Trade Issues and Expected Fed Interest Rate Hike Key Market Items in Focus

Posted on 09/23/2018 10:26 AM

Possible hearing Thursday re: Supreme Court nominee | Farm bill talks | Year-round E15


The House returns Tuesday amid similar issues like funding and trade policy issues (China, NAFTA, etc.).
     The Senate tentatively plans a hearing Thursday regarding the accuser of Supreme Court nominee
Brett Kavanaugh, which if it occurs will get blanket cable news coverage.
     President Trump will attend U.N. General Assembly meetings in New York City and address the group on Tuesday.
     A hike to interest rates is expected when the Fed's FOMC meets Wednesday.
     Farm bill conference talks will continue. Sooner or later the conferees must compromise and reach decisions. Most say later rather than sooner.
     Year-round E15 announcement could come “soon”… The White House wants to make an announcement when President Trump is in Iowa, some sources signal. The change will be part of an EPA call for public comments which will include other changes to the Renewable Fuel Standard (RFS) program dealing with RINs. More on this in Monday’s Policy Updates.

 

Possible Supreme Court nominee/accuser hearing key Washington focus. Despite major U.S. trade policy unknowns regarding NAFTA 2.0 talks with Canada, and the ongoing tariff escalations with China, Washington is all abuzz about the possible hearing Thursday regarding the accuser of Supreme Court nominee Brett Kavanaugh. Events are moving too fast on that matter to be covered adequately with this report.

The House of Representatives is back in session on Tuesday and will vote on the $852 billion spending package that covers nearly 70% of fiscal 2019 federal discretionary spending. It includes stopgap spending through Dec. 7 to prevent a government funding lapse. The Senate has already passed the measure. On Friday, President Trump signed into a law a FY19 spending bill that includes funding for the Army Corps of Engineers.

Tax plan. The House also will vote on the GOP-pushed Tax 2.0 package, but the Senate will not clear a similar measure.

The House Democratic Caucus this week will vote on a proposed rule change that would increase threshold of support needed before nominating a candidate for House speaker, The Atlantic reported last week. Current rules mandate a nominee receive voters from simple majority of caucus members before advancing to floor for conference-wide vote. A letter from some Democrats requests the threshold be raised to 218, a majority of House members, The Atlantic reported. The move is seen by some as directed at House Democratic leader Nancy Pelosi (D-Calif.).

Talks on a new farm bill will continue this week, but veteran sources say to discount talk by some lawmakers that a one-year extension will likely be necessary. While lingering issues will likely keep an agreement from surfacing soon, most expect an eventually deal either in October or after Nov. 6 elections in a lame-duck session of Congress.

When the current farm bill expires, some programs will lose funding but the majority of programs can continue to be implemented. Impacted programs include the Foreign Market Development (FMD) program, which subsidizes the cost of maintaining commodity groups’ overseas offices, and the Technical Assistance for Specialty Crops (TASC) program.

Regarding trade policy issues, the Wall Street Journal reported Friday that China canceled the previously scheduled talks with U.S. trade officials after the Trump administration said it would implement 10% tariffs on another $200 billion on Chinese products beginning Monday; China said it would counter with tariffs on another $60 billion on U.S. products. Next threatened step is still another $267 billion of U.S. tariffs should China as indicated implement those $60 billion in tariffs.

U.S. talks with Canada continue as officials try to get to the NAFTA 2.0 end zone. While there was not much news on the topic last week, seasoned trade policy experts say that could actually be good news as it shows the two sides are nearing the determination as to whether or not the talks will end successfully, or end in a total impasse. Canada must give on its protected dairy policies while the U.S. must compromise on several must-have Canadian issues including dispute-resolution language and a hoped-for pledge that the U.S. will not invoke tariffs on the Canadian auto and parts industries.

U.S., EU and Japan trade policy confab. On Tuesday, U.S. Trade Representative Robert Lighthizer will meet with Cecilia Malmstrom, the EU’s trade negotiator, and Japanese Trade Minister Hiroshige Seko while the U.N. General Assembly is in session. China’s international trade policies and how to curb them will be the focus for the top trade officials. The three will seek to lay the groundwork to develop stronger rules for industrial subsidies; state-owned enterprises; forced technology transfers; WTO transparency; and e-commerce.

