Morning Report: Trade deal with China

Vital Statistics:

 

Last Change
S&P futures 3190 13.25
Oil (WTI) 60.14 0.14
10 year government bond yield 1.85%
30 year fixed rate mortgage 3.97%

 

Stocks are up this morning on trade with China. Bonds and MBS are down.

 

The last full workweek of 2019 won’t have much in the way of market-moving data. We will get some housing data (housing starts and existing home sales) and the third revision to Q3 GDP, but that is about it.

 

China agreed to purchase more agricultural products from the US as part of an agreement that canceled additional tariffs that were supposed to take effect last night. This deal should end the tit-for-tat tariffs that have been weighing down financial markets for the past several months.

 

More evidence of weakness in the Eurozone as the German ISM numbers were downright awful, and were echoed by weakness in the UK and France. This will be the push-pull driving interest rates in the near future: an accelerating US economy will push rates higher, while stagnation in Europe will pull them lower.

 

Retail Sales rose 0.2% MOM in November, which was lower than expectations. Ex autos and gas, sales were flat.

 

The Fed is injecting liquidity into the system to prevent a repeat of September’s cash crunch, which sent overnight repo rates up to 10% at one point.