Big Surprise was the drop In Crude Oil production some 100k for the week.Sounds bullish but it looks like a one-off Event as tropical Storm Cindy was the cause.production should be ramped higher for next week’s report.Outside of The production numbers nothing was bullish in my opinion.But oil markets are wanting to trade higher so anything bearish or even in line might be ignored. This is similar to what I talked about yesterday in regards to Draghi speech. If Market has an opinion it will find a reason to trade in that direction.Crude Oil up through yesterdays highs.
Reason for market turnaround comes from ECB sources who said market misinterpreted Draghi Speech yesterday,It was meant to be more balanced not hawkish.
I love the hand holding from The central banks.Can you just let markets trade freely!
Still feeling the Effects of yesterday’s Draghi Speech. Comments from the big banks:
– Deutsche Bank believe the comments marked “a transition from the ‘whatever it takes’ period to ‘it will take a little less’ and a potential slow turning point in the direction of travel towards tighter policy”
– Lloyds write “Draghi’s comments were interpreted as increasing the likelihood that the ECB may start to wind down its asset purchases next year.”
US Treasuries Heavy in conjunction with Bunds again. Besides the 2 comments listed above many other experts stating Draghi Speech Watershed moment, beginning of End of QE, The Turning Point for ECB .it sure looks that way after a day and half but let’s see what happens after month end/Quarter end.US yield curve steepening again for second day, Is it a change in trend or just profit taking on the flattening trade? A rare occurrence of late is 3 day consecutive days of Steeping of Yield curve if it happens so tomorrow maybe we are seeing a change in trend. Bunds -50 ticks but at one Point were down 100.The bund trade overnight was a heavy volume, large range affair. What is different today is that not all European 10 yr. yields are higher. Portugal, Spain and Italy all show yields lower and Spreads to bunds are tighter. When spreads to Bunds are tighter it usually portends a Risk On type trade which is not the case in stocks. Schatz or 2 year German Yields ae actually unchanged to lower as futures sit near session highs and thus steeping the German Yield curve. This is another difference compared to yesterday’s trade as Schatz was beating up along with Bunds today opposite reaction. Hmmm /what is having an identical reaction today is the Euro. Almost touching 1.14 handle overnight and trading higher by 35 pips. Spot Euro has not exceeded 1.14 handle in a year. Dollar down another 25 ticks and languishing near sessions lows.
European and US Stocks trying to claw back some of the overnight Lows. NASDAQ unchanged now and Spoos right up on session’s highs. NASDAQ at one point was down 60 + handles. Dax Almost 100 big ticks off lows and stoxx 50 30 ticks off lows. No top tier Economic releases today. Oil steady to lower as yesterday’s API numbers were bearish. All eyes on EIA at 9:30
Just out ECB Sources say markets misjudged Draghi Speech on Stimulus. Unwind of yesterday’s hawkish trade underway.
- Euro touched a 9 month high vs dollar
- Euroyen 15 month high
- Eurgbp closing in on 2017 highs
- Biggest jump in Bund and Buxl (10 ,30) yield since 10/16
- 10 year yield +7 Bps
- 30 year Yields +6 Bps
Some already are saying moves amplified by upcoming month end /quarter end activity.Sell the winners, Buy the losers are at least some version of this take” profit trade.”Fang stocks down 2 days in row ,not A reason to say profit taking there yet, if continued losing streak last Till Friday Then we can talk.Not Just FANG but watch NDX into Friday’s Month end.WE very well could see some window Dressing on that day.
Crude oil has marched higher as Resistance levels have been broken.Some Speculation is given that weekly Oil Storage numbers will be bullish , but that sounds like An Excuse to fit the price action.Oil +1.9%,Gasoline +1.6%
All the action in Currencies & Fixed Income having little impact on Spoos they are only down 2 handles Vix +.8%.Treasury Vix +8%. I would love to see Yellen come out Hawkish and Turn This dollar Around,really Fire up activity.
News outlets reporting a massive amount of Cyberattacks occurring throughout the world.Ukraine supposedly hit pretty hard as according to BB “Ukrainian Power grid,banks and Government offices were hit.” Also The Big Russian oil Company Rosneft and World shipping Giant Maresk.Companies in France and UK have also reported Cyber Attacks today.Yesterday In Parts of Ohio Government websites hacked and replaced with pro Isis propaganda.Norway just Now Said they are a victim of Cyber attack.
No real Impact on the Trade yet but If oil Companies are attacked worries are that production could be stopped.Oil has rallied since 9:00 . Resistance levels are being taken out. The bounce continues in RBOB and HO
The rallying in yields continues all across Europe.See picture below
Pretty Significant moves overnight due to Draghi’s Comments. Be Aware though that not all his comments were Bullish Euro /bearish Bunds. Some of his commentary was more neutral but markets are ignoring these. For example “May Change policy stance not Tighten” “Inflation not yet Durable and Self Sustaining” these fell on Deaf ears. What was heard loud And Clear and caused greatest reaction Were these comments “all signs now point to a strengthening and broadening recovery in Euro area “and “deflationary forces are now replaced by reflationary ones” also in the Macro View “Global recovery is firming and Broadening” A This Holiday-esque Summer market may also be to blame for some of the gyrations
• Euro +85 Pips
• Yields Higher throughout Eurozone as Thoughts of an End to QE Italy and France +9 Bps, Germany And Spain +7 bps.Most Spreads wider to bunds
• Yields on 2 year maturities on average +4-5 Bps Higher throughout EZ
• European Stocks Lower Dax and Stoxx 50 -.5% Cac -.6%. Spoos -3 handles and Nasdaq -20
• US treasuries down with bunds .Yield curve flatter Go Figure. 5/30 trading below yesterday’s lows which were the lowest in 10 years.
Other major news of Note that is weighing on the Dollar is China central bank was supposedly Intervening in the Yuan (selling dollars) as Month End approaches. Reportedly the Central bank (per BB) would like to see the Yuan around 6.8100 per dollar on Month/Quarter end. Today the Yuan strengthened to 6.8101
Oil is working on it 4th consecutive higher close as the charts continue to point to a short term bottom. That could all change as we are upon the weekly API Number after close and tomorrows EIA. The pendulum in positioning has swung towards more neutral to bearish so it makes perfect sense that prices are starting to firm. Copper up a touch but tin fact all metals both precious and base are higher. This doesn’t play into the Draghi reflation comments.
So the Activity in Europe has impacted treasuries we do see Bund/10 year yield Spread tighten a bit as they do approach 2017 lows. All Eyes on Yellen speech today at 12:00 .No prepared Text and A Q & A her topic is Global Economic Issues
Over in the Grain Complex Weekly Crop ratings were lower than expected. Soybeans +10 Cents, Minneapolis Wheat +6 Cents