U.S., South Korea to sign revised trade deal this week. The U.S. and South Korea will sign their revised free trade agreement early this week in New York on the sidelines of the United Nations (U.N.) General Assembly meeting. The revised deal modified the automotive provisions of the pact and made other changes, such as easing customs barriers that have discouraged imports of U.S. agricultural goods.

President Trump this week will attend U.N. General Assembly meetings in New York City. He will address the session on Tuesday. The president also will have bilateral meetings during the week with world leaders, including South Korean President Moon Jae-In, Egyptian President Abdel-Fattah El-Sisi, French President Emmanuel Macron, Israeli Prime Minister Benjamin Netanyahu, Japanese Prime Minister Shinzo Abe and U.K. Prime Minister Theresa May.

U.S./North Korea talks. U.S. Secretary of State Mike Pompeo said he invited North Korean Foreign Minister Ri Yong Ho to meet during this week’s U.N. General Assembly in New York. The U.S. is ready to “engage immediately in negotiations to transform” relations with North Korea after Kim Jong Un’s decision to complete the previously announced dismantling of the Tongchang-ri site in the presence of U.S. and international inspectors, Pompeo said Sept. 19. Meanwhile, South Korean Foreign Minister Kang Kyung-wha will reportedly hold bilateral talks with Pompeo, Yonhap News reported, citing an unidentified ministry official.

Economic updates are spread out the entire week, with the biggest economic event being an expected interest-rate hike by the Fed on Wednesday. Key reports include:

Monday:
— The Federal Reserve Bank of Chicago releases its National Activity Index for August. Consensus estimates are for a 0.20 reading, up from July’s 0.13.
— The Federal Reserve Bank of Dallas releases its Texas Manufacturing Outlook Survey for September.

Tuesday:
— S&P Dow Jones Indices releases the CoreLogic Case-Shiller Home Price index for July. Home values are expected to rise 0.25%, more than June’s 0.11% increase.
— The Conference Board releases its Consumer Confidence Survey for September. Estimates are for a 132 reading, down from August’s 133.4.
— Richmond Fed Mfg Index.

Wednesday:
— The Federal Open Market Committee (FOMC) announces its interest-rate policy decision after a two-day meeting. There is near universal consensus that it will hike the federal-funds rate by a quarter percentage point, to 2%-2.25%.
— The U.S. Census Bureau announces new-home sales data for August.
— MBA Mortgage Applications

Thursday:
— Census Bureau reports durable-goods orders for August. Economists forecast a 1.8% bump.
— The National Association of Realtors releases its Pending Home Sales Index for August. Consensus estimates are for a 106.3 reading, about the same as for July.
— Other reports: Durable Goods Orders | GDP | International Trade in Goods | Jobless Claims

Friday:
— Bureau of Economic Analysis releases personal income and outlays for August. Income is expected to rise 0.4% after increasing 0.3% in July.
— The PCE deflator, the Federal Reserve’s favored inflation gauge, is expected to rise 2.3%.
— The Institute for Supply Management reports its Chicago Purchasing Managers Index for September.
— Consumer Sentiment.

Key USDA reports this week come Friday via the Grain Stocks and Small Grains Summary reports. U.S. and international agriculture and energy-related reports and events on tap this week include:

Monday, Sept. 24

Ag reports and events:

  • Export Inspections
  • Crop Progress
  • Cold Storage
  • EU weekly grain, oilseed import and export data

Energy reports and events:

  • Platts 34th Asia Pacific Petroleum Conference (APPEC) in Singapore, through Wednesday. Speakers include executives from BP, Shell, Trafigura, Vitol, Aramco, Indian Oil Corp., Mercuria Energy Group Ltd., Gunvor Group Ltd.
  • Rio Oil & Gas conference. Speakers include Brazil President Michel Temer, Petroleo Brasileiro SA CEO Ivan Monteiro, Energy Minister Moreira Franco

Tuesday, Sept. 25

Ag reports and events:

  • Food Price Outlook
  • Cotton Ginnings
  • Poultry Slaughter
  • Intertek and AmSpec release their respective data on Malaysia’s Sept. 1-25 palm oil exports; SGS data for same period
  • Unica’s bi-weekly Brazil Center-South sugar output
  • S&P Platts Kingsman sugar conference in Miami, first day of two, with speakers from ED&F Man Sugar, RaboResearch, Citi, Mexico National Chamber of the Sugar and Alcohol Industries, Sucroliq, Puma Energy

