Chinese Stocks Fall, U.S. Bonds Rise as Trump Administration Weighs Iran Retaliation –

Asian stocks tumbled on Tuesday, as the flight from risk assets continued in the wake of devastating weekend attacks on Saudi Arabia‘s oil industry.

Latest U.S. intelligence has been persistent in claiming that Iran was responsible for the attack. As The Wall Street Journal reports, Washington and its allies are already considering retaliation.

China Leads Asia Pacific Stocks Lower

Equity markets in the Asia Pacific region were mostly lower Tuesday, with Chinese shares extending an early-week slide. The benchmark Shanghai Composite Index fell 0.8% to 3,005.53.

shanghai composite index
China’s Shanghai Composite Index falls on risk aversion. | Chart: Yahoo Finance

The Shanghai Shenzhen CSI 300 Index was down 0.7% at 3,929.25.

In Hong Kong, the Hang Seng Index tumbled 0.9% to 26,884.40.

Japan’s Nikkei 225 index was down 0.1% to 21,964.74. Japanese markets were closed on Monday for a national holiday.

Australia’s benchmark S&P/ASX 200 Index pared losses to trade flat at 6,674.80.

U.S. Blames Iran for Saudi Oil Attack

[embedded content]

The U.S. intelligence community believes Iran is responsible for weekend drone attacks that devastated Saudi Arabia’s oil fields, resulting in the loss of 5.7 million barrels per day of crude output. According to The Wall Street Journal, Washington and its allies are weighing retaliation.

Iran has denied any involvement in the attacks, which were claimed almost immediately by Yemen’s Houthi rebels at war with Saudi Arabia since 2015. The Saudis dismissed the Houthis’ claims on grounds that the weapons used were Iranian made.

On Sunday, President Trump tweeted that his military was “locked and loaded” to respond once the attackers were verified.

The assessment behind naming Iran responsible hasn’t been shared publicly. It’s also not entirely clear whether U.S. intelligence agencies believe Tehran carried out the attack directly or through one of its proxies.

U.S. Stock Futures Flat-Line

The U.S. futures market was surprisingly calm in overnight trading. Dow, S&P 500 and Nasdaq futures were little changed at the time of writing.

The Dow Jones Industrial Average (DJIA) fell more than 140 points on Monday as risk aversion dictated market tempo. It was the Dow’s first drop in nine sessions.

U.S. Treasury bonds are rising this week, sending bond yields tumbling. The yield on the 10-year U.S. Treasury bond is down roughly 8 basis points from Friday’s close.

10-Year Treasury yield
U.S. Treasury yields give back some of last week’s gains. | Chart: CNBC

Last modified (UTC): September 17, 2019 3:38 AM

Here’s Why the Fed Is Getting Cold Feet About Cutting Interest Rates –

Will the Federal Reserve cut interest rates after its meeting on Wednesday?

If you asked traders this question a few weeks ago, they would tell you with more than 95% certainty that another rate cut was happening in September. Now, the picture isn’t so clear.

Central Bankers Getting Cold Feet, Fed Fund Futures Imply

There’s still a pretty good chance that the Fed will lower interest rates on Wednesday. Markets are pricing in a more than 65% likelihood of that happening, according to the latest Fed Fund futures prices from CME Group. But that figure is at least 30 percentage points lower than where we were earlier in the month when futures traders were all but certain that a second rate cut in as many meetings was on the way.

Fed fund futures
A second Fed rate cut isn’t as certain as it was before, according to CME futures. | Source: CME Group

Shifting attitudes toward monetary policy reflect a string of better than expected data releases showing higher inflation and a decent services sector. Consumer prices and wages rose faster than expected in August despite apparent weakness in other pockets of the economy, namely manufacturing.

U.S. Treasury yields also recorded their biggest weekly gain in at least three years, highlighting easing economic worries. As bond yields fell, the Dow and broader U.S. stock market surged back toward record highs.

Against this backdrop, there’s some evidence to suggest that the Federal Open Market Committee (FOMC) may adopt a more patient approach when setting monetary policy.

