August 5, 2019 Headlines

The global risk-off trade continues today following China’s retaliation to the new tariffs announced by President Trump late last week. Treasury yields are down 5-10 bps, and S&P 500 futures are down 1.5% ahead of the open. The Chinese government ordered its central bank to let its currency fall to the weakest level versus the dollar since 2008, exceeding the psychologically important 7 yuan per dollar level. Additionally, state-owned companies were reportedly ordered to suspend all imports of U.S. agricultural products; however, the ban on agricultural imports was later denied by state-owned television, which sparked a slightly recovery in equities.  Market participants continue to assess the end game as tensions escalate. The Trump administration will likely react to today’s actions by China, and of course, expectations for a Fed rate cut in September will rise. Fed easing can provide a modest cushion, but not enough to totally offset the recessionary headwinds of a trade war between the world’s two largest economies. It’s a game of political chicken ahead of the 2020 elections. If a rapid escalation of trade tensions sparks the Fed reaction that Trump has been wanting, he may feel that there’s enough recovery time prior to the election, assuming a trade deal is indeed secured. China clearly knows there’s a political clock running as well, and how much economic pain can be stomached over the next year?

Jason Haley
Managing Director, Investment Management Group

8/5/2019Markit US Services PMI52.252.2
8/5/2019Markit US Composite PMI51.6
8/5/2019ISM Non-Manufacturing Index55.555.1
8/6/2019JOLTS Job Openings74007323
8/7/2019MBA Mortgage Applications-1.40%
8/7/2019Consumer Credit$16.000b$17.086b
8/8/2019Initial Jobless Claims215k215k
8/8/2019Continuing Claims1691k1699k
8/8/2019Bloomberg Aug. United States Economic Survey
8/8/2019Bloomberg Consumer Comfort64.7
8/8/2019Wholesale Trade Sales MoM0.20%0.10%
8/8/2019Wholesale Inventories MoM0.20%0.20%
8/9/2019PPI Final Demand MoM0.20%0.10%
8/9/2019PPI Ex Food and Energy MoM0.20%0.30%
8/9/2019PPI Ex Food, Energy, Trade MoM0.20%0.00%
8/9/2019PPI Final Demand YoY1.70%1.70%
8/9/2019PPI Ex Food and Energy YoY2.30%2.30%
8/9/2019PPI Ex Food, Energy, Trade YoY2.10%


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