Trade continues to dominate markets; China is claiming the US is abusing trade, reiterating it will fight back if the recently announced tariffs are put in place; July 6th is the announced date for US tariffs to begin. India is also slapping retaliatory tariffs on U.S. goods, including chickpeas, starting Aug. 4. Two-thirds of North American and Asia-Pacific CFOs say U.S. trade policy will have a negative impact on their company over the next six months. Daimler warned of a profit hit from the trade war. The company predicts fewer Chinese consumers will buy Mercedes-Benz SUVs because of tariffs Beijing is slapping on autos imported from the U.S. Many of the C-Class sedans and crossovers exported from Alabama last year went to China. Meanwhile, American metal tariffs have already raised more than $775 million. 60% of North American CFOs say the full benefits of the Trump tax cuts remain, regardless of the trade risks. 40% say that uncertainty around trade is hurting their firm's ability to take full advantage of tax reform.
On Tuesday this week the global stock markets were hit hard when new tariffs were announced — an additional $200B against China, although what would be considered is still unresolved. There was a rush to safety from stocks into US treasuries pushing the 10-yr yield down to 2.86% before it ended Tuesday and 2.89%. Yesterday the note moved back up into its cocoon between 2.90% and 3.00%, ending yesterday +4 bps at 2.93% and MBS prices down 11 bps. Early this morning the 10-yr is slipping back to 2.91% and early prices of MBSs +11 bps at 8:30 am EST.
At 8:30 am ET weekly jobless claims, no longer a key focus with unemployment low, declined 3K to 218K. Weekly claims have been in a tight range for the last several weeks, and traders aren’t paying too much attention to it now.
The June Philadelphia Fed business index at 8:30 am fell much lower than forecasts for a read of 28.0 from 34.4 in May; the index plunged to 19.9. It is a volatile index, but the magnitude of the weakness is surprising. New orders were very strong, but at 17.9 are down nearly 23 points from May. Backlogs edged lower for the first time since January as the sample keeps shipments cranked up at a very active 28.7. The sample continues to find hands to do the work with employment up slightly to 30.4 and 3 tenths shy of the all-time record set in October last year.
At 9:00 am the April FHFA home price index was estimated at +0.4% from +0.1% in March; the index as released +0.1%. Yr/yr the price up 6.4% but down from 6.7% in March. In a way, it’s old data but that is what we get on this and the Case/Shiller data.
At 9:30 am the DJIA opened -60, NASDAQ +20, S&P -1. the 10 yr at 9:30 am stood at 2.91%, -2 bp from yesterday’s close.
The OPEC meeting begins tomorrow in Vienna; Saudi Arabia is pushing a plan to raise oil production by about 600,000 barrels a day, delegates said. The proposal, which hasn't been backed by all members, attempts to bridge differences between Iran and Russia and will probably be met with resistance by more hawkish producers like Venezuela. This morning crude price is down $0.80.
There hasn’t been any significant movement in mortgage rates or the bellwether 10-yr note for almost two months now. Two moves broke the 10 basis point yield range; both lasted only a few days. Apart from those two adventures, there has been little movement.Source: TBWS
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