decision

Central bankers are being counted on again to take the lead in reinvigorating global growth, despite mandates that don’t explicitly stretch beyond their own borders. In recent weeks the European Central Bank has sent strong signals that its record low interest rate could be heading even lower as early as September. Markets are also hoping the ECB will return to more unconventional policy with a new quantitative easing program in September.

But ‘not so fast,’ say some northern European members of the governing council. The Netherland’s Knot recently threw cold water on the idea of new extraordinary stimulus, saying the market expectations for the September ECB decision are “overdone.” Knot made the case that conventional rate policy should be enough for now, and that the central bank should keep its QE powder dry in case of a new shock.

The ECB doves want to see more government bond purchases, though even they are ruling out purchases of stocks or bank bonds at this point. As rates go lower there is also debate around how to lessen the adverse effects of negative interest rates on banks’ interest income, with so called ‘tiering’ (reducing the amount of excess liquidity subject to a negative interest rate) and modifications to the TLTRO being discussed as options.

The September meeting is the last for President Mario Draghi before he hands over the reins to Christine Lagarde. Markets often test new central bank leaders early in their terms, but Lagarde may have the advantage of being a well known quantity after her years heading the IMF. However, with Germany and the other euro zone nations experiencing weak data still unwilling to flex their fiscal policy muscle, it may fall on Lagarde to take ECB policy to new extremes of accommodation as her term starts.

September 17: German ZEW economic sentiment

Hopes that the export-oriented German and wider European economies would benefit from US trade war with China – by China substituting European imports for American ones – have not materialized. The general global trade malaise is dragging down German manufacturing, leading to new orders falling at the fastest pace in a decade. On the bright side, German consumer spending has held up, preventing the service sector from entering contraction.

The German ZEW index, which measures bullishness versus bearishness among analysts, has been negative for all but one of the last seventeen month, and last month it dove below the trend range to levels comparable to those seen during the 2008 financial crisis. That magnitude of bearishness is concerning and will be more troubling if it is confirmed in the September 17 reading.

Less than a week later, the German Flash Manufacturing PMI (9/23) will give another read on the situation in central Europe. The manufacturing PMI has been showing a state contraction for every month so far this year and yet another reading in the low 40’s would help confirm the dire straits German industrial firms have fallen into after experiencing a brief boom in 2017 and early 2018.

All this negative sentiment plays into the narrative that the German government may be considering new fiscal stimulus to fight off a more severe downturn. Germany is at risk of falling into a technical recession when it reports Q3 GDP (11/14), after posting a 0.1% decline in the Q2 reading. So far, however, Berlin has been reluctant to veer from its balanced budget goal. Despite European neighbors and economists urging Germany to go on a stimulative spending spree, the German government appears to be willing to take only modest measures. The stain of a recession later this year may be enough to prod the Germans to think bigger in the months ahead, perhaps dedicating some funding to much needed infrastructure spending, an area that has been largely neglected since the post-unification splurge in Germany. The cheers would be loud among economists if Berlin does decide to abandon the balance budget target and strategically spend its reserves.

September 18: FOMC rate decision

How the Fed navigates the rest of the year will be a delicate dance with market sentiment, as it attempts to provide some accommodation without giving up all of its ammunition, all while trying to avoid the perception that the central bank is underwriting the trade war. The dovish case that weak inflation and uncertainty over global trade and other macro issues has so far won out, leading the Fed to cut rates in July with another cut all but assured in September. However, two hawkish dissenters in July and Chair Powell describing the cut as a “mid-cycle adjustment” injected some doubt about the extent to which the central bank stands ready to act to sustain the current economic expansion.

As occurred in July, some market analysts are speculating again that the Fed could make a dramatic statement by cutting by 50 basis points in September. Such a move might backfire, however, as it might convey the Fed is deeply nervous about an impending recession. So a 25 basis point cut seems to be the safe bet: it would show market participants that the Fed is responding to their concerns, while leaving flexibility for the next step in monetary policy as more data comes in. At this point, Fed fund futures are anticipating another rate cut in October and possibly a fourth 25 basis point cut December, which seems quite aggressive and leaves the markets open to disappointment.

October 1: Japan consumption tax rises another 2%, to 10%

In October, Japan will raise its consumption tax to 10% from the current 8% level. Prime Minister Abe has already postponed the increase twice on concerns it could cause a slowdown, but his government is resolute that no further delays will be tolerated except in the event of a global financial crisis. Consumption tax hikes in 1997 and 2014 were followed by serious economic downturns, so the stakes are high given the current shaky global environment. The ultimate result may be that Japan needs to add fresh stimulus measures to offset the impact of the tax increase.

The tax increase comes at a particularly sensitive time as Japan finalizes its trade deal with the US. Negotiators have reached an ‘agreement in principle’ that is expected to be signed during ceremonies at the UN General Assembly in the second half of September. The agreement is said to reduce industrial tariffs, and address agriculture and digital trade issues. It does not, however, remove the 2.5% tariff on Japanese vehicles and auto parts that Abe sought, but it should eliminate the possibility that Trump will renew his threat to impose a 25% tariff on Japan auto exports to the US. Abe has stopped short of pledging to purchase hundreds of millions of dollars in US corn and other agricultural products as Trump has urged him to do, but the bilateral trade deal could still be a boon for the farm belt. The deal is also not comprehensive: as the Chamber of Commerce is quick to point out, the bilateral trade agreement does not tackle key regulatory barriers and IP protection, subjects that were covered in the Trans Pacific Partnership. As a result US exporters have been losing out on some sales to Japan that are going to TPP partner countries instead.

