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Bill Hubard Market Overview 28 August ‘17

Bill Hubard Market Overview 28 August ‘17

Bill Hubard Market Overview 28 August ‘17

Monday, August 28, 2017 - 08:45
Bill Hubard Market Overview 28 August ‘17

Movements on major assets last week with review for week to come

For the week ending August 25, 2017

  • Next up, US tax reform
  • US sanctions Chinese, Russia entities over North Korea
  • Global economy shows steady growth in August
  • Few fireworks expected at Jackson Hole
  • Hurricane Harvey threatens US Gulf Coast

*       Global equities rose modestly this week amid somewhat lower volatility measures and stable interest rates. The yield on the 10-year Treasury note held steady at 2.20% while volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), dipped to 11.9 from 14.75 a week ago. The price of a barrel of WTI was little changed, at $47.55 versus $47.20 a week ago, despite potential supply disruptions from Hurricane Harvey.

*     Tax reform back on Washington’s radar? According to media reports, senior Trump administration officials and Congressional leadership have agreed on an outline for a significant reform (first major change in 30 years!) of the US tax code. The framework includes lowering individual and corporate income tax rates while phasing out or doing away with popular deductions for things such as mortgage interest payments and state and local taxes. Equity markets rallied early in the week on the reports.

*       However, late Thursday afternoon reports surfaced that Congressional leaders do NOT expect to release a joint tax plan with the White House in September. Trump's chief economic advisor, Gary Cohn, told the Financial Times on Friday that starting next week the President’s calendar will revolve around tax reform. One criticism of Trump during the health care debate was that he did not “sell” the policy to the public. It looks as though he will seek to do so on tax reform.

*     US sanctions firms in China and Russia over North Korea: The US Department of the Treasury levied ‘fresh’ economic sanctions on several Chinese firms and a Russian firm, as well as Chinese and Russian individuals, for helping supply materials to North Korea’s nuclear and ballistic missile programmes. The United States seeks to interrupt the flow of hard currency that allows North Korea to acquire components from abroad.

*     Global recovery maintains strength: The synchronized global economic recovery that began about a year ago continues apace, with global PMIs showing that growth is remaining firm in most major economies. Europe showed a strong rise in manufacturing-sector output while in the US the service sector led the way.

*      No major policy shifts expected at Fed gathering: Several historic monetary policy moves were unveiled at the annual gathering of central bankers hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. But this year looks to be less momentous, with the ECB going out of its way to dampen down anticipation of an announcement from ECB president Mario Draghi on tapering the bank's asset purchase programme. Fed Chair Janet Yellen spoke on financial stability matters, but did NOT touch on any mentioned of monetary policy.

*       Gulf Coast refineries batten down hatches ahead of Harvey: Hurricane Harvey is heading for the US Gulf coast, an area that is home to numerous refineries and offshore drilling rigs. Weather-related disruptions are typically short-term in nature, barring ANY significant storm damage, but forecasts call for as much as 30 inches of rain and a storm surge of between 6-12 feet in what is expected to be the first major hurricane to hit the US mainland since Katrina on UK August Bank Holiday in 2005. However, oil and gasoline markets were little changed ahead of the storm's landfall.

*     US oil rig count: Baker Hughes has announced that drilling oil rig down 4 at 759 (up 353 versus year ago) in the week ending 25 August.

*     Report says US considering ban on Venezuelan debt trading: According to the WSJ, the US government is considering a ban on the trading of some Venezuelan debt by US-regulated financial institutions. Bonds issued by the Venezuelan government and the state-owned oil giant PDVSA could be subject to the freeze, the report says.

*     With 475 of the 500 members of the S&P500 Index having reported, Q2 earnings are expected to increase 12% compared with the year-ago quarter. Stripping out the energy sector, earnings growth is seen at 9.4%. Revenues overall are expected to increase 5.1%, 4.2% excluding energy.

The Week Ahead….

Date

Country/Area

Release/Event

Mon, 28 Aug

UK

Markets closed for late summer bank holiday

Mon, 28 Aug

US

Wholesale inventories

Tue, 29 Aug

US

Case-Shiller home price index

Wed, 30 Aug

Eurozone

Economic sentiment index

Wed, 30 Aug

US

GDP

Thu, 31 Aug

Japan

IP

Thu, 31 Aug

China

PMIs

Thu, 31 Aug

Eurozone

Unemployment rate, CPI

Thu, 31 Aug

US

Personal income/spending, core Personal Consumption Expenditures index

Fri, 1 Sep

global

Manufacturing PMI

Fri, 1 Sep

US

Employment report

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