Daily Comments

Asian markets headed into the weekend after a volatile week closing mixed. The Nikkei 225 edged up +0.06% and the Shanghai Composite added +0.29%. Der Spiegel reported that Germany was open to deficit spending in a recession. European equities closed higher. The DAX rose +1.31%. Yields on 10-yr. Bunds moved “up” to -0.680%. July Housing Starts were light at 1.191M but Building Permits were strong at 1.336M. Preliminary August Consumer Sentiment fell well below the consensus range at 92.1. Baker-Hughes reported that the U.S. oil rig count rose for the 1st time in 7 weeks by 6 to 770. Yields on 10-Year Notes rose to 1.545%. The September US$ Index was up +0.005 to 98.010. December gold fell back -0.5% to $1,523.60. September crude rose +0.7% to $54.87. Equities moved higher overnight and gathered steam heading into the open. The report on the willingness of Germany to engage in deficit spending sent markets higher another leg. Volumes were well off levels seen earlier in the week. Part of the enthusiasm was a promised phone call between Presidents Trump and Xi. At the close, markets were broadly higher.

The PBOC held the official midpoint of the yuan above 7. Despite the sharp selloff in the U.S., Asian markets closed mixed. The Nikkei 225 fell -1.21% but the Shanghai Composite rose +0.25%. European equities closed lower. The DAX fell -0.70%. Yields on 10-yr. Bunds fell again to new lows at -0.701%. Initial Claims for 08/09 rose to 220K. Q2(p) Nonfarm Productivity rose 2.3% and Unit Labor Costs were up 2.4%. June Business Inventories were flat. July Retail Sales were a strong +0.7% (ex-autos +1.0%), Industrial Production fell -0.2%, and Capacity Utilization eased to 77.5%. The August Philly Fed Business Outlook Survey at 16.8 and the Empire State Manufacturing Survey at 4.8 were better than expected, and the NAHB Housing Market Index met expectations at 66. Yields on 10-Year Notes fell again to 1.508%. The September US$ Index rose +0.180 to 98.005. December gold edged up +0.2% to $1,531.20. September crude lost -1.4% to $54.47. After a volatile overnight session, equities opened with modest gains. Averages made runs in both directions and volumes were heavy, but neither bulls or bears gained an advantage and markets closed narrowly mixed.

The delay in U.S. tariffs and easing tensions in Hong Kong outweighed disappointing industrial production for China in July. Asian markets closed higher. The Nikkei 225 rose +0.98% and the Shanghai Composite added +0.42%. German Q2 GDP fell -0.1% adding to recession fears. European equities closed sharply lower. The DAX tumbled -2.19%. Yields on 10-yr. Bunds fell to new lows again, now at -0.648%. July Import and Export Prices both rose above expectations, +0.2%. Last night’s API report showed a surprise build in crude inventories of +3.7M barrels while this morning’s EIA report showed a (more modest) build of 1.6M barrels. Yields on 10-Year Notes fell hard to 1.586%. The September US$ Index firmed, rising +0.195 to 97.825. December gold jumped +0.9% to $1,527.80. September crude fell back -3.3% at $55.23. On slowing growth worldwide and a (temporarily) inverted yield curve, U.S. equities erased most of yesterday’s gains before the open. Selling came in waves as all the major averages sank even further into the red. Volumes were very heavy throughout the day. At the end of a pessimistic session, markets closed on their lows.