Energy reports and events:

  • API weekly U.S. oil inventory report
  • Future of U.S. nuclear industry conference in Washington D.C., speakers from Exelon and NRC

Wednesday, Sept. 26

Ag reports and events:

  • Broiler Hatchery
  • Livestock and Meat Domestic Data
  • Globoil vegetable oil conference, Mumbai, through Friday. Commerce Minister Suresh Prabhu, Food Minister Ram Vilas Paswan expected to address meeting, together with forecaster Dorab Mistry
  • South African crop estimates
  • S&P Platts Kingsman sugar conference in Miami, final day, with speakers from Bonsucro, ALESA, Indian Sugar Exim Corp., Central American Sugar Assoc., Avenzza

Energy reports and events:

  • U.S. weekly ethanol inventories

Thursday, Sept. 27

Ag reports and events:

  • Weekly Export Sales
  • Agricultural Prices
  • Hogs and Pigs
  • Peanut Stocks and Processing
  • International Grains Council monthly report
  • Earnings: Cargill’s fiscal first-quarter results
  • EU weekly grain, oilseed import and export data
  • Buenos Aires Grain Exchange weekly crop report
  • Port of Rouen data on French grain exports

Energy reports and events:

  • EIA natural gas storage change

Friday, Sept. 28

Ag reports and events:

  • CFTC weekly commitments of traders report on various U.S. futures and options contracts.
  • Grain Stocks
  • Small Grains Summary
  • Egg Products
  • Peanut Prices
  • Turkeys Raised
  • FranceAgriMer weekly updates on French crop conditions

Energy reports and events:

  • Baker Hughes weekly U.S. oil/gas rig counts
  • U.S. EIA monthly EIA-914 oil and gas production report
  • EIA petroleum supply monthly

Other reports and events this week include:

Monday, Sept. 24

  • The trade war heats up as U.S. tariffs of $200 billion on Chinese goods are expected to take effect. At the same time, China will impose tariffs of $60 billion on U.S. goods.
  • Some markets in Asia, including China and Japan, are closed in celebration of the autumn equinox.

Tuesday, Sept. 25

  • President Trump to address U.N. General Assembly. The General Debate gives member states opportunity to state their views on major issues; through Oct. 1.
  • Trade policy. U.S. Trade Representative Robert Lighthizer will meet with Cecilia Malmstrom, the EU’s trade negotiator and Japanese Trade Minister Hiroshige Seko while the U.N. General Assembly is in session. The three will seek to lay the groundwork to develop stronger rules for industrial subsidies; state-owned enterprises; forced technology transfers; WTO transparency; and e-commerce.
  • Commerce Dept. final determinations expected on antidumping probes of Chinese, Italian forged steel fittings.
  • Regulatory reform. Office of Information and Regulatory Affairs (OIRA) Administrator Neomi Rao discusses regulatory reform at a Bloomberg Government breakfast.
  • Foreign investment/CFIUS. House Financial Services Committee Chairman Jeb Hensarling speaks at the Center for Strategic and International Studies event on reform of the Committee on Foreign Investment in the United States (CFIUS) operations, including the recently signed into law Foreign Investment Risk Review Modernization Act.
  • Health care in Rural America. Senate Health, Education, Labor and Pension Subcommittee hearing on Health Care in Rural America: Examining Experiences and Costs.

Wednesday, Sept. 26

  • Tax policy. House Ways and Means Oversight Subcommittee hearing on IRS authentication of taxpayers through using online tools, applications.
  • Auto tariffs impact. Senate Finance Committee hearing on the impact of tariffs on the U.S. auto industry.
  • WTO and China. Heritage Foundation forum, The WTO and the China Challenge.
  • SNAP/food stamp fraud. House Oversight and Government Reform Subcommittee hearing.
  • Endangered Species Act (ESA). House Natural Resources Committee hearing on bills to amend the ESA.

Thursday, Sept. 27

  • Health care. Senate Health, Education, Labor and Pensions Committee hearing on reducing health-care costs.
  • Big data. AGree Discussion Series, Harnessing (Big) Data for Small Farmers.

 

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