By Samuel Potter
They aren’t the biggest data points, but the numbers released on Monday – the New York Fed factory gauge and home builder sentiment – had the advantage of timing. Having both surprised to the downside, they will likely be ringing in the ears of Federal Reserve officials as policy makers gather round the table to discuss lunch options and the fate of the U.S. economy for two days starting today. Despite the sour data, the S&P 500 posted a small advance on Monday. The trouble for the Fed is the gains are happening because investors reckon the Fed has got their back, creating a weird circle where the Fed has less pressure to act because markets are fine because they think the Fed will act. Perhaps the U.S. central bank can take its cue from its European cousin, which outperformed dovish market expectations this morning. European Central Bank President Mario Draghi gave the clearest signal yet that more easing could be on the horizon if the economic outlook doesn’t improve, spurring money-market traders to price in a 10 basis-point cut by December while bonds rallied anew. The euro slid.
Facebook vs. Bitcoin
Facebook Inc. unveiled plans for a new cryptocurrency that the social-media giant hopes will one day trade on a global scale much like the U.S. dollar. Called Libra, the new currency will launch as soon as next year and be what’s known as a stablecoin — a digital currency that’s supported by established government-backed currencies and securities. The goal is to avoid massive fluctuations in value that have plagued the likes of Bitcoin.
The Pentagon has released new evidence to back its accusation Iran was behind a tanker attack in the Persian Gulf. It now plans to send about 1,000 more troops to the Middle East as tensions rise, though at the same time President Donald Trump has called the attacks “very minor.” China’s foreign minister warned against opening a “Pandora’s box” in the region. The past 24 hours has also thrown up more evidence that the trade war is gradually taking its toll on everything from fireworks to bicycles. The U.S. government reported China’s holdings of Treasuries fell to a two-year low, a slump that has coincided with increasing stress between the two largest economies and that doesn’t include the latest escalation. Trump’s top trade envoy will be in the congressional hot seat for two days starting today, giving lawmakers the chance to grill him about the prospects for a deal. And in Hong Kong, leader Carrie Lam sought to defuse protests by issuing a personal apology – without stepping down or officially withdrawing a bill that would allow extraditions to China for the first time. Given all of the above, it’s small wonder Bank of America’s monthly investor survey makes for grim reading.
It’s air-show update time, as the aviation industry’s big kahunas continue to wine and dine one another at a Paris airport, something most of us only do on an unavoidable layover. Airbus SE is off to a flyer (pun intended), a streak that continued on Tuesday with the stock up 0.2%. Poor old Boeing Co. remains on the runway after taking zero new orders on day one as the company suffers the fallout from two fatal crashes of the 737 Max. In a sitcom-worthy bout of self-awareness, the firm is apparently open to “rebranding” the plane. More bad news may be on the way: American Airlines is considering an order for as many as 50 Airbus A321XLR jets, a person familiar with the discussions said. The world’s largest carrier sees the plane as a potential replacement for its aging fleet of 34 Boeing 757-200 planes.
The yield on 10-year Treasuries sank to 2.05% following Draghi’s move to put stimulus on the table in order to combat slowing growth. The MSCI Asia Pacific Index traded 0.3% higher while Japan’s Topix fell 0.7% dragged down by telecommunications providers and electronics makers. The Stoxx Europe 600 index gained 0.8% as of 6:06 a.m. Eastern time. S&P futures pointed to a gain at the open. The main data on the schedule today is housing starts and building permits, both at 8:30 a.m. While Draghi spoke at Sintra earlier, he’s also appearing on a panel later this morning.