Globalization is more than Pax Americana

Doubts about globalization in light of the trade tensions may be understandable, but it arguably too pessimistic.  The EU and Japan signed a free-trade agreement that gets rid of more than 90% of the tariffs.  

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Beware of Linear Thinking about the Yield Curve

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The flattening of the US yield curve is causing anxiety as an inverted curve is widely seen as a reliable indicator of a looming recession.  This is one of the debates among Fed officials and could impact the trajectory of monetary policy.

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Dollar’s Downside Correction Set to Continue

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The US dollar entered a technical corrective phase after trending higher in recent weeks.  That technical correction has more room to run.  On the other hand, US 10-year yields may be near a low some 30 bp below the May peak, and oil prices may have another run at the highs, but the move is getting stretched.  The S&P 500 had a strong move ahead of the weekend, but 2800 needs to be overcome to be anything of note.  

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Strong Job Creation, but Disappointing Earnings Growth


The optics of the US jobs data were mixed.  Jobs growth was better than expected, but earnings growth disappointed.  The rise in the unemployment rate, the first in many months, is a reflection of the increase in the participation rate.  Canada’s jobs and trade data disappointed, but not sufficiently so to alter expectations for a hike next week.   Continue reading “Strong Job Creation, but Disappointing Earnings Growth”

Dollar Slips After Tariffs and Before Jobs Data


  • The first round of US-China tariffs went into effect.  The next round (~$16 bln) is expected in a few weeks.
  • Japan reported a strong rise in wages but poor consumption.
  • Germany followed yesterday’s sharp rise in factory orders with a dramatic increase in industrial output
  • May’s new customs union proposal looks dead-on-arrival.
  • Focus now on US and Canadian jobs and trade data.  Barring a major surprise, the Bank of Canada will likely hike rates next week.

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Dollar is Mixed on Eve of US Jobs and Tariffs


  • PBOC sets reference range for the yuan much higher, but the market unwinds gains
  • Germany reports much stronger than expected factory orders and the first increase of the year
  • Large options are set to expire for the euro and yen today
  • Japanese investors buy a record amount of foreign equities at the end of June
  • US reports ADP jobs estimate, ISM/PMI non-manufacturing surveys, and the FOMC minutes from last month’s meeting

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While the US was on Holiday–Wednesday Summary

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US markets were closed Wednesday, but there were several developments for investors.  Asian equities struggled even though the yuan stabilized. However, it finished poorly, suggesting this phase is not over.  Both the EMU and the UK reported better PMI data.  Oil consolidated while the dollar was mostly softer.  

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Third Quarter Begins With a Thump


Trade tensions remain elevated and this appears to continue to weigh on equities despite the better tone before the weekend on what seems to be mostly window dressing.  The dollar has begun the new quarter on firm footing and the US 10-year yield is at five-week lows, just above 2.80%.  

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More Backing and Filling for the Greenback to Start July

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The dollar appears to have entered a consolidative or corrective phase, and the technical indicators signal more work may be needed before the rally can resume.  On the other hand, the push lower in yields looks over, and oil’s surge looks set to continue.   We remain concerned that a major buyer of US shares, namely US companies, may move to the sidelines ahead of the earnings season.  

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