October 1: China tariffs rise another 5%; 70th anniversary of the founding of the People’s Republic

The US will raise tariffs by another 5% to a total of 30% on $250B of Chinese goods on the first of the month in what appears to be Trump’s strategy of slowing ratcheting up the pain as long as China doesn’t move toward a deal. Trump has played both the good cop and bad cop during these negotiations and may decide to delay or waive the additional 5% duty if he senses progress being made. Either way the markets will continue to watch his tweets with baited breath as the day to day uncertainty over the talks persists.

For his part, China’s President Xi will find it very difficult to give into any America demands that would cause him to lose face amid the pomp leading up to the 70th anniversary of the founding of the People’s Republic. The mid-November APEC meeting that will be attended by both Trump and Xi would seem like a logical target date to get a deal done if it’s going to happen this year. Meanwhile the clock will be ticking down to the next deadline on December 15, when tariffs will escalate again on over $160B in Chinese consumer goods, and China will institute its previously announced retaliatory duties.

If no deal coalesces in the next few months, the risks of further retaliations will grow. China has already showed a willingness to allow a freer float of its currency, which enabled it weaken past the key 7.00 level in early August, suddenly crystalizing concerns that the trade war could expand into a full blown currency war. Beijing could also escalate into areas such as increased audits on foreign operations within the country, challenging free navigation in Asian waters, or even reducing its US Treasury purchases. More quietly China may already be withholding its assistance on North Korea, which perhaps not coincidently has conducted a series of missile tests this summer after remaining dormant for over a year.

October 15: Q3 earnings season unofficially starts

Corporate earnings reports will begin to flow out during the third week of October, beginning with the major banks describing how they are coping with a fresh round of lower rates. Then industry, and finally retailers, will reveal how incrementally higher tariffs, and more importantly tariff-related uncertainty, is weighing on their business and planning efforts. Corporate earnings were solid in Q1 and Q2, allaying some fears that the trade war would drag down results. But more and more companies with links to China are warning that the next round of tariffs will crimp their business, and many may have to raise prices to consumers and end users. This could start showing up in inflation readings as soon as October. There could be some nasty downward revisions to Q4 forecasts from many corporations that have already squeezed their supply chains as much as possible to resist price increases. This may be the quarter during which firms see no way around raising prices on household goods, which could threaten the consumer spending that has been the pillar propping up the US economy. Also any strong uptick in inflation could make an already divided Federal Reserve even more reluctant to cut interest rates.

October 21: Canada Federal Elections

This fall’s election in Canada could see another G7 nation bring its conservative party back into power. Throughout the year Canada’s Conservative Party (CPC) has led in the polls, which could spell the end of Justin Trudeau’s government. The polls have tightened recently, despite the PM being involved in an ethics scandal, so the Liberals could still make it a contest. Trudeau’s favorability rating stands at just 31%, which seems dismal until compared to CPC leader Andrew Scheer at 38%. Still it will be an uphill batter for Trudeau as the latest Angus Reid polling found that more than a third of people who supported the Liberal Party in 2015 are planning to vote for another party at this point. If he does pull out the victory the Conservative leader has pledged his government will repeal Trudeau's carbon pricing policy and new standards requiring cleaner burning fuel, and balance the budget within two years, all while increasing health transfers and social transfers by at least 3% annually.

October 31: Brexit (?)

New PM Johnson is adamant that the UK withdrawal from the EU will happen without further delay, no matter the consequences. Johnson’s hope is that the threat of an unceremonious ‘no deal’ Brexit will be enough to coax the EU into granting him concessions over the key sticking point, namely the Irish border backstop. To this end Johnson roped the Queen into the political drama by getting her approval to suspend Parliament for a month ahead of the October 31 deadline in an effort to impede UK legislators from neutering his ‘no deal’ threat.

That maneuver has European officials stepping up commentary about making preparations for a potential ‘no deal’ Brexit with just weeks to go to the deadline. It has also rallied the ‘no deal’ opponents in Britain to quickly draft new legislation that would delay the Brexit date again, this time to January 31, 2020. Johnson’s government has only a one vote majority in Parliament, setting them up for a dramatic vote in the first few days of September. If Johnson sees any defections and this new bill passes, he has indicated his next move will be to call for a general election (likely on Oct 14). The stakes are high and Johnson’s government could be one of the shortest-lived in history.

Even if Johnson is victorious in quashing the Brexit delay, it now seems highly unlikely he will be able to extract a renegotiated Brexit deal by the mid-October European Council meeting in six week. In this scenario, Johnson’s ‘no deal’ threat would likely become a reality on October 31, and markets will be watching for any fallout in the UK…and in Europe. The UK may face significant challenges in the near term from switching over to WTO rules for trade in Europe. As the months go by, however, if Britain doesn’t suffer major economic damage from the Brexit, it may embolden other discontented EU members (such as Italy) to contemplate leaving the union.

