Market Update: Tuesday, July 10, 2018

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Daily Insights

  • Kavanaugh nominated to Supreme Court. President Trump nominated Brett Kavanaugh to succeed Justice Anthony Kennedy on the U.S. Supreme Court. Kavanaugh is considered a conservative on many issues, and could tilt the court firmly in that direction. His nomination will require a simple Senate majority, but it likely won’t be a smooth ride. Markets are taking the nomination in stride, as he is likely to make the court more pro-business.

  • Small businesses remain optimistic. The NFIB Small Business Optimisim Index came in at its sixth-highest level ever, once again showing corporate America isn’t yet concerned with trade tariffs. Investing in additional inventories and plans to create new jobs were highlights. Additionally, tax cuts and regulatory reform were viewed as policies that should continue economic growth.

  • Yields remain at low end of recent range. With the 10-year Treasury yield still hovering near 2.85% and the 30-year near 2.95%, longer-term yields remain depressed over trade-related concerns; with shorter-term yields climbing month to date, the yield curve has flattened further and the spread between the 2- and 10-year Treasury yields has fallen below 30 basis points (0.3%). Auctions this week across various maturities, from 3-month to 30-year, may give investors an indication of investor yield curve preferences and market direction.

  • The 10-year Treasury futures market is sending powerful signals, now at the largest net short level in the history of the market, meaning investors believe yields will increase from here. Counterintuitively, this can serve to depress rates in the short-to-medium term, as investors who wish to capture a profit (or avoid a loss) on those trades need to buy Treasury futures contracts to close them out, which can weigh on Treasury yields.

  • China inflation data results come in as expected. The Consumer Price Index rose 1.9% year over year in June, in-line with consensus, while the Producer Price Index increased 4.7% year over year, above consensus, at 4.5%, and an acceleration from the 4.1% reading in May. So far there are few signs of a detrimental impact from tariffs, though we will continue to monitor the situation. Check out our latest Weekly Economic Commentary for an update on U.S. and China trade tensions.

  • Trade tensions resources. With the U.S. having implemented its first round of tariffs on Friday on goods imported from China, today on the LPL Research blog we’ll provide links to related resources you can reference in client conversations and share with investors.

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Click Here for our detailed Weekly Economic Calendar

Tuesday

  • NFIB Small Business Optimism (Jun)
  • France: Industrial Production (May)
  • Italy: Industrial Production (May)
  • UK: Industrial Production (May)
  • Germany: ZEW Survey (Jul)
  • Eurozone: ZEW Survey (Jul)
  • Japan: PPI (Jun)
  • Japan: Core Machine Orders (May)

Wednesday

  • PPI Final Demand MoM (Jun)
  • Wholesale Inventories (May)

Thursday

  • CPI MoM (Jun)
  • Monthly Budget Statement (Jun)
  • Germany: CPI (Jun)
  • France: CPI (Jun)
  • Eurozone: Industrial Production (May)

Friday

  • Import Price Index MoM (Jun)
  • Japan: Industrial Production (May)

 

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