Market News 9-4

(GRAINS)  Beans and wheat gap higher in overnight trade on adverse US winter wheat weather and dialing back of trade war rhetoric over weekend by Administration officials.
(JPM on overnight) US-China trade dynamic failed to deteriorate further over the last two days (US S&P futures are up 16-17 points). Washington and Beijing have a long and arduous trade negotiation ahead of them but investors are hopeful a path to resolution exists (and the first step down that path could come Tues during Chinese President Xi’s speech at the Boao Forum – hopes are high that Xi will announce significant market access reforms during this speech).
(JPM on earnings) The upcoming earnings season is expected to be a strong one and should help refocus attention back on corporate fundamentals and the SPX’s valuation support (with the market penciling in a ~$170+ 2019 EPS estimate). Geopolitics will be a wildcard as the market heads into May and Trump faces a decision on the Iranian nuclear agreement (by 5/12) and his summit w/Kim.
(The Hill) Mnuchin said Sunday that there “could be” a trade war between the United States and China due to the recent tariff threats, but he does not expect one. “I don’t expect there will be a trade war. It could be, but I don’t expect it at all”
(JPM on equities) Stocks are likely to find support soon as market focus shifts to dividends (which will remain a tailwind for equities). Dividends have historically closely followed earnings growth, which we stay constructive on. Payout ratios do not look stretched and credit conditions remain favorable. Dividends in the Financial sector are by far the most depressed vs past peaks, and in our view offer the biggest upside surprise potential.
(Bloomberg) US deficits/Treasury demand – the CBO on Monday will publish new US fiscal forecasts and its prior deficit estimates ($563B in F18 and $689B in F19) are expected to be ratcheted higher. The Treasury is being forced to issue increased amounts of paper to compensate for the climbing deficits and this will eventually push yields higher.
(Bloomberg) A poll conducted for the pro-remain group Best for Britain by YouGov shows a majority of Britons support the idea of a second referendum on any final Brexit deal secured by Prime Minister Theresa May. With her calendar already full of Brexit- related negotiations, it is unlikely May will give into demands for another vote. Meanwhile, on the ground in the U.K., the country’s exit from the European Union has been supplanted as the biggest risk facing companies by potentially weaker growth in the economy, according to a survey of chief financial officers.
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