Daily Market Color

Energy Sector Keeps Stocks Afloat, Trade Concerns Persist


Iran Oil Subject to Sanctions

Today the United States Department of State issued a statement saying that it will push US allies to cut imports of all Iranian oil to zero by November 4th of this year.  Unlike under the Obama administration, other nations will not have the ability to “phase out” reliance on Iranian oil.  Iran is currently the third largest producer of oil in OPEC and exports more than 2 million barrels of oil per day.  US allies China, India and Turkey are also key importers of Iranian oil, and the US intends to break their reliance on Iranian oil through the threat of sanctions.  WTI crude gapped 3% higher to over $70/barrel following the announcement, touching its highest level in more than a month.  



Trade Tensions Remain in Spotlight

Investor sentiment was held in check today as the Trump administration made minimal progress in alleviating the potential for trade wars with developed nations around the globe.  Today the House of Representatives passed a bill expanding the foreign investment rules, specifically aimed at China’s past intellectual property transgressions against the US.  The bill received bipartisan support via a 400-2 vote and will limit the ability for Chinese companies to invest in US firms, specifically within the telecommunications network.     



Import tariffs from the European Union remained in the discussion as President Trump responded to the potential for automakers and manufacturers such as Harley-Davidson to move their operations abroad.  “If they move, watch, it will be the beginning of the end—they surrendered, they quit! The Aura will be gone and they will be taxed like never before!” Trump tweeted this morning.  He labeled the move as “an excuse” to shift production overseas, directly referencing Harley Davidson’s plans from earlier this year to move one of its plants from Kansas City to Thailand.  Ultimately, the tariffs imposed from the EU are a result of the United States’ steel and aluminum import duties, a strategy which Trump continues to defend amid serious pushback from several of its largest trading partners.  


Equities Turn Positive with Energy Sector

After a flight to safe haven assets to open the week, equity markets rebounded to post small gains during today’s trading session.  The news surrounding Iranian oil exports being subject to sanctions led shares in energy producers higher, helping to offset losses in the financial sector which declined for a twelfth consecutive day – the longest losing streak for financials on record.  Overall, the tech-heavy NASDAQ led the way, gaining 0.39%, followed by the S&P 500 (+0.22%) and the DJIA (+0.12%).  Bond yields and swap rates were largely unchanged on the day, moving less than 1bp across the curve.  The yield on the current 10-year US Treasury note closed near 2.88%.  In foreign exchange markets, the US dollar was up 0.4% on the day against major currencies, helped by gains vs. those currencies largely affected by the ongoing trade tensions such as the Canadian dollar and South African rand.


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