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Trump: China and Mexico both want to make a deal with the US

Comments from Trump:

  • If Mexico doesn’t take steps to control migrants, the tariffs will take place
  • I think they want to make a deal
  • Mexico can stop the migrants
  • We will see what happens today on Mexico talks
“I think Mexico has to step up and if they don’t, tariffs will go on and if they go high, companies are going to move back into the United States,” he said.
Almost everyone assumes it’s a bluff at this point but it will be interesting to see how the market reacts if/when a deal is made.

European stocks rise modestly on the day

US stocks back higher after dipping into the red

The European major stock indices are ending the day with modest gains.
The provisional closes are showing:
  • German DAX, +0.1%
  • France’s CAC, +0.46%
  • UK’s FTSE, +0.08%
  • Spain’s Ibex, +0.4%
  • Italy’s FTSE MIB bucked the trend and is closing down -0.4%
The benchmark 10 year yields in Europe are lower. Italy, which was higher earlier, reversed the flows and also fell on the day.  German yields remain around the -0.20%.
10 year benchmark yields in Europe are lowerin the US stock market, the markets have been whipping around. Both the S&P and NASDAQ gave up solid early gains, and moved into the red (negative), but are now both higher again.  The snapshot as London/European traders look to exit show
  • the S&P index of 12.72 points or 0.45% at 2816.0
  • The NASDAQ index of 25 points or 0.34% at 7552
  • The Dow is up 148 points or 0.59% at 25480
In the US debt market, the 2 year was down nearly 10 basis points earlier in the day but are currently only down about 4 bps.  The 30 year is higher as the yield curve steepens a bit.
The US yield curve steepens with 2 year yields lower and 30 year yields higher

World Bank lowers its global growth forecast for 2019 to 2.6% (from 2.9%)

Forecasts from the World Bank slashed, they are citing the impacts of trade wars.

Media statement:
  • There’s been a tumble in business confidence
  • a deepening slowdown in global trade
  • and sluggish investment in emerging and developing economies
This is worrisome because subdued investment weakens the foundations for sustained growth.
The previous growth forecast from the bank was in January, a sluggish 2.9%
  • this June update is worse at 2.6%
  • All six global regions, East Asia and the Pacific; Europe and Central Asia; Latin America and the Caribbean; Middle East and North Africa; South Asia; and sub-Saharan Africa have lower forecasts. 
Oh, and the forecasts do not incorporate US threats to up tariffs on China to 25% nor last week’s threats of up to 25% tariffs on Mexico. Awesome. 
More:
  • global economy’s growth will be the weakest since 2016
  • trade growth on track to be the weakest since the GFC
  • other factors  – financial market stresses, suboptimal business environments in many countries, and economies that were already slowing because of cyclical factors
Meanwhile, we get policy makers expressing the four letter word (hope).

Three things to watch in this week’s ECB – Nomura

What to watch out for in this week’s ECB meeting

Nomura Research discusses its expectations around this week’s ECB June policy meeting on Thursday.

Our economists outlined in their preview 1) a possible decision on the introduction of a tiering system, 2) TLTRO details and 3) a forecast update, will be major focuses at this week’s meeting. The ECB has already committed to keep its low rate unchanged at least until end-2019, and amid fragile risk sentiment, the ECB’s decisions may not change the mid-term EUR trend, in our view. Nonetheless, the Bank’s decisions can have different implications on EUR-crosses,” Nomura

EUR’s reactions against USD and JPY will likely be muted though, as movements in yields and risk sentiment can work in opposite directions for these crosses. Thus, we believe EUR trades against the commodity and Scandinavian currencies would be better trades into the ECB meeting in G10 space. If the ECB wants to avoid more proper easing measures, such as the restart of QE and deeper negative rates, at a later stage, the Bank may want to avoid a major disappointment from an announcement on TLTRO’s details.

Then, TLTRO conditions could be generous, and we believe tactical EUR/SEK short positions remain attract.. We also maintain our CAD/NOK short and EUR/GBP long exposure,” Nomura adds.

US stocks finish at the highs in biggest rally in five months

US stocks rally 2%

  • S&P 500 up 59 points (or 2.1%) to 2803
  • Nasdaq up 2.7%
  • DJIA up 2.1%
  • Toronto TSX up 0.8%
Is this the start of a turnaround or a dead-cat bounce? Who knows but that’s a big rally. The index erased a week of declines in a single day. I think the optimistic comments about getting a deal from Lopez-Obrador were the main driver but the market also liked a slight dovish slant from Powell.
Technically, the S&P 500 reclaimed the 200-day moving average, the late-March low and the May low… all in one day.
US stocks rally 2%