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Monday, June 4, 2018

Following a week that delivered tons of economic data here in the States — most of it exceptionally positive, by the way — it’s now time to peer elsewhere to assess how new developments will be pushing markets going forward. Zacks Chief Strategist John Blank focuses his latest Global Week Ahead on the banking systems in the Eurozone. You can read all about it here: What of Deutsche Bank and Europe’s Other Banks?

Aside from a new ISM report (on Services this time, after a strong Manufacturing read of 58.7% last week), some productivity numbers and, of course, weekly jobless claims, we slow down considerably this week. This coincides with the final unraveling of Q1 earnings season, with only the final retailers and very few other companies reporting in the coming days.

Canada’s Prime Minister Justin Trudeau used some harsh language (harsh for Canada, anyway) to describe the tariffs slapped on his country’s steel and aluminum imports to the U.S., calling them “insulting.” Over the weekend, the G7 summit (the Group of Seven countries represent the most advanced economies in the world, including the U.S., Canada, Japan, Germany, France, Italy and the U.K.) blasted Treasury Secretary Steve Mnuchin over President Trump’s tariff policy, expressing “unanimous concern and disappointment” regarding them.

Speaking of Italy, tensions have soothed somewhat with the return of Giuseppe Conte to stitch together the country’s disparate political ideologies between populists in the country and the rest of the EU, as well as within Italy’s political parties who’ve wrested control. For now, new snap elections look to have been avoided, but how Italy’s economic difficulties are addressed domestically and as the third largest economy in the EU will be watched closely this week.

And what of trade relations with China? As U.S. Commerce Secretary Wilbur Ross continues to attempt to iron out details of new policy, Defense Secretary James Mattis spoke of the world’s second-largest economy by accusing China of “intimidation and coercion” in the Indo-Pacific region. This focus on China also relates to the on-again summit in Singapore scheduled for next week between President Trump and North Korean leader Kim Jong Un. Kim has met recently, and more than once, with Chinese leaders, and it would stand to reason that some of their discussions revolved around how to deal with the U.S., and President Trump in particular.

At this hour, pre-market levels are continuing from Friday’s rally, which came upon a very strong non-farm payroll and unemployment rate report Friday morning. We also saw historically low jobless claims and strong business investment in the U.S. last week, which would further support higher stock prices. While some analysts are eyeing potential strength in value of the U.S. dollar perhaps throwing some shade on an otherwise sunny forecast, we currently see the main driver’s of a future rally to come from developments elsewhere, now that the U.S. has done its part for the global economy.

Mark Vickery
Senior Editor

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