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Trade Tensions Ease

The final week of August was relatively quiet for mortgage rates. The latest news on the trade negotiations between the U.S. and China captured the most attention, but had little lasting impact. The economic data also had just a minor effect, and rates ended the week a bit lower. Since the end of July, however, mortgage rates have posted very significant declines.
The trade negotiations between the U.S. and China became a little friendlier this week. Following a series of threatened tariff increases by one country and retaliatory moves by the other earlier in the month, the two sides expressed more willingness to work together to reach a mutually beneficial deal. For example, Chinese trade officials said that they "firmly reject an escalation" of the trade war and are willing to continue negotiations with a "calm attitude."

The latest data revealed that inflation continued to hold steady at low levels. In July, the core PCE price index, the inflation indicator favored by the Fed, was just 1.6% higher than a year ago, the same annual rate of increase as last month. The Fed's stated target rate for this index is 2.0%, and July was the fifth straight month of readings well below this level.  

This week's news from the housing sector was mildly disappointing. In July, pending home sales fell 2.5% from June, while the consensus forecast was for a much smaller decline. Since pending sales are signed contracts to buy existing homes, they are a leading indicator of closings in coming months. Even with the decline in July, though, pending sales were at roughly the same level as a year ago.  
Looking ahead, the monthly Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the ISM national manufacturing index will come out on Tuesday and the ISM national services index on Thursday. In addition, news about the trade negotiations could influence mortgage rates. Mortgage markets will be closed on Monday in observance of Labor Day.

Weekly Change
10yr Treasury fell 0.01
Dow rose 800
NASDAQ rose 250

Tue 9/3 ISM Manufacturing
Thu 9/5 ISM Services
Fri 9/6 Employment

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