CALENDAR
SEPTEMBER
1: New US tariffs on China go into effect
2: US Labor Day; UK Manufacturing PMI
3: US ISM Manufacturing; Fed’s Rosengren (dissenter) speaks; China Caixin Services
4: UK Services PMI
5: US ISM Non-Manufacturing PMI
6: US Payrolls & Unemployment; Fed Chair Powell speaks

9: UK GDP; UK Manufacturing Production; China CPI
10: Special Election in North Carolina; China New Loans
11: US PPI; China Trade Balance
12: OPEC+ monitoring meeting; ECB Policy decision; US CPI; Democratic Presidential Debate
13: US Retail Sales; Preliminary UofM Consumer Sentiment

15: China Industrial Production
16:
17: German ZEW Economic Sentiment; UN General Assembly (9/17-9/30)
18: UK CPI & PPI; US Housing Starts & Building Permits; FOMC Policy Decision & SEP update; BOJ Policy Decision
19: UK Retail Sales; BOE Policy Decision; Philadelphia Fed Manufacturing Index
20:

23: Euro Zone Flash Manufacturing & Services PMIs
24: German Ifo Business Climate; US Consumer Confidence
25:
26: US Final Q2 GDP
27: US Durable Goods Orders: US Personal Income & Spending

29: China Manufacturing & Non-manufacturing PMIs; China Caixin Manufacturing PMI
30: German CPI; UK Current Account; UK Final Q2 GDP; Chicago PMI
OCTOBER
1: Additional 5% tariffs on $250B of Chinese goods; 70th Anniversary of the founding of the PRC; UK Manufacturing PMI; US ISM Manufacturing PMI
2:
3: UK Services PMI; US ISM Non-manufacturing PMI
4: US Payrolls & Unemployment

7: China Trade Balance
8: US PPI
9: China New Loans; FOMC Minutes
10: UK Q3 GDP; UK Manufacturing Production; ECB Minutes; US CPI
11: Preliminary UofM Consumer Sentiment

14: China CPI
15: German ZEW Economic Sentiment; Q3 earnings season unofficially starts

16: UK CPI & PPI; US Retail Sales
17: UK Retail Sales; Philadelphia Fed Manufacturing Index; US Housing Starts & Building Permits; China Q3 GD; China Industrial Production
18: European Council meeting (10-17 and 10/18)

21: Canada Federal Elections
22: German Ifo Business Climate; UK Autumn forecast statement (tentative)
23:
24: Euro Zone Flash Manufacturing & Services PMIs; Euro Zone Policy Statement; US Durable Goods Orders
25:

28:
29: US Consumer Confidence
30: German CPI; US Advance Q3 GDP; FOMC Policy Statement; China Manufacturing and Non-manufacturing PMIs; BOJ Policy Statement
31: BREXIT deadline; Euro Zone CPI; US Personal Income & Spending; Chicago PMI; China Caixin Manufacturing PMI
NOVEMBER
1: UK Manufacturing PMI; US Payrolls & Unemployment; US ISM Manufacturing PMI

Barron's Weekend Summary

Barron's Weekend Summary: Cover story on biotechs researching mRNA; Features positive on MRNA, TBIO, AZN, MRK, TAK, GSK and TPRE, GLRE 

Cover story: In what could be the next frontier for treating disease, scientists are increasingly seeking to make drugs out of ribonucleic acid, or mRNA, the molecule that couriers blueprints from a cell’s DNA to its protein factories; Biotech companies, including TBIO and MRNA are leading the way, and big pharma companies such as MRK, SNY, AZN, and GSK are investing in the sector. 

Tech Trader: Positive on ATVI: Events over the past week have dramatically brightened the outlook for the videogame company, which just re-released the 15-year-old version of its popular World of Warcraft online role-playing game—under the new name World of Warcraft Classic—to overwhelmingly positive reviews from gamers. 

Trader: There’s a good reason that presidents usually don’t face recessions when running for re-election—they control many of the tools to prevent one, and the surest way for Donald Trump to do so now would be to end the trade war with China. 

Profile: Bryan Hinmon, manager of the MFAM Global Opportunities fund, says that investors who want to beat the market, and their competitors, must discover the unique qualitative advantages in companies that a quant screen or a factor-based fund can’t detect (top 10 holdings: AMZN, MA, MDT, TEAM, SBUX, SoftBank, PAYC, WSO, MELI, SBAC). 

Features: 1) + TPRE, GLRE: Daniel Loeb and David Einhorn, two prominent hedge fund investors who make a big bet on the reinsurance business are finding that their bets on Third Point Reinsurance and Greenlight Capital Re, are struggling -- shares trade below book value and their IPO prices; analysts see the stocks as low risk options with an "attractive turnaround potential"; 2) Any number of factors—trade tensions, confusing economic data, and uncertain monetary and fiscal policy—could push stocks in a bullish or bearish direction, and there’s no consensus among investment strategists Barron’s recently surveyed on the outlook for markets in the months ahead; 3) + MRNA, TBIO, AZN, MRK, TAK, GSK: For investors seeking to move into the mRNA sector, Moderna and Translate Bio are good plays, in part because they have received investment from major pharma companies, which offer a hedged way to bet on the sector; 4) The average American will change jobs a dozen times over the course of his or her career, raising the question of whether they should take their retirement money with them or leave it—and there are a host of common mistakes and pitfalls to be aware of. 

Follow-Up: +/- JNJ, AGN, ENDP: “The dominoes are starting to fall in the opioid litigation, and the latest developments shouldn’t make drugmakers feel good about their chances when the cases start going to trial.” 

European Trader: + Cineworld Group: UK-based movie theater operator “could offer blockbuster returns for investors as it looks to cash in on its monthly subscription service and a full slate of strong films.” 

Emerging Markets: Brazil’s economy, No. 8 in the world, refuses to rebound: Gross-domestic-product growth hasn’t hit even 2% since 2013—and fixing the problems will require major overhauls of the country’s complex tax system and regulatory apparatus. 

