Daily Market Color

Easing Trade Concerns Boost Risk Assets


Trade War Concerns Easing

Risk assets posted a second consecutive day of gains, boosted by the news of refreshed trade talks between the US and China along with comments from Mexico’s economy minister Ildefonso Guajardo, who stated his hopes to resolve the outstanding bilateral issues with NAFTA by next week.  All three major US stock indices finished the week on a high note, with the DJIA advancing 0.4% while the S&P 500 (+0.3%) and Nasdaq (+0.1%) posted more modest gains.  US Treasurys held within a tight range throughout the trading session, with the yield on the 10-year note set to close near 2.86%.  In commodities, WTI crude futures edged 0.65% higher to $65.90/barrel.  For the week, however, WTI finished with a loss, marking its sixth consecutive week doing so.  In FX markets, the US dollar retreated 0.5% against major currencies in response to trade-friendly announcements.     



Quarterly Reports a Thing of the Past?

In what may have been the only good news for Elon Musk today: President Trump has asked the Securities and Exchange Commission to consider changing the requirement that publicly traded companies report earnings from quarterly to semi-annually.  SEC Chairman Jay Clayton commented that the President had “highlighted a key consideration.”  In a further elaboration, “the SEC’s Division of Corporation Finance continues to study public company reporting requirements, including the frequency of reporting,” Clayton said.  Trump said that he had hoped changing the requirement would lead to public companies and investors taking a longer term view. “And I thought of it and it made sense to me, because you know we are not thinking far enough out,” Trump said.  Business leaders including Elon Musk, Warren Buffet and Jamie Dimon have been critical of the current quarterly reporting requirement.  In 2014 the European Union changed from a quarterly reporting requirement to a semi-annual reporting requirement, which appears to be a framework under consideration.


Consumer Sentiment Falls

Today the University of Michigan Sentiment Index for July came in below estimates of 98 at 95.3, which represented the index’s lowest level in the past 10 months.  There was a less favorable opinion of the buying conditions, mostly due to prices.  While some of this price sticker shock has been mitigated by rising wages, according to the report, consumers are more sensitive to inflation than in past periods.  Home purchases and vehicle purchases were both viewed less favorably than they have in some time, and home prices being viewed less favorably than at any time since 2006.  It appears the data indicate that interest rates are playing a major role in purchase decisions, possibly pointing to the importance of future Fed rate hikes on consumer behavior.



Pastor Cannot Pass Go

Earlier today a high court in Turkey officially rejected the appeal for the release of American Pastor Andrew Brunson, who now remains in custody on charges of terrorism.  Brunson has been detained for the past two years, and his plight has been thrust further into the spotlight as the governments of US and Turkey exchange bilateral tariffs and financial sanctions.  Commenting on the situation, President Trump tweeted-    
Turkey has taken advantage of the United States for many years. They are now holding our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage. We will pay nothing for the release of an innocent man, but we are cutting back on Turkey!
The news prompted an extended decline in the Turkish lira (-4%) and further escalated concerns over the ability of the Turkish government and corporations to pay back outstanding debt denominated in foreign currencies.


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