Assessing Economic Risks

donald trump, dow jones industrial average
President Trump is urging the Fed to ease monetary policy into uncharted territory. | Source: AP Photo / Evan Vucci

Although recent data are clouding our judgement about this week’s policy announcement, they’ve done very little to change the Fed’s mind about the economy.

The Fed turned dovish on monetary policy shortly after the December 2018 stock-market crash. The trend toward zero interest rates will likely accelerate as FOMC members join a chorus of central bankers around the world in easing monetary policy to accommodate a weaker economy and ongoing trade-war risks.

At the same time, the Fed is facing pressure from above, with President Donald Trump insisting that officials cut rates to zero or below.

The U.S. economy has seen diminishing returns since Trump’s first year in office but remains well ahead of its advanced peers abroad. Gross domestic product (GDP) expanded 2% annually in the second quarter, the second-weakest in three years. The economy expanded at a 3.1% annual clip between January and March.

FOMC Meeting Timeline

FOMC officials kick off their two-day policy meeting on Tuesday, with the official interest-rate decision coming the following afternoon. The Wednesday decision will be accompanied by a revised summary of economic projections covering GDP, unemployment and inflation.

After September, the Fed only has two policy meetings remaining for 2019 – one in October and one in December.

Last modified (UTC): September 17, 2019 2:56 AM

Recession No More? Bond-Market Selloff Pushes Treasury Yields to Six-Week High –

U.S. government debt yields continued to rise on Friday, booking their biggest weekly gain in three years on better than expected data, China trade progress and looser monetary policy.

Treasury Yields Extend Rally

Government bond yields were higher across the board, extending a rally that began at the start of September. The benchmark 10-year Treasury note peaked at 1.91%, the highest since late July, according to CNBC data.

The 10-year yield has gained over 40 basis points since the month began.

The 2-year Treasury note jumped around 8 basis points on Friday to 1.81%. The yield on the 30-year bond added 11 basis points to 2.38%.

Investors Reassess Economic Outlook

Investors piled up government debt last month over concerns that the U.S. and global economies were heading toward recession. The latest thawing in U.S.-China trade tensions, combined with better than expected economic reports and looser monetary policy from the European Central Bank (ECB), have abated those fears for now.

Like the ECB, the Federal Reserve is widely expected to cut interest rates next week. Fed Fund futures prices courtesy of CME Group imply a nearly 80% chance of a rate cut following the Sept. 17-18 Federal Open Market Committee (FOMC) meeting.

The September rate announcement will be accompanied by a revised summary of economic projections covering GDP, unemployment and inflation. Central bankers are notoriously bad at forecasting the future, with no Fed administration ever predicting recession.

The consumption component of the U.S. economy remained firm in August, according to the latest retail sales report. The Commerce Department reported Friday that retail sales rose 0.4% in August following an upwardly revised gain of 0.8% the month before.

Separately, the University of Michigan’s consumer sentiment index improved to 92.0 in September from 89.8 the month before.

Last modified (UTC): September 14, 2019 3:25 AM

Gold Price Flashes Oversold Signal Following Massive Correction –

Gold’s yearlong surge took a pause this week, as investors exited risk-off assets in favor of stocks on the belief that the United States and China are inching toward a new trade agreement.

The yellow metal is down almost 5% from its September peak.

Gold Price Corrects Lower

Gold for December settlement, the most actively traded futures contract, bottomed at $1,493.10 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest in over four weeks. It would later consolidate right around $1,494.00 a troy ounce.

The latest slide dragged gold’s price closer to oversold levels on the relative strength index (RSI). The commodity is still up more than 16% year-to-date.

Silver – a commodity that has outperformed gold in recent months – also fell on Friday. The December contract for the grey metal plunged 66 cents, or 3.7%, to $17.52 a troy ounce.

Trade Optimism Fuels Risk Appetite

[embedded content]

Bullion is plunging along with Treasury bonds after the United States and China exchanged ‘goodwill gestures’ ahead of next month’s planned trade meetings.

On Friday, China announced through Xinhua news agency that it will exempt American soybeans, pork and other commodities from its latest round of tariffs. The move offers negotiators a fresh start as they forge ahead with their October summit.

