Trump’s Tweets distract everyone from what is really going on

This week's Market Report

The BDYI Global Shipping Index is quite high at 2,168. There is a lot of Global shipping going on but the news is always doom and gloom with Trump’s Tweets and that distracts everyone from what is really going on. The Vix fear index climbed on Friday to 19.87 but was at 15.65 on Wednesday. The WTI oil price is $55.28 which is where it was back in October of 2017

This week’s quote is about negative headlines:

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Bad news travels at the speed light; good news travels like molasses. - Tracy Morgan

A speech and a tweet concluded last week’s volatile trading

Equity investors, all over the world, started trading this week with a lot of optimism as world economies prepare to receive some stimulus. China has announced interest rate reforms that will lower corporate borrowing rates, while Germany’s finance minister, Olaf Scholz, announced the possibility of spending as much as $55 billion (50 billion Euros) to help boost the economy. Minutes from the U.S. Federal Reserve’s July meeting, where they cut rates by 0.25%, shows that the Feds debated cutting rates by 0.50%. This news helped global markets to stabilize and keep the huge gains on Wednesday. However, global investors who have waited all week for the U.S. Federal Reserve Chairman, Jerome Powell’s Friday speech at Jackson Hole, Wyoming for more clues on the economy and the interest rates were disappointed by the lack of commitment in his statements. Chairman Powell stated that the Feds will “act as appropriate” to keep the economy healthy. Furthermore, a statement from the Chinese government that they will impose additional retaliatory tariffs on 5,078 American goods and U.S. President Donald Trump’s tweet instructing U.S. companies to “immediately start looking for an alternative to China” pulled European and North American equity markets sharply lower on Friday.

Canadian prices of goods and services climbed last month. The annual inflation rate in July was at 2%, which is higher than the 1.7% analysts were expecting. This reduced the expectation of an interest rate cut by the Bank of Canada, as a higher rate is needed to fight off inflation. Manufacturing sales declined by 1.2% in June but are still better than economists’ forecast of a 1.7% decline. RBC and CIBC kicked off the Canadian banks’ earnings season with both institutions experiencing growth in their retail business that were offset by a significant slowdown in their capital markets division. Canadian technology company, Shopify Inc, continues its surge (up 170% year to date) and overtook BCE Inc as the 10th largest publicly listed Canadian corporation.

U.S. Fed Chair Jerome Powell, on his speech on Friday did not commit to further interest rate cuts due to the mixed U.S. economic data. While there’s a slowdown in the manufacturing sector and concerns about escalating trade issues, he said that “solid jobs growth and rising wages have been driving robust consumption and supporting overall moderate growth”. Shares of Home Depot, Lowe’s and Target surged this week after reporting higher than expected Q2 earnings, showing that U.S. consumers have not lost their appetite to spend. On the other hand, a widely-followed survey of U.S. factory activity, IHS Markit, showed a reading for 49.9. The first time in almost 10 years that it fell below 50. A reading below 50 means that the manufacturing sector is contracting.

In global news, the British Pound experienced huge volatility as it dropped close to its three-year-low against the Euro on Tuesday as British Prime Minister Boris Johnson negotiates his country’s divorce from the European Union (EU), but recovered strongly on Thursday after German Chancellor Angela Merkel’s comments that a solution to the Irish border issue (a huge sticking point in the Brexit negotiation) can be resolved before the October 31 deadline. The Chinese Yuan fell to an 11-year low against the U.S. dollar as traders worry about the escalation of the U.S./ China trade issue. Meanwhile, Europe’s largest economy, Germany, released weak manufacturing numbers as measured by the IHS markets’ manufacturing PMI index. Furthermore, a German automotive production dropped by 12 percent in the first half of 2019.

What’s ahead next week:

Canada

  • Average Weekly Earnings
  • GDP – second quarter

U.S.

  • Durable Orders
  • Consumer Confidence Index
  • GDP – second quarter 
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