Commodities: “Commodities will end August with a second straight monthly loss, as uncertainty surrounding the U.S.-China trade war feeds expectations of a global economic slowdown—and demand for raw materials.” 

Streetwise: Humpty-Dumpty deals—in which a company breaks itself apart, then after a number of years decides to put itself back together through a merger—are rare, but they have become common in this late-cycle market with low bond yields and high share prices.- 

Cooldown of trade rhetoric allows relief rally

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

Barrons weekend summary

Barrons weekend summary: positive feature on Nestle 

- Cover on NFL broadcast rights says NFLX, AMZN and GOOGL could eventually compete for the content with current broadcasters CBS, FOX, NBC, and ESPN. NFL could also seek new revenue by selling out of market games and mobile rights to media players like AT&T's DirecTV, Verzion, Comcast's NBC and Disney's ESPN.

Barrons says Nestle is showing good growth under CEO Mark Schneider who joined the company in 2017 and has followed a strategy of divesting non-core assets.

Positive tone sours as trade war escalates

TradeTheNews.com Weekly Market Update: Positive tone sours as trade war escalates
Fri, 23 Aug 2019 16:07 PM EST

Markets opened the week on a positive note helped by talk of fiscal stimulus around the globe and the expectation key central bankers would offer dovish commentary later in the week from Jackson Hole. Weak global growth and continued uncertainty on trade induced speculation that officials in Germany, Washington DC and across Asia were looking for measures to ensure growth. To that end China announced new measures on lending that effectively resulted in the lowering of a key interest rate. The ECB’s Renh emphasized they stand ready to significantly increase stimulus measures, while President Trump kept up his rhetoric calling on the Fed to cut rates by 100 basis points and confirmed the White House is looking at new tax cuts, though not imminently. The Commerce Department granted Huawei an additional 90 day extension on a license that allows the company to conduct some business with US customers, which was taken as a constructive move on the trade front. UK PM Johnson met with key leaders in Europe raising hopes that a path towards a Brexit deal could forged, however unlikely it still appeared. As PM Conte stepped down in Italy markets were encouraged by President Mattarella granting the Five Star and PD parties enough time to come up with a coalition deal to avoid a new election.

The tone changed significantly though as the week drew to a close, as press reports speculated China was readying retaliatory tariff measures. On Friday, China confirmed those reports by announcing plans to levy tariffs on $75B in US goods effective September 1st, with some addition levies going into effect in mid-December, mirroring the timing of the next round of US tariffs. The news came alongside Fed Chairman Powell’s highly anticipated speech at Jackson Hole. Ultimately the Fed Chair offered little in the way of new ground, suggesting the wide array of views held by policymakers will continue for some time. He acknowledged low inflation remains the conundrum of the current central bank era and reiterated that policymakers stand ready to act to keep the expansion going. Futures continued to project a 25 basis point cut as inevitable next month, but the path after that remains unclear, beholden to things like Brexit, Hong Kong, and tariffs as Powell enumerated. The President reacted quickly on twitter, insuating both Chairman Powell and President Xi were both enemies of the US while indicating his administration would soon announce new measures to deal with trade and the byproducts of a Fed Reserve that is not as accommodative as Trump sees fit. The US 2-10 year spread bobbed in and out of negative territory and rates generally moved lower. Stocks and other risk assets tanked into Friday afternoon. Copper hit another 2+ year low and gold prices pushed back towards the highs of the year. The Friday selloff pushed stocks into their fourth straight down week: the S&P500 lost 1/4%, the DJIA dropped 1%, and the Nasdaq fell 1.8%.

Earnings from major retailers led corporate news headlines this week. Home Depot reported a beat but trimmed its sales outlook due to lumber and tariffs. Lowe’s shares surged after its profitability came in well above forecasts despite inclement weather. Kohl’s EPS topped estimates, though same store sales came in under consensus, pushing shares modestly lower. Target posted a large beat and raised its outlook, noting volume boosts from in-store pickup and same-day shipping, sending shares up 20% to record highs. Gap reported revenue below consensus and weaker than anticipated comp sales due to a ‘challenging environment.’ Toll Brothers shares slipped post earnings, though they pointed to a good start in Q4. Salesforce stock rallied on a revenue beat and forecast raise, soothing investor concerns about the cloud giant’s recent acquisition of Tableau Software.



SUN 8/18
*(CN) China PBoC announces new interest rate reform plan, Loan Prime Rate (LPR) as the new Benchmark Reference Rate to be used by banks for lending (aimed at supporting funding for small businesses); to be set monthly
(US) President Trump: China tariffs have cost nothing or very little, China wants to make a deal, we'll see what happens; humanitarian outcome in Hong Kong would be good for trade deal; China President Xi has something in mind to do with trade, reiterates not ready to make a deal with China - speaking from New Jersey

MON 8/19
(DE) Germany reportedly targeting job creation, domestic market in potential stimulus measures as contingency for crisis - US financial press
(US) Commerce Sec Ross: Confirms US granting Huawei another 90 days for some business; Added 46 more subsidy to Huawei 'entity list' - Fox business
(US) President Trump tweets: Fed should cut by at least 100 bps; strong dollar is hurting other parts of the world
(EU) ECB's Rehn (Finland): Reiterates stance that ECB needs to provide a significant degree of monetary stimulus to ensure that financial conditions remain very favorable and to support euro area growth and domestic price pressures"
BIDU Reports Q2 $1.47 v $0.94e, Rev $3.84B v $3.77Be
(US) White House reportedly considering temporary payroll tax cut in effort to reverse weakening economy - Washington Post
(US) State Attorney Generals to move ahead with antitrust investigation of big tech companies, looking at marketplace dominance - US financial press