“We hope that the United States is as good as its words and will fulfill its promises, in order to create favorable conditions for cooperation in the agricultural field,” Xinhua said in a Friday news release.

The U.S. and China remain very far apart on several contentious issues, including Chinese industrial policy and intellectual property. Talks broke down in May after China reportedly walked out of an agreement that President Trump said would have been good for both countries. Talks have been at a virtual standstill ever since.

Last modified (UTC): September 14, 2019 3:26 AM

Zuckerberg, Bezos and Cook are About to Get Their Emails Raided by Congress –

Leaders of Silicon Valley’s powerful elite have been ordered by Congress to hand over reams of documents including emails and financial statements as part of a widening bipartisan probe of the technology industry.

Congress Probing Big Tech for Monopoly

As The Wall Street Journal reports, the House Judiciary Committee has asked Inc., Facebook Inc., Apple Inc. and Google parent Alphabet Inc. to hand over sensitive documents as part of an investigation into the monopolistic practices of major technology firms. The documents requested include executive communications and information about competitors, mergers and other important business decisions.

Among the dozens of executives named, Amazon founder Jeff Bezos, Facebook creator Mark Zuckerberg and Apple CEO Tim Cook were the most notable. Congress is also requesting information on Google’s early leaders, including Larry Page and Sergey Brin.

The companies have until Oct. 14 to produce the documents, which may become public as the investigation unfolds.

Rare Bipartisan Support

Silicon Valley’s growing monopoly of online commerce has united both parties in Congress – a rarity in today’s fractured political landscape. As Committee Chairman Jerrold Nadler stated per WSJ, the new request was initiated amid “growing evidence that a handful of corporations have come to capture an outsized share of online commerce and communications.”

Ultimately, the probe will assist the Judiciary Committee in determining whether anti-competitive behavior is occurring.

The technology giants are already subject to sweeping antitrust reviews by the Justice Department.

In July, Facebook was ordered by the Federal Trade Commission (FTC) to pay an unprecedented $5 billion fine over privacy breaches tied to the Cambridge Analytica scandal. The FTC had accused Facebook of using “deceptive disclosures and settings” to erode user privacy and mine personal data that were then packaged and sold to firms.

Tech Stocks Subject to Sector Rotation

Facebook, Amazon and Alphabet are part of a much broader technology industry that has vastly outperformed the S&P 500 Index this year. That could soon change as markets rotate from momentum stocks and into value plays.

The so-called sector rotation began earlier this month just before U.S.-China trade optimism propelled the stock market back toward record highs. Even factoring the broad gains, shares tied to transport, commodities, retail and banking have outperformed technology, REITs and defensive plays.

The best technology stocks could still lead, especially if semiconductors rebound on any meaningful resolution to the tariff war. According to a recent analysis by Goldman Sachs, technology companies with visible revenue growth (i.e., subscriptions, services) are likely to perform well in this environment.

Last modified (UTC): September 14, 2019 3:26 AM

Asian Stocks Post Huge Rally After U.S., China Exchange ‘Goodwill Gestures’ –

Asian stocks advanced on Friday after an apparent thawing in U.S.-China trade tensions fueled investors’ appetite for riskier assets.

In the process, the Chinese yuan stabilized at three-week highs against the U.S. dollar.

Asian Market Update

Markets across the Asia-Pacific region reported big gains in the final session of the week. In Japan, the benchmark Nikkei 225 index climbed 0.9% to 21,947.53, the highest in four-and-a-half months.

Mainland China’s Shanghai Shenzhen CSI 300 Index jumped 1.1% to 3,972.38.

The Hang Seng Index in Hong Kong added 0.2% to 27,144.48.

Chinese Yuan Strengthens Against the Dollar

The yuan rose against the dollar this week after President Trump agreed to delay additional tariff hikes on Chinese imports at the request of Vice Premier Liu He. The move, which was described by Liu “as a gesture of goodwill,” came after China announced it would delay duties on certain American-made imports.

Since Monday, the dollar-yuan exchange rate has fallen 0.5%.

For much of 2019, China has been devaluing its currency in response to escalating U.S. tariffs. Although the Chinese currency has strengthened this week, its free-fall is expected to continue. CLSA chief economist Eric Fishwick recently pegged USD/CNY as high as 7.3 by the end of the year.

