- Solid jobs report helps solidify counter-balance to trade tensions. We continue to expect a solid overall economic backdrop, bolstered by fiscal stimulus, to overwhelm the dollar impact of tariffs in 2018 on the way to eventual trade deals between the U.S. and its major trade partners. Friday’s jobs report helps to solidify this thesis based on: 1) solid and better-than-expected June job creation (213K), in addition to positive revisions to the prior two months, 2) benign 2.7% wage inflation, and 3) an increase in the labor force participation rate, which we view as a positive economic signal.
- More political uncertainty in the U.K. Theresa May’s Cabinet minister resigned, leaving prospects for a “soft Brexit” that would maintain close ties to the European Union very much in question. The news has sparked speculation that Brexit hardliners would try to oust May.
- What does an inverted yield curve mean? One of the most popular market-related discussions recently is on the yield curve. The reason being the yield curve (as measured by the 2-10 year Treasury spread) is at its flattest level since right before the financial crisis. Also, the past nine recessions have all been preceded by an inverted yield curve. It is important to note that the yield curve is not currently inverted, but that hasn’t stopped the masses from focusing on it. Here’s the catch, looking at the past five recessions shows that a recession didn’t officially start until an average of more than 21 months after the yield curve initially inverted. The S&P 500 Index, meanwhile, added an average of nearly 13% over this timeframe and was higher in every single instance. Today we will take a closer look at this misunderstood signal.
- The week ahead. The big events of the week are not economic data points but rather President Trump’s Supreme Court pick, a NATO summit, and the start of second quarter earnings season. The U.S. data calendar will generate some interest, however, with consumer and producer prices, import/export prices, small business optimism, consumer confidence, and the monthly U.S. federal budget numbers on the docket. Energy outlooks from the U.S. Energy Information Administration, OPEC, and the International Energy Agency are also due out this week, followed by the U.S.D.A. agriculture supply and demand estimates. Overseas data includes Eurozone industrial production and a series of Chinese releases on foreign exchange reserves, trade, foreign investment, loan growth, and money supply.
- 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)
- PPI Final Demand MoM (Jun)
- Wholesale Inventories (May)
- CPI MoM (Jun)
- Monthly Budget Statement (Jun)
- Germany: CPI (Jun)
- France: CPI (Jun)
- Eurozone: Industrial Production (May)
- Import Price Index MoM (Jun)
- Japan: Industrial Production (May)