TUES 8/20
HD Reports Q2 $3.17 v $3.08e, Rev $30.8B v $31.0Be
KSS Reports Q2 $1.55 v $1.52e, Rev $4.43B v $4.46Be

WEDS 8/21
LOW Reports Q2 $2.15 adj v $2.00e, Rev $21.0B v $21.0Be
TGT Reports Q2 $1.82 adj v $1.61e, Rev $18.4B v $18.3Be
(US) Labor Dept: prelim estimate of nonfarm payrolls benchmark revision would reduce March 2019 employment level by 501K, or 0.3% - press
*(US) FOMC MINUTES FROM JULY 31 MEETING: MOST OFFICIALS SAW RATE CUT AS 'MID-CYCLE ADJUSTMENT' OR POLICY 'RECALIBRATION'; TWO POLICYMAKERS WOULD HAVE PREFERRED A 50BPS CUT IN JULY RATHER THAN 25BPS CUT
(JP) Japan Investors Net Buying of Foreign Bonds: ¥499.7B v ¥175.8B prior week; Foreign Net Buying of Japan Stocks: -¥359.6B v -¥187.1B prior week
(KR) Bank of Korea (BOK): Japan export curbs could be more damaging to local economy than tariff hikes; chip exports likely to continue to fall y/y for the duration of 2019

THURS 8/22
(CN) China Commerce Ministry (MOFCOM) spokesperson Gao Feng: despite delayed tariffs from US, any new tariffs to lead to trade escalation; urges US to stop imposing new tariffs
*(FR) FRANCE AUG PRELIMINARY MANUFACTURING PMI: 51.0 V 49.5E (moves back into expansion and highest reading since Nov 2018)
*(EU) EURO ZONE AUG PRELIMINARY MANUFACTURING PMI: 47.0 V 46.2E (7th straight contraction, but highest reading since Jun 2019)
*(EU) ECB ACCOUNT OF POLICY MEETING (JULY MINUTES): Widely agreed on need for accommodative stance for prolonged period
*(US) AUG PRELIMINARY MARKIT MANUFACTURING PMI: 49.9 V 50.5E (lowest since Sept 2009)
(DE) Reportedly Bundesbank sees no need for Germany fiscal stimulus right now
(US) Fed's Kaplan (dove, non-voter): would like to avoid cutting again in Sept, but will have an open mind about taking further action in next few months - CNBC
CRM Reports Q2 $0.66 v $0.47e, Rev $4.00B v $3.95Be
GPS Reports Q2 $0.63 v $0.52e, Rev $4.01B v $4.02Be; affirms FY19 guidance

FRI 8/23
(CN) Global Times Editor-in-chief Hu Xijin tweet: Based on what I know, China will take further countermeasures in response to US tariffs on $300 billion Chinese goods. Beijing will soon unveil a plan of imposing retaliatory tariffs on certain US products. China has ammunition to fight back. The US side will feel the pain.
(US) Fed's Bullard (dove, voter): market has expectations for low inflation, TIPS breakeven suggest only 1% inflation over next 5-years; we should "take out more insurance against the downside risks"; expect "robust debate" about 50bps cut in Sept - TV interviews from Jackson Hole
*(CN) CHINA TO LEVY 5-10% RETALIATORY TARIFFS ON $75B OF US GOODS; effective on Sept 1st and Dec 15th
(US) JULY NEW HOME SALES: 635K V 647KE
(CN) Pres Trump promises to respond to China's tariffs 'this afternoon'; 'orders' American companies to immediately start looking for an alternative to China
(DE) Germany govt document: govt does not see a need for short term economic stimulus; govt does see a recession in Germany, forecasting a second consecutive quarter of contraction in Q3 - German press

Barrons weekend summary

Barrons weekend summary: cover story positive on oil & gas stocks; 

positive features on AEO, IAC - Oil & gas stocks may be bottoming out with Wall Street having largely abandoned the sector, even though many names provide large dividends (BP CPG.CA CVX CXO DO EOG HAL OXY PSX PXD RDS.A RIG RRC SLB SU.CA SWN VLO XOM CPG RIGN.CH SU)

- Positive feature on AEO: retailer is managing to gain market share in a difficult retail environment, thanks in part to its successful Aerie intimates chain.

- Positive feature on IAC: Barrons note that IAC has appreciated this year largely thanks to its 81% stake in MTCH, which itself has seen strong growth driven by soaring Tinder membership. The growth in MTCH may, however, be obscuring the value of the parent company.

Plunging bond yields keep investors jittery

TradeTheNews.com Weekly Market Update: Plunging bond yields keep investors jittery
Fri, 16 Aug 2019 16:03 PM EST

Global markets spent the week beholden to the specter of crumbling interest rates amid ongoing global uncertainty. Volatility rose and volumes retreated likely amplifying how reversals in sentiment manifested in a whipsawing market. Monday saw Hong Kong’s international airport effectively shut down by protestors, resulting in continued speculation about a potential intervention by the mainland. Also, the Argentine peso, bonds, and stocks all dropped precipitously following a primary defeat for the business-friendly incumbent Macri. On Tuesday, equities rose sharply on what was viewed as a positive development in the US/China trade negotiation. Namely, the US Trade Rep’s office announced that the impending fourth round of China tariffs scheduled to take effect on September 1 will be delayed until December for some key consumer goods, with the explanation that the White House didn’t want to crimp consumers’ holiday spending. Apple and its suppliers along with other key cogs in the consumer electrics chain surged higher. The SMH jumped 3% on the news and USD/CNY dropped 1.5% back toward the key 7.00 level. Gold and silver prices slumped as safe haven trades unwound.

