Daily Market Color

Tepid Movement in Financial Markets with Trade War Looming


Trade War Tensions Weigh on Financial Markets

Risk assets held within a tight range again today as the trade war tensions between the US and China continue to simmer.  In stock markets, the DJIA (-0.41%) and S&P 500 (-0.21%) finished lower while the Nasdaq (+0.01%) managed to close near unchanged on the day.  Gains in the energy sector helped to offset a portion of the equity declines, driven by a rise in crude oil prices ahead of Friday’s production meeting amongst OPEC and its allies.  WTI crude futures settled 1.2% higher to $65.85/barrel after briefly touching a two-month low earlier in the trading session.  In bond markets, US Treasurys were near flat on the day, as the 10-year note yield remained at 2.92%.  



Bostic Supports Three 2018 Rate Hikes

Earlier today Atlanta Fed President Raphael Bostic (voter, neutral) voiced his preference for three total rate hikes in 2018 while acknowledging that the economy “appears to be in a pretty good place”.  Bostic cautioned that “I want to make sure we…don’t miss something that suggests the economy is in a position where a too aggressive stance puts the brakes on growth.”  Bostic lands in the minority of voting members after median forecasts at last week’s FOMC meeting pointed towards a total of four hikes in 2018.  Fed fund futures currently indicate a 53% probability of a 4th rate increase before year end that would bring the target range to 2.25%-2.50%.  



The Week Ahead

Updates to the tariff trade war between the US and China will most likely remain the focal point influencing market movement throughout the week.  U.S. Secretary of State Mike Pompeo continued to escalate matters this afternoon as he referred to China’s trade practices as “predatory economics 101” while labeling the nation’s recent statements regarding opening their economy as “a joke.”
On Wednesday financial markets will tune into the ECB Forum on Central Banking where there will be a panel discussion amongst global central bank heads including Fed Chair Jerome Powell, ECB President Mario Draghi, BOJ Governor Haruhiko Kuroda, and Reserve Bank of Australia Governor Philip Lowe.
Key economic data releases are few and far between over the next five days, highlighted by monthly housing starts (Tuesday), existing home sales (Wednesday) and the Purchasing Managers’ Index (Friday).


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