By Samuel Potter
As investors cheer central bankers saying some dovish stuff and the Brits waste time picking Boris (more on that below), the U.S. remains locked in a delicate standoff in the most sensitive geopolitical region on Earth with an old foe which is fairly friendly with a nuclear super power. What could possibly go wrong? A White House official has confirmed the U.S. called off military strikes against Iran on Thursday night that were approved by President Donald Trump. The latter warned Tehran via Oman that an attack was imminent, according to a Reuters report on Friday that cited unnamed Iranian officials. He conveyed the message that he was against war and wanted to talk, and gave Iran a short period of time to respond, it said. Meanwhile, United Airlines has suspended its service between Newark and Mumbai, a route that regularly flies through Iranian airspace. As watchers try to second-guess Trump’s goal in this crisis, the rising tensions are giving new urgency to a long-unresolved fight over whether presidents have abused their power in taking the country into war.
It’s Boris or another guy. But basically it’s Boris
In most places, you could select the new leader of a group with one vote, maybe two if it’s close. But the U.K. isn’t most places, and the Conservatives aren’t just any group. And so, after five separate votes, they’ve narrowed it down to two candidates who will now spend four weeks – yes, four – touring the country to persuade the party membership to back them in yet another vote. Got it? Well, never mind. The main thing is, Boris Johnson will face Jeremy Hunt amid rumors some of the Boris camp voted for Hunt in a bid to get an easier opponent for the last round. That should tell you most of what you need to know. Hunt’s chances are very, very small. Five Things is calling it for Boris, and taking the next four weeks off. In the meantime, here are their respective Brexit plans, which for Boris seems to vary depending who you talk to.
Will the easy-money market juggernaut roll on? The S&P 500 starts Friday having closed the previous session at an all-time high and after notching the intraday record in the same session. For some, it’s too late to be bullish equities. But stocks are by no means alone. The total return indexes for the U.S. investment-grade corporate bonds, high-yield, sovereign and quasi-sovereign debt have risen to record levels – the first time since July 2016 that all these asset classes have traded at their peaks simultaneously. The question is where we go from here. See below for today’s answer, in the meantime spare a thought for China – it’s the one place with a dovish central bank that’s yet to see a spectacular rally in government debt. Pesky trade war.
Reports of the U.S. nearly bombing Iran understandably hit sentiment at the end of a strong week. The MSCI Asia Pacific Index slipped 0.5% as Japan’s Topix finished 0.9% lower. The Stoxx Europe 600 Index fluctuated in a narrow range, slipping 0.1% as of 6:00 a.m. Eastern time. S&P 500 futures pointed to a drift lower at the open, the yield on 10-year U.S. Treasuries was at 2.042%, and gold was little changed.
For once there’s nothing at 8:30 a.m. so enjoy a leisurely breakfast. But make sure you’re all set at 9:45 a.m., because that’s when the Markit purchasing manager numbers hit. Existing home sales will be at 10:00 a.m. If you feel like you haven’t had enough Fed lately, then Cleveland Fed President Loretta Mester and Fed Governor Lael Brainard take part in a Fed Listens event in Cincinnati at 12:00 p.m. The Baker Hughes rig count comes at 1:00 p.m.