Wednesday stock markets essentially gave back all of the previous day’s gains after global growth concerns resurfaced in force. Weak data out of China and Germany led to further inversions along sovereign yield curves. The widely followed US 2/10-year spread finally dipped into negative territory flashing a well-established recession warning signal for the US economy. Risk assets came under significant pressure, led by selling in stocks. US banking names dropped 2-3% on the day of the inversion, while the Dow finished down a whopping 800 points. Oil prices moved lower alongside weakness in emerging markets and some high yield debt as well. By Thursday, global interest rates continued to move lower. The US 30-year bond yield dipped below 2% for the first time ever, but the 2/10-year spread managed to stay in positive territory. Strong July retail sales data changed the outlook for the Q3 consumption spending data considerably while productivity accelerated higher. The numbers in aggregate will likely resulted in forecasters raising US Q3 GDP forecasts but overall had little effect on trading. Separately, the Euro moved lower and European bond yields dropped to fresh record negative levels following dovish commentary from the ECB’s Rehn underscoring the belief the ECB will do “whatever it takes.” The US 10-year yield subsequently dipped below 1.5% first time since 2016 before moving higher into the Thursday’s closing bell. On Friday, stocks, yields and risk assets continued to bounce back, helped in part by renewed press speculation that Germany could give up balanced budget goals and resort to deficit spending in the event of a recession. For the week, the S&P lost 1%, the DJIA dropped 1.5%, and the Nasdaq gave up 0.8%.

As earnings season wound down, retailers and tech hardware were in focus this week. Walmart reported above consensus and guided higher as its US SSS remained close to 3% and e-commerce sales surged. Macy’s shares plummeted after the company slashed its EPS outlook and noted that rising inventories remain an issue. Applied Materials came under pressure despite beating on the top and bottom line after forecasting a gradual industry recovery starting next year with flattish margins in a challenging environment. Nvidia jumped after posting an earnings and revenue beat, despite seeing weaker than expected data center revenue. Cisco Systems shares fell on declining business in China, saying it is being “uninvited” from bidding on contracts with state-owned enterprises in that country. Deere earnings came up short and the equipment company cut its outlook, citing delayed purchases from farmers amid the US-China trade dispute. Viacom and CBS finally consummated their long-discussed reunion, merging in an all-stock deal to contend within the increasingly competitive media sector.


SUN 8/11
(AR) Argentina Presidental opposition candidate Fernandez beats President Macri in primary vote

MON 8/12
2330.TW Reports Jul (NT$) Rev 84.8B v 74.4B y/y
(HK) Hong Kong closes airport citing serious disruptions in operation; activate emergency center
*(US) JULY MONTHLY BUDGET STATEMENT: -$119.7B V -$120.0BE

TUES 8/13
*(UK) JUN AVERAGE WEEKLY EARNINGS 3M/Y: 3.7% V 3.7%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.9% V 3.8%E (fastest pace since the 2008-09 global financial crisis)
*(UK) JULY JOBLESS CLAIMS CHANGE: +28K V +31.4K PRIOR; CLAIMANT COUNT RATE: 3.2% V 3.2% PRIOR
(DE) GERMANY AUG ZEW CURRENT SITUATION SURVEY: -13.5 ( lowest level since May 2010.) V -6.5E; EXPECTATIONS SURVEY: -44.1 (lowest since Dec 2011)) V -28.0E
*(US) JULY CPI M/M: 0.3% V 0.3%E; CPI (EX-FOOD/ENERGY) M/M: 0.3% V 0.2%E; CPI NSA: 256.571 V 256.411E
*(CN) CHINA JULY INDUSTRIAL PRODUCTION Y/Y: 4.8% V 6.0%E (slowest growth since Feb 2002); YTD Y/Y: 5.8% V 6.0%E
*(CN) CHINA JULY RETAIL SALES Y/Y: 7.6% V 8.6%E; YTD Y/Y: 8.3% V 8.4%E

WEDS 8/14
*(DE) GERMANY Q2 PRELIMINARY GDP Q/Q: -0.1% V -0.1%E; Y/Y: 0.4% V 0.1%E
*(EU) EURO ZONE Q2 PRELIMINARY GDP: Q/Q: 0.2% V 0.2%E; Y/Y: 1.1% V 1.1%E
700.HK Reports Q2 (CNY) Adj Net 23.5B v 21.1Be, Op 27.5B v 21.8B y/y, Rev 88.2B v 93.4Be
*(US) 2/10-YEAR YIELD CURVE INVERTS FOR FIRST TIME SINCE MAY 2007
M Reports Q2 $0.28 v $0.46e, Rev $5.55B v $5.63Be; strategic initiatives on track
992.HK Reports Q1 Net $162.2M v $152Me, Op 343M v 180M y/y; Rev $12.51B v $12.5Be
*(AU) AUSTRALIA JULY EMPLOYMENT CHANGE: +41.1K V +14.0KE; UNEMPLOYMENT RATE: 5.2% V 5.2%E

