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Global Fears Recede but the Data is Turning

This week is the opposite of last week, headlines are better but economic reports are troubling.  This week has seen the British Parliament take a major step towards averting a chaotic “no-deal” Brexit and a Hong Kong withdraw of the controversial extradition proposal that caused massive protests.  This should have caused a “relief” selling of treasuries and higher yields.  The ISM Manufacturing index fell below 50% (contraction) for the first time in years.  Is this an aberration or are manufacturers pulling back in today’s volatile trade environment?  The next few manufacturing reports and anecdotal information will be closely watched.  The 10 year T is at 1.46%, just 10 bps above its all time low.  Inflation (or the lack thereof): last week’s PCE was 1.6%, well under the Fed’s 2.0% target; oil prices are dropping and may test the $50/per barrel key technical level.  This week’s employment report (Friday) will be closely watched on the heels of the poor ISM. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners