Trade News and Fed Speak Will Fill the Void of Delayed Economic Reports

Feb 04, 2019
The US and China flags

China Trade Talks & Looming Gov’t Funding Deadline 

This week will be dominated by the doings in D.C. as we’re still flying somewhat blind with a backlog of economic releases still in process. Thus, with the partial blackout caused by the shutdown the focus will be on D.C. as any news on trade developments with China has the potential to create some waves. The looming Feb. 15th deadline on government funding will start to garner some attention too. While there’s no chance the funding bill coming from Congress will have any wall funding, the president is hinting strongly he may sign the bill and then declare a national emergency to secure some wall funding that way. That would invite a court challenge and once again highlight our current state of political dysfunction.  Finally, with five Fed speakers this week, including Chair Powell, we may get to assess the level of resolve in the Fed’s newfound dovishness especially after last Friday’s strong employment report for January.


Treasuries

Treasuries

Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar

 


calendar icon Top 5 Events for the Week

FEB 4 - 8, 2019

1. China Trade Talks & Gov’t Funding—All Week 

2. Fed Speak – All Week 

3. Nonfarm Productivity —Wednesday

4. ISM Non-Manufact. & Markit Composite PMI—Tues.

5. Bloomberg Consumer Confidence —Thursday

 

 

1.  China Trade Developments and Government Funding Bill–All Week

This week will be dominated by the doings in D.C. as we’re still flying somewhat blind as the backlog of economic releases are still in process. Fourth quarter GDP along with December personal income and spending numbers are a couple of the first tier releases we still haven’t received.  Thus, with the partial information blackout caused by the shutdown the focus will be on D.C. as any news on trade developments with China has the potential to create risk-on or risk-off waves depending on the negotiations.  Also, February 15th deadline on government funding looms and will start to garner some attention. While there’s no chance the funding bill coming from Congress will have any wall funding, the president is hinting strongly he may sign the bill and then declare a national emergency to secure some wall funding that way. That would invite a court challenge and once again highlight our current state of political dysfunction.

 

2.  Fed Speak —All Week

This week we have five Fed members speaking in various venues, including Chair Powell, so we are likely to get some additional insight into the level of dovishness, especially after last Friday’s strong January employment report. The highlight of the week will be Chair Powell speaking Wednesday evening with Vice Chair Richard Clarida the next morning, but Cleveland Fed President Loretta Mester kicks things off tonight with a discussion on the economy and monetary policy. The FOMC meeting last Wednesday checked-off all the dovish boxes so it will be interesting to see if that was an overreaction to the hawkish December meeting, or if it was indeed the tone they wanted to leave with the market, which is they will be pausing for the foreseeable future. Given the strength of the jobs numbers for January some course correction would be understandable.

 

3.  4Q Nonfarm Productivity —Wednesday

Fourth quarter productivity is supposed to be released this Wednesday but it may be delayed due to the government shutdown. If it is released expectations are for productivity to print at 1.6% which is off the 2.3% third quarter level. Mediocre productivity is a big conundrum to economists as it’s failed to move decidedly higher since the crisis. Coming out of the recession productivity has averaged around 1.4% while the 40-year period prior to the Great  Recession averaged 2.2%. As long as productivity remains between 1% - 2% it will be hard for the economy to maintain long-run growth above 2%-2.5% given the current modest level of population growth.

 

Quarterly Nonfarm Productivity Annualized

 

4.  January ISM Non-Manufacturing & Markit Composite PMI —Tuesday

These privately produced series are not subject to the shutdown backlog so we’ll get a look at January readings on the services sector as well as the composite (services and manufacturing) reading. Expectations are for the ISM services sector to print a 57.1 versus 58.0 in December but it should indicate continued expansion in that sector. The Markit composite reading is expected to print a 54.5 which too is the same as the December reading. If these expectations are met it will be another indication, along with the jobs report, that despite market turbulence at year-end the economy continued motoring along in January.

 

5.  Bloomberg Consumer Confidence —Thursday

Recent consumer confidence readings—namely University of Michigan and Conference Board—have taken hits due to the market volatility in the fourth quarter but with the rebound in stocks in January and the solid jobs report the weekly Bloomberg reading could be an early tell on any reversal of the recent downtrend. Expectations are for a 57.4 reading which compares to the 61.6 high reading back in October. 

 

 

 


arrow up icon Investment Yield Ranges Over Last Year

 

US Treasuries

FHLB Agency Bullets

Mortgage Backed SecuritiesMunicipals

US Corporate - Financials

US Agency Swap Rates

 Source: Bloomberg

 

 

 


 

Tom Fitzgerald Signature

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

 

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