Daily Market Color September 12, 2018US-China Trade Outlook Brightens Producer Price Data Puts Brakes on Inflation Euphoria Just when it seemed like all key economic indicators were pointing towards an uptick in inflation, today the Labor Department’s report on U.S. business prices did not support that recent trend. For the first time since February 2017, there was a monthly decline recorded in the producer-price index (-0.1%). The majority of the downturn was attributed to prices falling in the volatile food (-0.6%) and trade services (-0.9%) components, which more than offset price increases in a few of the tariff-impacted products, such as the metals sector. Excluding food, energy, and trade services, producer prices increased a marginal 0.1%, missing expectations of +0.2%. Yesterday’s sharp selloff in US Treasurys was halted following the PPI data. Yields/swap rates finished today’s trading session 1-2bps lower across the curve, as the 10-year note yield settled down near 2.96%. The US dollar held near unchanged on the day against major currencies. Tomorrow financial markets will look to the Labor Department’s monthly release of its Consumer Price Index to round out the current inflation picture. US-China Trade Progress Providing a glimmer of hope in the ongoing trade negotiations with China, it was reported this morning that the US had sent an invitation to Chinese trade officials with the intention to plan another round of discussions. The most recent talks between the two sides occurred August 22 – 23, but concluded with no tangible progress. The US is currently readying tariffs on $200 billion of Chinese imports and has threatened to impose duties on an additional $267 billion if concessions were not made. On the other side of the table, Chinese leaders have continued to maintain dialogues with major US companies to assure them that they would not be impacted by any retaliatory tariffs, in an effort to retain crucial business and investment flow in China. Commenting on the impact of the existing and proposed tariffs, this afternoon the Fed released its Beige Book report which included a mixed analysis of the trade war effects. The text labeled the impact as modest, but cited a slowing in business investment amongst manufacturers with the trade uncertainty. US stocks received a boost from the more trade-friendly tone, as the S&P 500 (+0.04%) and DJIA (+0.11%) managed to squeeze out small gains while the tech-heavy Nasdaq finished 0.23% in the red. Shares of Apple Inc. (-1.24%) weighed on major indices after the company failed to impress investors at the public unveiling of its newest products earlier today, which included new versions of the iPhone and Watch. Other major tech companies were generally softer off the potential for stricter regulations in the social media sector.