Market Update: Thursday, Mar 14, 2019 | LPL Financial Research

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Daily Insights

China trade deal coming together. The latest news out of Washington, D.C., continues to point to an agreement fairly soon, one of the key drivers in propelling the S&P 500 Index’s quick return to the 2800 level this week. Key points of negotiation include: Existing tariff removals, currency, auto tariffs, join venture requirements, market access, intellectual property protection, and Chinese goods purchase commitments. There is still a chance things come unraveled-Trump reiterated his position yesterday that he will only accept a good deal-but resolution in the next month or so is looking increasingly likely. Presidents Trump and Xi are expected to meet in April but that could slip into May. Removal of tariffs is a possible upside surprise, while strong progress has been made on Chinese commitments to purchase U.S. energy and agriculture goods, better market access for manufacturing and finance companies, and currency policy. Intellectual property enforcement remains the key sticking point.

Mixed batch of Chinese data. China reported retail sales, industrial production and fixed asset investment data overnight. Retail sales (+8.2% YoY) and fixed asset investment (+6.1%) were in line with expectations while industrial production (+5.3% YoY) fell short of expectations. Industrial production growth slowed while fixed asset investment accelerated, painting an overall mixed but generally steady growth picture. The Chinese economy is slowing modestly-just enough to get China to the negotiating table and encourage them to implement stimulus, but not enough to materially impair the global growth outlook.

Brexit update. Today on the LPL Research blog, at the risk of contributing to your possible “Brexit fatigue,” we attempt to put the U.K.’s tenuous situation into perspective. The latest news is that the “hard Brexit” (aka no deal) vote failed to pass yesterday, reducing the odds that the U.K. crashes out of the EU without a deal (they were already low). Next up is a vote today on an extension to the March 29 deadline that we think will pass. That will then be followed by another Theresa May proposal next week that is likely to fail, but at least has a chance as the clock is ticking. These votes establish what U.K. policymakers do not want, but what they do want remains unclear, with the Irish border still a key sticking point. In the end, an April or May agreement still appears most likely, though as this situation drags on, a do-over via a second referendum becomes increasingly likely. The risk of no Brexit at all likely brings the pro-Brexiters to the table at some point.

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Thursday

  • Import Price Index (MoM Feb)
  • Export Price Index (MoM Feb)
  • Initial Jobless Claims (March 9)
  • New Home Sales (MoM Jan)
  • Germany CPI Report (Feb)
  • Bank of Japan Rate Decision (Mar)

Friday

  • Industrial Production (MoM Feb)
  • JOLTS Job Openings Report (Jan)
  • University of Michigan Sentiment Index (Preliminary Mar)
  • Eurozone CPI Report (Feb)

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