Market Update: Thur, June 6, 2019 | LPL Financial Research

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Daily Insights

Trade negotiations with Mexico continue. Progress has been made but “not nearly enough” according to President Trump, setting up 5% tariffs on Mexican imports to go into effect on Monday. Talks continue today. Stocks opened slightly higher despite those headlines and a credit rating downgrade of the nation’s sovereign debt. We expect an agreement with Mexico before Mexican tariffs are ratcheted significantly higher and remain more focused on China talks.

U.S. companies are shifting production to avoid tariffs. This is clearly a logical response, as imports from Taiwan, Korea and Vietnam to the United States are on the rise while Chinese imports are down double digits. Trade globally is only growing at about 1% annually, down from 5% last fall, so clearly tariffs are having a real negative impact. However, should the trade dispute continue into the fall, substitution can help mitigate the impact of higher costs and price increases.

ECB to keep rates lower for longer. The European Central Bank (ECB) responded to weaker growth, stubbornly low inflation, and falling market-based interest rates by pledging to hold rates at least through mid-2020, adding six months to the central bank’s prior commitment while using the phrase “as long as necessary” to convey flexibility to do more as needed. The move which could put some upward pressure on the U.S. dollar may be the last from ECB chief Mario Draghi, who will retire in October.

Main Street sentiment improves. Main Street’s sentiment continues to rebound from a 7-year low reached in March, according to the Federal Reserve’s (Fed) Beige Book released Wednesday. U.S. businesses’ feedback in the Beige Book is especially telling now that U.S.-China trade tensions have flared up again, and global demand continues to decline. In today’s LPL Research blog post, we’ll highlight more details on Main Street’s sentiment from the Beige Book.

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Thursday

  • Nonfarm Productivity (QoQ Q1)
  • Initial Jobless Claims (June 1)
  • Eurozone Employment (Q1)
  • Eurozone GDP Report (Q1)
  • European Central Bank Rate Decision (June)

Friday

  • Nonfarm Payrolls Report (May)
  • Unemployment Rate (May)
  • Average Hourly Earnings (YoY May)
  • Japan Leading Index (Preliminary Apr)
  • Germany Industrial Production (Apr)

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