Prior Week Summary
The major U.S. equity indices advanced last week, notching their first weekly gains since late July as a reprieve from the harsh rhetoric by the U.S. and China seen the week prior, and solid economic data in the U.S. worked to improve investor sentiment. The second estimate of 2nd quarter GDP saw the U.S. economy accelerate at a 2.0% pace, lower than last month’s initial estimate of 2.1%, but nonetheless topping consensus expectations calling for 1.8% growth. The U.S. consumer also appears to be on solid footing as consumer spending increased 4.7% in the 2nd quarter, far above consensus estimates and 0.6% in July with the latest readings of the Conference Board Consumer Confidence Index indicating that sentiment remains near its highest point in recent memory. Additionally, the Dallas Fed Manufacturing Outlook and durable goods orders posted better-than-expected figures, but pending home sales fell much lower than consensus estimates. In Germany, the second estimate of 2nd quarter GDP confirmed that the German economy slowed 0.1% to end the 1st half of 2019, and the latest inflation data indicated prices drop 0.2% month over month.
After the U.S. and China announced plans to levy new tariffs the prior week, dialogue between the two sides has seemingly improved with a spokesperson for China commenting, “China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war. China is lodging solemn representations with the U.S. on the matter.” Also promising for trade negotiations, President Trump has indicated that a September meeting between the two sides is still scheduled saying, “We are talking to China, the meetings in September, that hasn’t changed.” Both countries implemented additional tariffs as-scheduled on Sunday.
The Look Forward
Market participants are gearing up for a busy week as updated figures on construction spending, factory orders, the ISM Manufacturing Index, and the August employment report are scheduled for release this week. A host of Federal Reserve officials have speaking engagements throughout the week, most notably Federal Reserve Chairman, Jerome Powell, who speaks on the economic outlook in Zurich on Friday.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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