“This is going to be a busy week for headlines—look for the market to move on every single headline, every single comment out of Washington and China,” Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook.
The back and forth between the U.S. and China continues as markets brace for implementation of 25 percent tariffs on $50 billion in Chinese goods, or possible delays in implementing the tariffs on July 6. In retaliation, China has announced its own tariffs to be imposed on U.S. goods, including duties on agricultural products and crude oil exports. The tariffs will be applied in two stages: the first round of tariffs would include $34 billion of goods subject to the July 6 date, with an additional $16 billion subject to review.
“Talks of negotiations and talk of delaying the tariffs could put the market back in positive territory quickly,” Krosby said. “However, another aspect to consider is the effect this may have on negotiations with North Korea. The Chinese could turn around and give the North Koreans what they want in terms of goods and trade.”
The Organization of the Petroleum Exporting Countries (OPEC) will meet Friday to discuss whether to increase oil production, or whether to continue with production cuts. Ten non-OPEC producers, including Russia, will also attend the meeting. OPEC has suggested that increased production may be warranted as Iranian and Venezuelan oil production may be hindered as sanctions on Iran are imposed, and as the Venezuelan political and economic backdrop deteriorates further.
“President Trump, by taking the side of Saudi Arabia in larger Middle East issues, is expecting the Saudis to increase oil production,” Krosby said.
The Federal Reserve’s annual stress test results will be released on Thursday. The results will focus on the ability of major banks, including the U.S. operations of large foreign banks, to withstand a serious economic downturn or financial shock.
Not to be missed, a package of housing-related data will be released this week including the National Association of Home Builders’ index (NAHB); housing starts; building permits; and existing home sales.
“This is important because we want to hear how one of the major foundations of the U.S. economy is holding up in light of higher mortgage rates,” Krosby said.
Earnings to watch:
This week’s important economic data:
Monday: NAHB index
Tuesday: Housing starts; building permits
Wednesday: Existing home sales
Thursday: Leading indicators
Friday: Markit manufacturing PMI (flash report); Markit services PMI (flash)
Read Quincy Krosby’s full Q2 Market Commentary: Regime Change.
The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.