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May 14, 2019
Five Things
Bloomberg

U.S. adds some carrot to the tariff stick, Pompeo finds little support for Iran position, and Uber blame game begins.

"I have a feeling"

President Donald Trump said that he feels talks with China "are going to be very successful" as he confirmed he will meet President Xi Jingping at next month's G-20 summit. His comments came after the U.S. Trade Representative's office released the list of $300 billion of Chinese goods that are next in line for a 25% tariff while Beijing announced its own trade measures. Trump may be coming under pressure from inside the Republican party as the standoff is increasing pain for American farmers, among the president's most loyal supporters. Markets are recovering some of the worst of yesterday's sell-off as hopes of a deal linger. 

Iran tensions

U.S. Secretary of State Michael Pompeo received a cool response from European Union allies at a meeting in Brussels where he tried to persuade leaders in the region to take a harder line towards Iran. EU foreign-policy chief Federica Mogherini called for "maximum restraint from all sides." Trump warned that Iran will "suffer greatly" if it does anything that leads to an outbreak of hostilities with the U.S. Between geo-political tensions and the trade war, the oil market is getting pulled in different directions.

Corporate woes

There are some signs this morning that Uber Technologies Inc.'s post-IPO plunge may be easing, with shares slightly higher in pre-market trading. That is unlikely to distract from questions over the company's two-day 18% tumble. The debate over how well Morgan Stanley and other banks handled the hotly anticipated offering is complicated by the very unlucky timing of the float. Speaking of the latter, Bayer AG shares fell to the lowest level in almost seven years this morning as a jury awarded $2 billion (yes, with a b) in damages in a California court case over Monsanto Co.'s Roundup weedkiller. Bayer bought Monsanto in June of last year. 

Markets mixed

Overnight, the MSCI Asia Pacific Index dropped 0.9% while Japan's Topix index ended the session 0.4% lower, well off the session lows. In Europe, the Stoxx 600 Index was 0.6 percent higher at 5:50 a.m. Eastern Time as the region's equities recovered some of yesterday's losses on the softening of U.S. trade rhetoric. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 2.412% and gold slipped. 

Coming up…

U.S. April import and export price data is published at 8:30 a.m. Fedspeak continues, with Kansas City Fed President Esther George and San Francisco Fed President Mary Daly due later. Speaking in Europe earlier today, Federal Reserve Bank of New York President John Williams warned that central banks around the world should be reviewing their strategies to prepare for a future of slow economic growth and low interest rates. Investors will hope to get an update on the Canadian pot shortage when Tilray Inc. and Aurora Cannabis Inc. report earnings. 

What we've been reading

This is what's caught our eye over the last 24 hours.

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And finally, here's what Joe's interested in this morning

There's been a lot of hype about socialism lately. In theory, the question of whether the U.S. continues to maintain its, roughly speaking, capitalist system or veer towards the left should be a pretty significant market story. Yet outside some specific concerns about "Medicare for All," these big questions don't seem to be top of mind for most investors. Over at NY Mag, Jonathan Chait makes the argument that the early polling success of Joe Biden implies that the Democratic Party isn't nearly as left wing as many in the media had assumed. Biden might not win of course (it's still extremely early) but his position still probably says something about the state of the party. In other words, it seems possible that the next time the Democrats hold power, there won't be some massive course correction to the left as a response to Trump. Again, in theory the investing class should like it, but it's not really part of the current conversation. That said, perhaps you should keep an eye on a chart of managed healthcare stocks relative to the S&P 500. They got creamed over the last few months, in part due to fears about future policy, and the elimination (or further reduction) in the role of private health insurers. But they've surged back nicely since the middle of April. As the Democratic primary evolves, this may be the clearest proxy for the perceived leftward (or not) tilt of the party.

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