China and the U.S. are set to resume face-to-face trade negotiations next month. Several contentious issues, like Chinese industrial policy and intellectual property, block the formation of a new trading agreement.

U.S. Futures Drift Higher

U.S. equity futures were slightly higher in overnight trading, with the Dow Jones Industrial Average (DJIA) on track to open positively in New York. Futures on the blue-chip index are up 32 points, or 0.1%, to 27,216.00.

The Dow is coming off its seventh straight positive session, the longest winning streak since early May.

S&P 500 futures edged up 0.1% to 3,017.00. Nasdaq futures climbed 0.2% to 7,956.00.

Last modified (UTC): September 13, 2019 3:27 AM

U.S. Treasury Yields Continue to Surge as Mnuchin Considers “Dangerous Temptation” –

U.S. government debt yields rose on Thursday after core inflation exceeded analysts’ estimates, signaling that the economy is performing better than previously feared.

The inflation report seemed to strike a delicate balance on Wall Street: Firming expectations about the domestic economy without compromising the Federal Reserve’s plans to lower interest rates next week.

Treasury Yields Rise

Government bond yields rose across the board Thursday, extending their September rally. The benchmark 10-year Treasury note peaked at 1.80%, the highest since Aug. 3, according to CNBC data. The yield was up around 5 basis points at the time of writing at 1.782%.

The yield on the 2-year Treasury note reached a high of 1.73%. It was last spotted just below peak levels.

U.S. 3o-year Treasury notes saw their yield rise by about 5 basis points to 2.261%.

Falling yields reflect higher prices for government bonds and lower appetite for risk-off assets. On Thursday, this environment propelled the Dow Jones Industrial Average (DJIA) toward its seventh consecutive gain.

Mnuchin: Treasury “Seriously Considering” 50-Year Bonds

Treasury Secretary Steven Mnuchin said on Thursday that his department is “seriously considering” issuing 50-year bonds as soon as next year as it seeks cheaper ways to finance its massive debt load.

Last month, it was reported that the Treasury Department was contemplating not just issuing 50-year bonds, but 100-year notes as well. Ultra-long bonds are becoming a “dangerous temptation,” according to Bloomberg, given how well Austria’s century debt has performed.

Mnuchin said no decision on ultra-long bonds has been made, though demand for such obligations is said to be rising.

“This is something I have talked about over the last two years, it is something we are very seriously considering,” he said on CNBC’s “Squawk Box.” “We’re looking at issuing a 50-year bond, what we could call an ultra-long bond. We think there is some demand for it. It is something we’ll very seriously consider for next year.”

Core Inflation Rises

A closely-watched measure of consumer inflation rose faster than expected in August, leading to the largest annual increase in a year.

The Labor Department reported Thursday that the so-called core consumer price index (CPI) – a gauge that strips away food and energy costs – rose 2.4% year-over-year. Analysts were expecting an increase of 2.3%.

Core consumer prices rose 0.3% from July, also higher than expected.

The main CPI figure came in at 1.7%, lower than July’s 1.8% reading. It was slightly lower than forecasts.

Last modified (UTC): September 12, 2019 8:32 PM

Dow Flinches Ahead of Titanic Tariff Hikes in 48 Hours – CCN Markets

The Dow and broader U.S. stock market traded mixed on Friday, giving back much of their earlier advance as investors looked ahead to planned tariff hikes by the United States and China this weekend.

Dow Pares Gains; Nasdaq Declines

Equities lost their luster Friday afternoon, diverging from a more upbeat Dow futures market. The Dow Jones Industrial Average rose by as much as 152 points before paring gains. The index finish up 41.03 points, or 0.2%, at 26,403.28.

The broad S&P 500 Index of large-cap stocks edged up 0.1% to close at 2,926.46. The gains were mainly concentrated in materials, industrials and financials stocks.

The technology-heavy Nasdaq Composite declined 0.1% to 7,962.88.

U.S.-China Trade War Intensifies

Beginning Sunday, the United States and China will raise tariffs on each other’s goods, prolonging a trade fight that is now in its second year.

