We’re excited to start featuring Guest Market Updates from David Battany, EVP Capital Markets at Guild Mortgage. David was born and raised in Boulder and earned a B.S. degree in Finance from the University of Colorado in 1985. He’s excited to periodically be featured on The Brian Manning Team Blog and to be back in Boulder…at least electronically. Welcome, David.
From The Desk of David
Stocks and bonds are both down this morning on weaker than expected economic data and concerns that the worldwide economy may slow in response to new tariffs President Trump will impose on Argentina and Brazil. The 10-year US Treasury is currently yielding 1.824%.
Here is where the markets are focused today and this week:
Argentina and Brazil. President Trump has called out Argentina and Brazil for intentionally devaluing their currencies to give themselves an unfair advantage over US farmers. President Trump tweeted that he will be re-imposing tariffs on steel and aluminum imports to the US from these two countries, which is the first time that President Trump has linked tariffs to alleged currency manipulation by a foreign government. When a government devalues their currency, it makes their exports more competitive to other countries, and makes foreign imports more expensive, giving their domestic business firms a competitive advantage over international competitors. This move against Argentina and Brazil is being viewed by the markets as a warning to other countries who manipulate their currencies, and could drive new trade tensions and reduced optimism regarding the world wide economy.
China Trade Discussions. This continues to remain as the top market driver. This is the second day of US capital markets trading since President Trump signed the congressional bill supporting the Hong Kong protestors. Stocks are slightly below record highs as the markets look for any signs that a trade deal will be signed. Growing weaknesses in the Chinese economy are prompting many to view that China will agree to a trade deal in the coming weeks. If a deal is signed, this would push up stock prices and push up mortgage interest rates.
ISM Manufacturing Index. The Institute for Supply Management manufacturing index came out today at 48.1, down from the previous month of 48.3 and below the market expectation of an increase to 49.5. This index reflects US manufacturing health and factory purchases. This relatively flat index value reflects that US manufacturing is still not driving the US economy, and that the headwinds of global uncertainty, are resulting in less corporate investment in US firms.
Key Data Releases this Week:
- Tuesday: No major economic releases scheduled.
- ADP Employment Report. Market consensus is +155,000 jobs
- ISM non-manufacturing index. Market consensus is 54.5 down from previous of 54.7
- Initial Jobless Claims. Market consensus is 215,000
- Trade Balance. Market consensus is -48.9 billion better than previous of -52.5 billion
- Factory Orders. Market consensus is -0.5% slightly better than previous of -0.6%
- Durable goods orders. Market consensus is +0.6%
- Core Capital goods orders. Market consensus is +1.2%
- Nonfarm payroll. Market consensus is +190,000 up from prior of +128,000
- Unemployment rate. Market consensus is 3.6%, flat to previous of 3.6%
If any of these releases come out better than expected for the US economy, this will create upwards pressure on stock prices, downward pressure on bond prices, and upwards pressure on mortgage interest rates. If the results come out worse than expected for the US economy, the opposite price pressures will occur.
EVP Capital Markets, Guild Mortgage
David Battany joined Guild in 2015 and is responsible for risk analysis, trading, hedging, and new product strategy. He brings more than thirty years of experience in the mortgage industry, most recently at PennyMac, the largest non-bank correspondent lender in the United States, where he led product strategy, and more than a decade at Fannie Mae, where he led strategy for single-family business and managed lender relationships. Mr. Battany has served on the board for the California Mortgage Bankers Association (CMBA) and for the Mortgage Bankers Association (MBA), and on the board for the Residential Board of Governors for the MBA. He earned a B.S. degree in Finance from the University of Colorado in 1985.