Stocks climbed globally this morning as the U.S and China were reported to be close on a trade deal. This deal would end American tariffs on Chinese goods in return for Chinese concessions. Specifically, the deal would end the US tariffs on $200bn in Chinese goods. In return, the Chinese will lower tariffs and other restrictions on American goods, buy U.S. products and protect intellectual property rights.
Bond prices are relatively flat, and the 10-year treasury is yielding 2.75%. The global growth outlook has diminished in the past year as manufacturing activity, consumer spending and business confidence have declined. The slowdown in the economy kept inflation past the Federal Reserve’s 2% target for a seventh straight year in 2018. Many bond investors are questioning whether muted price increases are another sign that prospects for the economy and earnings are dimming. On Friday, investors will get another chance to see where inflation is heading when the Labor Department publishes its monthly jobs report.
New homes sales likely fell in December, unwinding from the previous month’s jump. Due to the government shut down this data has been delayed. A recent deceleration in home-price growth below wage gains is notable and coupled with the Fed’s pledge to hold interest rates will help improve housing affordability. Home affordability will help improve further deterioration in home sales.