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Macroeconomic & Geopolitical

Busy Week For Global Central Banks

2 August 2019 - 4 min read

The three things you need to know this week: Fed cuts rates, U.S. slaps additional tariffs on Chinese goods and a budget deal is passed in the Senate.

Overview

New Tariffs: President Donald Trump said he will impose a 10% tariff on the remaining $300 billion of imports from China, beginning September 1. He said recent trade talks have been constructive but voiced displeasure that China has yet to purchase large quantities of U.S. agricultural products. Market reaction was decidedly negative as equities reversed strong intraday gains and U.S. Treasury yields moved sharply lower.

U.S. Senate Passes Budget Deal: The Senate voted 67-28 to pass a two-year deal that will increase federal spending and raise the debt ceiling. The House passed the measure last week with bipartisan support, and President Trump is expected to sign the measure. If a deal was not reached, sequestration would have kicked in and lowered the level of discretionary spending. The deal is expected to raise spending by approximately $320 billion and pushes any budget issues until after the 2020 election.

Earnings Update: Bloomberg data shows 72% of the S&P 500 reported earnings with revenues up 4.4% Y/Y and earnings 1.8% higher Y/Y. Compared to estimates, sales are 1.2% higher and earnings surprised to the upside by 5.3%. The technology sector has shown the biggest positive earnings surprise, while the energy sector has exhibited the largest underperformance. Two-thirds of the companies that report in the current season for the Stoxx 600 have announced results with sales up 1.7% Y/Y and earnings down 2.8% Y/Y. Sales are slightly ahead of estimates while earnings are 2.9% better than expectations. The real estate sector has provided the biggest upside earnings surprise and the communications sector has been the biggest earnings disappointment so far.

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