Nearly 92% of apparel imports from China will be subject to tariffs on Sunday, according to the American Apparel and Footwear Association. In response to the tariff fight, retailers including Macy’s, Best Buy, and Home Depot have announced they are moving factories out of China.

The United States will implement all remaining tariffs on December 15, giving consumers more time to load up their holiday baskets before Christmas.

Sunday will also mark the beginning of new tariffs on $75 billion worth of American imports into China. Beijing announced those measures last Friday, prompting the U.S. president to threaten additional duties against the country.

Click here for a real-time Dow Jones Industrial Average chart.

Dow Rallies 326 Points Because Wall Street Buys the China Rumor – CCN Markets

The Dow and broader U.S. stock market shot higher on Thursday, as investors bought into the rumor that the United States and China will resume trade talks shortly.

Dow Surges; S&P 500, Nasdaq Follow

All of Wall Street’s major indexes reported big gains, mirroring a strong pre-market for Dow futures. The Dow Jones Industrial Average led the market higher, surging 326.15 points, or 1.3%, to 26,362.25.

The broad S&P 500 Index of large-cap stocks rallied 1.3% to 2,924.58, with ten of 11 sectors reporting gains. Technology, industrials, and communication services all outperformed the benchmark.

The technology-laden Nasdaq Composite jumped 1.5% to close at 7,973.39.

U.S.-China Trade Hopes Revive Wall Street

Equity markets were bolstered by news that China’s Commerce Ministry was in talks with U.S. officials to resume trade talks as early as September. China’s Foreign Ministry later said it was “not aware” of such conversations.

Regardless of whether both sides return to the negotiating table, a trade deal is highly unlikely anytime soon. With the U.S. economy hanging on for dear life, President Trump will use the impasse to bolster his re-election bid.

Trump has simultaneously claimed that the U.S. economy is the strongest in history and that we need additional rate cuts (with a side of quantitative easing, no less).

Cutting rates when the economy is strong goes against virtually every economic orthodoxy we’ve been taught.

In any case, Trump’s wish for additional stimulus has already been granted. The Federal Reserve has not only abandoned quantitative tightening but has charted a new path to lower interest rates. Fed Fund futures imply a nearly 96% likelihood of a second interest rate cut in September.

Click here for a real-time Dow Jones Industrial Average chart.

Dow Jumps 258 Points But Dangerous New Trade War Looms – CCN Markets

The Dow and broader U.S. stock market rose on Wednesday, shrugging off early volatility as rising oil prices boosted energy shares.

Global equities were much more subdued amid concerns that another trade war was unfolding between two neighboring Asian economies.

Dow Rallies; S&P 500, Nasdaq Follow

All of Wall Street’s major indexes advanced, overcoming a volatile pre-market for Dow futures. The Dow Jones Industrial Average jumped 258.20 points, or 1%, to 26,036.10.

The broad S&P 500 Index of large-cap stocks gained 0.7% to 2,887.94, with most sectors reporting gains.

Slumping energy shares put downward pressure on the Nasdaq, which underperformed the Dow and S&P 500. The technology-driven average rose 0.4% to 7,856.66.

Japan-South Korea Trade War?

Trade relations between Japan and South Korea soured last Friday after Tokyo dropped its Asian neighbor as a preferred trading partner.

South Korea’s ruling Democratic Party accused Japan of waging “economic war” after Tokyo dropped the country as a preferred trading partner. The move was the latest in a protracted dispute that threatens to disrupt global supply chains tied to smartphones and electronics.

[embedded content]

On Friday, Japan announced it was removing South Korea from a so-called white list that gave the neighboring Asian country preferred status in bilateral trade. As of August 28, Japanese exports to South Korea must go through additional screening to ensure they are not used for weapons.

While Japan has assured that the new measures are not equivalent to a trade ban, South Korea’s president said they were “reckless.”

“If Japan — even though it has great economic strength — attempts to harm our economy, the Korean Government also has countermeasures with which to respond,” President Moon Jae-in said earlier this month, according to CNN.

Click here for a real-time Dow Jones Industrial Average chart.