Helsinki Summit Dominates Headlines

Retail Sales Display Continued Strength in US Economy

Sales at US retailers maintained a robust pace during the final month of the second quarter, boosting the outlook for Q2 economic growth.  Overall retail sales in June climbed 0.5% from the previous month (in-line with expectations), driven by rises in automobile purchases and gasoline prices.  In addition, sales during May were revised substantially higher to +1.3% from +0.8%, representing the largest monthly rise since September 2017.  One of the few weak spots in the report, department store sales continued to struggle -1.8%, as Americans continue to trend towards online shopping.  Compared to the first quarter of 2018, retail sales during Q2 jumped 1.9%.  As consumer spending accounts for more than two-thirds of U.S. economic output, today’s report bodes well for the first estimate of Q2 GDP, which is scheduled to be reported next week.

Putin it Together

In Helsinki, President Trump met with Russian Federation President Vladimir Putin at a time when US-Russian relations may be nearing their lowest point since the end of the Cold War.  The meeting comes just days after Special Counsel Mueller indicted 12 Russian military operatives for meddling in the 2016 US Presidential election.  President Trump commented on the situation and the details he has received,  “I have great confidence in my intelligence people, but I will tell you that President Putin was extremely strong and powerful in his denial today.”    

Members of both parties were quick to criticize the President’s performance during the press conference after the closed door meeting.  The following are a few examples of the comments by members of the Senate.   

Senate Majority Leader Mitch McConnell (R-KY) said through a spokesperson, “As the Leader has said many times, Russia is not our friend, and he agrees with the findings of the intelligence community regarding Russia’s efforts to interfere in our elections. Those positions have not changed.”

Senate Minority Leader Charles Schumer (D-NY) said,  “The President put what’s best for him over what’s best for the security and well-being of the United States.” 

Senate Intelligence Committee Chair, Richard Burr (R-NC) issued a statement that included  the following: “Vladimir Putin is not our friend and never has been. Nor does he want to be our friend. His regime’s actions prove it. We must make clear that the United States will not tolerate hostile Russian activities against us or our allies.” 

Senator  John McCain (R-AZ) released a statement as well that included the following: “Not only did President Trump fail to speak the truth about an adversary; but speaking for America to the world, our president failed to defend all that makes us who we are—a republic of free people dedicated to the cause of liberty at home and abroad.”

Kashkari Urges Caution

Neel Kashkari, President of the Minneapolis Fed, published an opinion piece that seemed to urge for caution by voting members of the FOMC over the possible inversion of the yield curve which could result from overly aggressive Fed rate action.  Kashkari remains concern that an inverted yield curve would be a leading indicator of a pending recession. The rates curve was again flatter today as the spread between 2 year and 10 year swap rates hovers near 10 bps.  Across the curve treasuries moved higher by 1-3 bps.  The 10 year US Treasury was up 3bps on the day, closing at a yield near 2.86%. 

Risk assets held within a tight range again today as earnings season marches on amid the threat of expanding trade war tensions.  In stocks all three major indices finished the day close to where they started. The DJIA had the only positive day closing up  +0.18%. The S&P 500 was marginally lower -0.10%, while the Nasdaq, off by -0.26%, posted the biggest loss of the day.   WTI crude futures settled 3.9% lower to $68.24/barrel after news of increased supply from Saudi Arabia was announced as well as lower demand anticipated among shippers with the increasing trade tensions between the US and China.  In foreign exchange markets the US Dollar (USD)  was down -0.1% against the British Pound (GBP), and down -0.2% against the Euro (EUR).