THURS 8/15
*(UK) JULY RETAIL SALES (EX-AUTO/FUEL) M/M: +0.2% V -0.2%E; Y/Y: 2.9% V 2.3%E
*(CN) China Finance Ministry State Council Tariff Committee: Will have to take countermeasures on US moves; US actions violates consensus reached in Osaka at G-20 meeting in Jun
(HK) Hong Kong Govt cuts 2019 GDP growth forecast from 2.0-3.0% to 0.0-1.0% citing ongoing political unrest; confirms stimulus measures of HK$19.1B
WMT Reports Q2 $1.27 v $1.21e, Rev $130.4B v $130.5Be
*(US) Q2 PRELIMINARY NONFARM PRODUCTIVITY: 2.3% V 1.4%E; UNIT LABOR COSTS: 2.4% V 2.0%E
*(US) JULY ADVANCE RETAIL SALES M/M: 0.7% V 0.3%E; RETAIL SALES (EX-AUTO) M/M: 1.0% V 0.4%E
*(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: 16.8 V 9.5E
*(US) JULY INDUSTRIAL PRODUCTION M/M: -0.2% V 0.1%E; CAPACITY UTILIZATION: 77.5% V 77.8%E
(US) Pres Trump: any China trade deal has to be on "our terms" - syndicated radio interview
(EU) ECB's Rehn (Finland): ECB needs to have significant and impactful easing package in Sept; weakening economy justifies a monetary policy response - press interview
(US) Atlanta Fed raises Q3 GDP growth to 2.2% from 1.9%
*(MX) MEXICO CENTRAL BANK (BANXICO) CUTS OVERNIGHT RATE BY 25BPS TO 8.00%; NOT EXPECTED
(US) Fed's Bullard (dove, voter): Would like to take action to make sure we hit our inflation target; doesn't want to prejudge what action Fed might take at next meeting, but wants to take action - Fox Business interview
(US) White House Trade Adviser Navarro: thinks Fed's Bullard virtually guaranteed rate cut at next meeting - Fox Business interview
AMAT Reports Q3 $0.74 v $0.70e, Rev $3.56B v $3.53Be
NVDA Reports Q2 $1.24 v $1.15e, Rev $2.58B v $2.55Be
(JP) Japan Investors Net Buying of Foreign Bonds: ¥173.1B v ¥292.0B prior week; Foreign Net Buying of Japan Stocks: -¥187.0B v -¥339.9B prior week
(CN) China NDRC: To roll out plan to boost population's disposable income for 2019-2020; will stick to deleveraging and avoiding risks, which is not in conflict with stabilizing growth; keep pushing for companies bond-to-equity swap

FRI 8/16
OPEC Monthly Report: cuts outlook on 2019 global demand growth (2nd cut in last 3 months)
*(US) JULY HOUSING STARTS: 1.191M V 1.256ME; BUILDING PERMITS: 1.336M V 1.270ME
*(US) AUG PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 92.1 V 97.0E (lowest since Jan)
(DE) Germany govt reportedly is prepared for deficit spending if recession hits - Der Spiegel

Markets gyrate as trade war bleeds into the currency market

TradeTheNews.com com Weekly Market Update: Markets gyrate as trade war bleeds into the currency market
Fri, 09 Aug 2019 16:14 PM EST

It was a wild week for markets with stocks plunging Monday after it appeared China allowed the Yuan to devalue above the key 7 mark to the US dollar. Interest rates lurched lower amidst intense safe haven flows fueled by a growing narrative the trade war had morphed into a potentially more destabilizing currency war. NYSE decliners led advancers by more than a 10:1 margin and the VIX surged 25%. Futures markets priced in at least another 25 bps cut in September from the Fed and started to price in two additional cuts before next spring. Also, the entire German yield curve entered into negative territory for the first time. After Monday’s closing bell the US Treasury formally designated China a currency manipulator, and China responded by confirming the suspension of purchases of US agriculture products.

Markets attempted to stabilize on Tuesday before several Central banks in Asia came out and surprised markets with more aggressive than expected rate cuts and dovish rhetoric. Wednesday’s outsized move lower in global interest rates was exacerbated by renewed worries of a full-blown currency war and an accompanying “race to the bottom” for central banks. President Trump did little to allay those fears throughout the week. On multiple occasions Trump continued to call the US Fed incompetent while demanding more aggressive rate cuts, even going a step further by overtly tying his view regarding the Fed to his belief the US dollar is overvalued. US stock indices briefly neared or tested Monday’s lows before a powerful reversal rally ensued Wednesday afternoon and carried over into Thursday. Treasury yields also saw sharp reversals from Wednesday morning lows and with that the curve steepened significantly.

Friday’s trade saw risk aversion flows resurface. The PBOC continued to allow the Yuan fix to further above 7 and the Administration confirmed the postponement on a decision about licenses for US companies to restart business with Huawei. Responding to reporters at the White House, President Trump indicated that though the September trade talks were still on it was not out of the question they could be called off. The US/China trade fight continued to take place against a backdrop of growing unrest in Hong Kong. Protests were planned for this weekend spreading to the international airport. Hong Kong’s Chief Executive Lam acknowledged the resulting downward economic pressure is serious and her administration is considering implementing emergency measures to boost the domestic economy. Separately, UK GDP had a negative print for the first time since 2013 and a growing Italian political crisis blossomed after Deputy PM Salvini withdrew his support for the current government, potentially paving the way for new elections this fall. Oil prices rebounded from stiff declines seen earlier helped by jawboning from oil producers. Gold prices consolidated above $1,500 for the first time since 2013 helped by modest weakness in the Greenback and shrinking costs to carry due to falling interest rates. The US 2-10 year yield spread finished the week below 10 bps. In a volatile week the S&P ended down 0.5%, the DJIA lost 0.8%, and the Nasdaq fell 0.6%.

