The Market Today

TODAY’S CALENDAR

Construction Data, Manufacturing Activity, and Auto Sales: This week’s calendar is loaded with important economic reports, including today’s flurry of data.  At 9:00 a.m. CT, the August Construction Spending data is expected to show a 0.4% MoM increase in activity.  Also at 9:00 a.m., the September ISM Manufacturing index is expected to pull back from 61.3 to 60.0, remaining at a very strong level.  Throughout the day, September’s Vehicle Sales will be reported.  Expectations are that sales increase from 16.6 to 16.8 million units annualized.  However, after GM quit reporting monthly sales figures, the data has lost some of its relevance.

 

Deluge of Fedspeak: There are also several Fed officials speaking this week, including Vice Chair Quarles testifying before Congress and Chair Powell speaking at NABE tomorrow.  As for today, Atlanta Bank President Bostic (8:00 a.m.), Minneapolis Bank President Kashkari (10:00 a.m.), and Boston Bank President Rosengren (11:15 a.m.) are all scheduled to speak.

 

NOTEWORTHY NEWS

United States-Mexico-Canada Agreement: U.S. and Canadian officials announced a deal had been struck Sunday afternoon to replace the 1994 North American Free Trade Agreement.  The new agreement, dubbed the United States-Mexico-Canada Agreement, is remarkably similar to NAFTA but with a handful of key changes.  On autos, the new deal protects Canada and Mexico from U.S. auto tariffs so long as they export fewer than 2.6 million units per year.  This cap is approximately 40% higher than current auto exports for each country, according to Bloomberg data.  As previously announced, 75% of auto content must originate from Mexico or the U.S. while 40% of laborers must be paid at least $16 per hour. New Steel and aluminum tariffs placed by the U.S. will remain, but future tariffs would require a 60-day negotiation period between the U.S., Mexico, and Canada in lieu of immediate announcement/implementation.  The arbitration panels largely remain intact with the exception of Chapter 11, the investor/state settlement process (it will, however, remain for key sectors). The U.S. will benefit from gaining more access to Canadian dairy.  The deal is set for a 16-year term with a 6-year review.  Finally, exemptions for tariffs on cross-border purchases were raised from $50 to $100 (Mexico) and $20 CAD to $150 CAD (Canada).  There remain a large number of hurdles before the deal arrives at Congress for a vote, but news of an agreement has pushed Treasury yields higher in overnight trading.  As of the time of writing, the 10-year yield is trading at 3.08%, 2 bps higher than its Friday afternoon close.

 

WEEKLY RECAP

ICYMI – Vining Sparks Weekly Recap September 28, 2018: Steady Fed and Italian Uncertainty