By Lorcan Roche Kelly
China says U.S. violates Trump-Xi accord, bond market still very nervous, and it’s a huge day for retailers. Here are some of the things people in markets are talking about today.
Just as markets seemed to be catching their breath after yesterday’s huge moves, Chinese authorities issued a statement saying President Donald Trump’s planned additional 10% tariff violates the consensus reached between the leaders of both countries in Osaka. The release went on to say that China will have to take necessary countermeasures. U.S. stock futures fell and bond yields dropped in the wake of the unexpected warning.
The continuing grind lower in global bond yields sees the U.S. 30-year Treasury yield under 2% this morning for the first time ever. The world’s pool of negative-yielding debt now stands at more than $16 trillion. While the two-year to 10-year spread is just about positive today even in the face of the China headlines, it’s certainly not wide enough to calm any nerves. A rise in European yields also reversed in the wake of the statement from Beijing.
In the real economy, today is a good day to assess the health of the consumer. U.S. retail sales for July are expected to show a 0.3% increase, slightly lower than June’s headline figure. Already today, U.K. retail sales showed a 0.2% increase, with the rise being driven by online promotions, suggesting consumers remain wary. Walmart Inc. reports second-quarter earnings before the bell, with analysts expecting a forecast boost. J.C. Penney Co. Inc. will also report in what is shaping up to be another difficult results season for traditional retailers.
Overnight the MSCI Asia Pacific Index slipped 0.7% while Japan’s Topix index closed 1.0% lower will all industry groups on the gauge declining. In Europe, the Stoxx 600 Index was 0.8% lower at 5:50 a.m. Eastern Time with cyclical stocks leading losses after the China warning. S&P 500 futures pointed to more red at the open, the 10-year Treasury yield was at 1.556% and gold was higher.
It’s not only retail sales today – there’s a full slate of economic data to digest. At 8:30 a.m. initial jobless claims numbers, August Empire manufacturing and Philadelphia Fed business outlook all land at the same time as retail sales. Industrial production is expected at 9:15 a.m. At 4:00 p.m. June U.S. TIC flows data is released. Nvidia Corp. is also due to report earnings later.