Markets and rates still a little rattled over trade war talk

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Published Date 3/2/2018

Had a nice pop yesterday taking the 10 yr to 2.81% -5 bps, today the pop broke and the 10 yr 2.86% +5 bps. Trade wars the topic that presently floods market thinking, but when listening and reading most of the day the conclusion is confusion as to what the Trump tariffs on China steel and aluminum will do to trade pacts between nations. Inflation, or not? Trade wars or not? Most major money managers back to their desks to analyze their positions. Next week Trump will lay out the details, so now it is a lot of knowledgeable speculation. The Fed may face its worst possible scenario; increased inflation and slower economic growth. These coming tariffs could well be a game changer. However, it's all speculation at the moment, so we have to sit, read and watch markets as they attempt to adjust to the various speculative scenarios. At the moment it doesn’t look that nefarious in itself but if widespread retaliation occurs that may be a game changer.

Atlanta Fed GDP now; Q1 growth +3.5%. The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 3.5 percent on March 1, up from 2.6 percent on February 27. The nowcasts of first-quarter real consumer spending growth and first-quarter real private fixed-investment growth increased from 2.0 percent and 2.7 percent, respectively, to 2.9 percent and 4.4 percent, respectively, after this morning's data releases. The model's estimate of the dynamic factor for February—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be-released monthly GDP source data—increased from 0.23 to 1.68 after this morning's Manufacturing ISM Report On Business from the Institute for Supply Management. The next GDPNow update is Wednesday, March 7. Please see the "Release Dates" tab below for a full list of upcoming releases.

Next week (and this weekend) will focus on the tariffs, but there are economic reports. Monday, Jan ISM services sector index. Tuesday, Jan factory orders. Wednesday, Feb ADP private jobs report; Q4 productivity and unit labor costs, Fed Beige Book, Jan consumer credit. Thursday, weekly jobless claims. Friday, Feb employment data.

Regarding the trade war talk, some saying today we are on the edge of economic Armageddon, most others less frightened. Like Gilda Ratner once said;” if it isn’t one thing, it’s another” The low on the DJIA today -390, nice rebound this afternoon though.

Source: TBWS

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