Economic July News

US producer prices rose in June by slightly more than expected on gains in the cost of services and vehicles. The personal consumption expenditures (PCE) index hit the Fed’s 2 percent index in May for the first time in six years. The Trump administration ratcheted up the tariff penalty of 10 percent on approximately $200 billion in Chinese goods on Tuesday, which now exceeds the total value of items China imports from the US. Beijing is expected to fight back in other ways as it cannot match the tariff increases. Tariffs will not go into effect immediately as they will go through Congressional hearings next month as part of the review process. Mortgage applications rose 2.5 percent last week as inventory finally increases.
Trump’s Tariffs – The trade war not only hurts the overall economy and weakens demand – it’s also caused 16 million barrels of crude heading to China on ships to re-route elsewhere. Good for consumers globally, but certainly not good for Chinese consumers who now must pay higher prices on American oil.
A slew of Wall Street banks are reporting quarterly results before the bell today, unofficially kicking off the second-quarter earnings season. Markets could pick up steam if positive print is recorded at JPMorgan, Wells Fargo, Citigroup, First Republic Bank and PNC Financial. Overall S&P 500 companies are expected to post second-quarter profit growth of around 21%, according to Thomson Reuters. • China’s trade surplus with the U.S. swelled to a record in June, a result that could further inflame trade tensions with Washington. Exports to the world’s largest economy rose 5.7%, while imports from the U.S. rose 4%, resulting in a trade surplus of $28.97B. Separately, an explosion at a chemical plant in China overnight killed 19 people and injured 12, marking the latest deadly industrial incident in the country. • “The (Trump) administration says that what it’s trying to achieve is lower tariffs. So if it works out that way, then that’ll be a good thing for our economy,” Fed Chair Jerome Powell told the ECB Forum. “If it works out other ways, so that we wind up having high tariffs on a lot of products, goods and services… and that they become sustained for a long period of time, then yes, that could be a negative for our economy.” •
American officials are on their way to Mexico to meet president-elect AMLO and the current administration, adding to speculation that the U.S. may be looking for a NAFTA victory while trade tensions escalate with China. Ahead of the meeting, Mexico reportedly opposed a deal known as a “Safe Third Country Agreement,” which would make people seeking asylum in the U.S. apply in Mexico instead. • The U.S. has rejected a French waiver request for companies operating in Iran, according to Finance Minister Bruno Le Maire, adding that “Europe must provide itself with the tools it needs to defend itself against extra-territorial sanctions.” The exemptions would be critical for Total to continue a multi-billion-dollar gas project in Iran and PSA Group to pursue its joint venture. • Corn and soybeans turn lower again overnight. Sellers returned overnight, pushing corn futures 3 to 4 cents lower and beans down 8 to 9 cents. Winter wheat futures are 1 to 2 cents higher, while spring wheat futures are fractionally lower, though the market has seen two-sided trade. The greenback is higher today, while crude oil futures are posting slight losses.