China’s July exports jumped +7.2% y/y when a small decline had been expected. President Trump banned U.S. transactions with two of China’s app giants. The Nikkei 225 lost -0.39% and the Shanghai Composite fell back -0.96%. June German industrial output rose strongly, fueled by exports to China. European markets gained strength. The DAX was up +0.66%. 10-year Bunds yield -0.503%. June Wholesale Trade was -1.4% vs consensus of -2.0%. Consumer Credit was $9.0B. July Nonfarm Payrolls rose a stronger than expected 1,763K, the Unemployment Rate eased to 10.2%, Average Hourly Earnings rose +0.2%, the Average Workweek widened to 34.5 hours, and the Workforce Participation Rate slipped to 61.4%. 10-Year Notes yield 0.564%. The Sep. US$ Index bounced to 93.395. Aug. gold sank -1.32% to $2,042.10. Sep. crude fell -1.0% to $41.54. In the overnight session the ES was off nearly 20 points, and on the open prices were still weak. After the ES opened prices started moving into the black. Late in the day Mnuchin said “COS Meadows and I will recommend to the Pres. to move forward on some executive orders (re. stimulus).” The ES bounced into the close.

Tensions are rising between the U.S. and China ahead of a trade meeting later this month. Asian markets were mixed. The Nikkei 225 lost -0.43% while the Shanghai Composite added +0.26%. European markets were weaker across the board. The DAX slipped -0.54%. 10-year Bunds yield -0.531%. Challenger reported that announced job cuts for July were 262,649, representing a 54% surge. Initial Claims for 07/31, while still horrific, were much better than expected at 1,186K, falling by 249K. This is the lowest level since the beginning of the pandemic, the first decline in three weeks, and the largest one-week decline since early June. 10-Year Notes yield 0.54%. The Sep. US$ Index lost -0.10% to 92.755. Aug. gold closed at an ATH of $2,074.10. Sep. crude lost -0.40% to $42.02. Congressional negotiations over continued covid-19 stimulus continue, with Friday’s scheduled recess growing ever closer. Points of debate include an extension of the $600/week unemployment benefit, eviction freezes and handouts to cities/states. Equity prices initially bounced around both sides of unchanged, but as the day wore on, prices rallied to close on session highs.

The China July Caixin/Markit services PMI fell to a still strong 54.1. Asian markets were mixed. The Nikkei 225 lost -0.26% while the Shanghai Composite added +0.17%. European markets rallied. The DAX gained +0.47%. 10-year Bunds yield -0.504%. Despite low rates, the MBA Mortgage Applications Index for 07/31 fell -5.1%. The June International Trade Deficit narrowed to -$50.7B. The July ADP Employment Report showed private payrolls grew +167K when almost +2 million had been expected. The July Markit PMI Services Index printed as expected at 49.6. The July ISM Non-Manufacturing Index rose to 58.1% vs. 55% consensus. EIA reported crude inventories for 07/31 were -7.373M vs -3.001M forecasted. 10-Year Notes yield 0.549%. The Sep. US$ Index slid to 92.805. Aug. gold hit another ATH, ending at $2,034. Sep. crude moved up to $42.20. Employment data was well below expectations, but optimism regarding more fiscal stimulus from Congress, stronger than anticipated services result, as well as favorable Disney earnings all offered buoyancy to stocks from the opening bell. Throughout the day, ES bulls drove prices still higher, and prices closed near highs.