Daily Comments

Asian markets were higher. The Nikkei 225 recovered most of yesterday’s loss, adding 1.24%. The Shanghai Composite reversed early losses, but still only added a modest +0.31%. The PBOC promised to support markets if necessary. German May PPI rose slightly ahead of expectations. European equities gave up early gains but closed mostly higher. The DAX rose +0.14%. Yields on 10-yr. Bunds edged up to 0.375%. The Q1 Current Account was reported at -$124.1B, a little better than expected. May Existing Home Sales disappointed at 5.430M. Last night, the API reported a draw in crude inventories for the week of 06/15 of -3.0M barrels. This morning, the EIA’s official report was an even larger draw of -5.9M barrels. Yields on 10-Year Notes rose to 2.935%. The US$ Index was flat. August gold lost -0.3% to $1,274.50. July crude expired up +1.8% at $66.22. Tomorrow we’ll begin tracking August crude, which settled at $65.71. After a strong open, markets diverged, with the DJIA falling into the red while the Nasdaq 100 and the Russell 2000 set new all-time highs. On light volume, markets closed mixed.

There was another ratcheting up of trade tensions as President Trump asked for a plan for 10% tariffs on an additional $200B of imports from China. Asian markets were broadly lower. The Nikkei 225 fell -1.77% while the Shanghai Composite tumbled to a 2 year low, down -3.82%. ECB President Draghi said, “we will remain patient in determining the timing of the first rate increase…” European equities finished lower. The DAX fell -1.22%. Yields on 10-yr. Bunds fell to 0.373%. May Housing Starts at 1.350M were above expectations and an 11 year high, but May Building Permits at 1.301M disappointed. Yields on 10-Year Notes slipped to 2.888%. The US$ Index is just below its high for the year. August gold lost -0.1% to $1,278.60. July crude lost -1.2% to $65.07. President Trump’s trade rhetoric weighed heavily on markets overnight. Opening with steep losses, equities wavered but held and eventually began to work back from the lows. Multiple attempts to push averages lower were met with buying. The small-cap Russell 2000 closed to within a whisker of the all-time high set yesterday. Markets again finished with only moderate losses.

The May Japan trade balance came in with a wider deficit than expected. Exports were slightly stronger than expected but imports were much stronger. Asian markets were mostly lower. The Nikkei 225 fell -0.75%. The Shanghai Composite was closes for a holiday. European equities were lower (though well off the lows) as trade war fears escalated The DAX lost -1.36%. Yields on 10-yr. Bunds edged down to 0.400%. The June NAHB Housing Market Index fell to 68 when a sharp gain had been expected. Builders expressed concerns over the cost of lumber, a key product in the tariff spat with Canada. Each of the components, present conditions, future conditions, and buyer traffic, slipped one point. Yields on 10-Year Notes were flat at 2.922%. The US$ Index was flat. August gold added +0.1% to $1,280.10. July crude added +1.2% to $65.85. While major averages sank in early trade on trade war concerns, the small-cap Russell 2000 climbed to new all-time highs. The early negative sentiment also lacked conviction as volume was very light. While the Russell 2000 managed to hold on to modest gains, other major averages finished modestly lower.