The Market Today

Optimism Rises as U.S.-China Trade Being ‘Relatively Close to an Agreement’


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

Factory Orders Report to Give More Insight into Business Weakness: September’s factory orders report is scheduled for 9:00 a.m. CT which will include the final revision to the disappointing September durable goods orders data.  Core capital goods orders were initially estimated to have fallen 0.5% in September.  Fixed business investment fell 3.0% in last week’s 3Q GDP report, the second weakest quarter since the recession.

Fedspeak: Also on the calendar today, San Francisco Fed Bank President Daly is scheduled to speak at 4:00 p.m. CT. Daly is not a voter this year but has tilted slightly dovish in her comments.


OVERNIGHT TRADING

Optimism Rises as U.S.-China Trade Being “Relatively Close to an Agreement”:  Stocks are higher coming into today’s trading and sovereign yields are rising on global optimism for a U.S.-China trade deal.  In meetings in Bangkok this morning, senior U.S. and Chinese officials have indicated more progress toward phase one of a trade deal.  Secretary of Commerce Wilbur Ross said before the meeting that phase one was “very far along.”  National Security Adviser Robert O’Brien said that President Trump had invited President Xi to the U.S.  President Trump previously stated that he would want any deal to be signed in the U.S.  O’Brien also indicated progress with Chinese Premier Li Keqiang at this morning’s Bangkok meetings, saying “we’re relatively close to an agreement.”  Chinese stocks were up 0.7% while the Hong Kong Hang Seng rose 1.7%.  Eurozone stocks are up 1.2%.  After the S&P and Nasdaq both set new record highs last Friday, U.S. equity futures are up again this morning.

EU Manufacturing PMIs Inch Higher but Remain Weak: The October Markit manufacturing PMI for the Eurozone inched up from September’s low this morning, up from 45.7 to 45.9.  The headline index for the region remains very weak and has now been below 50.0 for nine consecutive months. The indices for France and Germany both ticked higher by 0.2 points to 50.7 and 42.1, respectively.  Germany’s weakness remains an acute concern for the region.


NOTEWORTHY NEWS

ICYMI – November 1, 2019 Weekly Market Recap: Yields fell last week and stocks rose to new records after the Fed cut rates and as surprisingly strong labor data eased fears about an unwelcomed slowdown in the U.S. economy. In the major reports of the week, the first 3Q GDP estimate showed the economy grew a better-than-expected 1.9% on the back of a resilient consumer, steady government spending, and the first positive quarter for housing since 2017. Those positive components offset the second-worst quarter for the business sector since the recession. Hours later, the Fed cut rates for a third time but signaled a pause of the recent mid-cycle adjustment, pushing back against those who expected more cuts in the months ahead. However, Powell also pushed back against any who thought the Fed could raise rates any time soon, solidifying their pause-and-hold position. Friday’s jobs report supported that position, as stronger-than-expected hiring offset growth worries but continues to apply only modest upward pressure to wages. In other news, the EU granted the U.K. a Brexit extension and U.K.’s parliament voted for new elections. There were mixed headlines on trade but sentiment ended on an upbeat note of progress. For the week, the 2-year yield fell 6.6 bps while the 10-year yield dropped 8.4 bps. The S&P 500 set two new records, including Friday’s close. Click here to view the full recap.

October 2019 Monthly Review: Persistent trade uncertainty and worries that global weakness was continuing to weigh on U.S. growth led the Fed to cut rates for a third time before signaling a pause of their mid-cycle adjustment. Click here to see how the Fed’s decision and other economic and market developments during the month affected U.S. and global interest rates.


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