In corporate news this week, Disney reported a larger than anticipated earnings miss, which the company blamed on its Fox acquisition and weak theme park revenue as crowds awaited the full opening of its new Star Wars expansion. Kraft Heinz results did little to quell investor uneasiness about its situation, and the CEO noted an ‘unacceptable’ level of decline. CVS beat and raised outlook as brand name medicine revenue rose. Zillow’s report disappointed the street as the company forecast Q3 losses in its new home-flipping division. Mastercard acquired the real-time payments division of Nets Group for €2.85B to boost its existing account-to-account capabilities. Broadcom confirmed it would acquire Symantec’s Enterprise Security Business for $10.7B in cash in a move to expand its reach beyond chip manufacturing. The FDA rebuked Novartis for withholding manipulated data from regulators involving its gene therapy Zolgensma, though the company responded by saying it had investigated the issue and neither patient safety nor treatment efficacy had been affected.


SUN 8/4
HSBA.UK Reports H1 $0.42 v $0.36 y/y, Pretax $12.4B v $10.7B y/y, Rev $29.37B v $27.29B y/y; confirms plans to cut more than 4K jobs and to buyback $1.0B shares
*(CN) CHINA PBOC SETS YUAN REFERENCE RATE: 6.9225 V 6.8996 PRIOR (weakest yuan fix since Dec 2018)
*(CN) China Offshore yuan -0.5% to 7.0107 (fresh record low); yuan weakens amid PBoC fix and recent trade threat by the US
(CN) China reportedly asked state-run purchasers to halt US agriculture imports

MON 8/5
*(DE) GERMANY JULY FINAL SERVICES PMI: 54.5 V 55.4E (confirms 73rd month of expansion)
*(EU) EURO ZONE JULY FINAL SERVICES PMI: 53.2 V 53.3E (confirms 73rd month of expansion)
*(UK) JULY SERVICES PMI: 51.4 V 50.3E (4th straight expansion)
*(US) JULY FINAL MARKIT MANUFACTURING PMI: 53.0 V 52.2E
*(US) JULY ISM NON-MANUFACTURING INDEX: 53.7 V 55.5E
*(CN) US TREASURY DEPT DESIGNATES CHINA AS CURRENCY MANIPULATOR
(CN) China Commerce Ministry (MOFCOM) confirms has suspended purchases of US agriculture products; have not ruled out putting tariffs on US agri products imported after Aug 3rd, new 10% tariffs on Chinese goods violates G20 agreement

TUES 8/6
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.00%; AS EXPECTED
*(US) JUN JOLTS JOB OPENINGS: 7.348M V 7.326ME
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE (OCR) BY 50BPS TO 1.00%; MORE THAN EXPECTED
DIS Reports Q3 $1.35 v $1.76e, Rev $20.3B v $21.7Be

WEDS 8/7
*(IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY 35BPS TO 5.40%; MORE-THAN-EXPECTED
*(TH) THAILAND CENTRAL BANK (BOT) CUTS BENCHMARK INTEREST RATE BY 25BPS TO 1.50%; NOT EXPECTED
*(DE) GERMANY SELLS €2.646B VS. €4.0B INDICATED IN 0.0% OCT 2024 BOBL; AVG YIELD: -0.79% (record low) V -0.66% PRIOR; BID-TO-COVER: 1.18X (technically uncovered) V 1.51X PRIOR
*(US) JUN CONSUMER CREDIT: $14.6B V $16.1BE
(JP) Japan Investors Net Buying of Foreign Bonds: ¥286.2B v -¥161.5B prior week; Foreign Net Buying of Japan Stocks: -¥339.9B v +¥36.7B prior week
CVS Reports Q2 $1.89 v $1.70e, Rev $63.4B v $62.6Be
Z Reports Q2 -$0.14 v -$0.15e, Rev $599.6M v $586Me

THURS 8/8
941.HK Reports H1 (CNY) Net 56.1B v 65.6B y/y; EBITDA 151.1B v 145.9B y/y; Rev 389.4B v 391.8B y/y
TKA.DE Reports Q3 Net -€94M v -€90Me, adj EBIT €226M v €227Me, Rev €10.8B v €10.6Be; considers selling units
DTE.DE Reports Q2 adj Net €1.33B v €1.24B y/y, adj EBITDA (adj for leases) €7.26B v €5.93B y/y, Rev €19.7B v €18.4B y/y
KHC Reports Q2 $0.78 adj v $0.75e, Rev $6.41B v $6.64Be
(US) Atlanta Fed maintains Q3 GDP growth at 1.9%
*(US) TREASURY $19B 30-YEAR BOND AUCTION DRAWS 2.335%; BID TO COVER 2.24 V 2.20 PRIOR AND 2.20 AVERAGE OVER LAST 4 AUCTIONS
*(JP) JAPAN Q2 PRELIMINARY GDP Q/Q: 0.4% V 0.1%E; GDP ANNUALIZED Q/Q: 1.8% V 0.5%E (3rd straight quarter of expansion)

FRI 8/9
*(US) JULY PPI FINAL DEMAND M/M: 0.2% V 0.2%E; Y/Y: 1.7% V 1.7%E
(US) Pres Trump: things are going 'very well with China'; not ready to make a deal; Possible next month's trade talks with China could be cancelled; I would not devalue the dollar