Jobs

The just released Consumer confidence touched a 17  year high as it appears no one is worried about anything.The percentage of  respondents who think stock market higher over next 3 months moved 3% higher vs  last month.This Consumer confidence metric differs from U of M confidence in that it focuses more on labor market activity.Below find a Chart of  2 of the Labor market   components, Jobs plentiful/Jobs hard to get ratio.This metric touched a multi-year high today as  US labor market continue to look stronger by the month.The red horizontal lines  are Recession period and you can see that as recession ended jobs were hard to come by.Tighter and tighter or stronger and stronger the labor market becomes the more hopeful fed will be  that inflation  is primed to move higher.A tale for another day is that the Euro zone today saw strong labor numbers but weak Inflation ones.

job r

Bitcoin

CME has announced the creation of bitcoin futures to launch in Q4.We can argue what the impact on bitcoin is ,bullish or  bearish  but for now prices are at new all chime highs.1 minute graph below

bityy

 

Morning 10-31

News:

  • China’s Bond market again seeing sellers as yields climb  for a second day.10’s +6.8 Bps,5’s +7.5 Bps
  • Bank of Japan left Policy Unchanged as expected but the vote for such action was 8-1.The lone dissenter was in favor of more stimulus as the BOJ trimmed Inflation Forecasts. NKY closed little changed .After chopping around post Decision the Yen is steady to lower as I type
  • Germany’s celebrating unification day it is a Public holiday, volumes a little lighter in Europe. Dax closed
  • Next Fed chair appears will be Jerome Powell. His odds of nomination are at 83% according to predictit.org Trump Will make announcement on Thursday.
  • Catalonia Government accepts central rule and new elections (Reuters). Germany /Spain yield spread tighter by 1.7 Bps.
  • According to the IMF Saudi Arabia needs Oil to trade > $70 barrel in 2018 to break even on spending plans (Bloomberg)
  • Positive comments regarding apple overnight, ahead of earnings on Thursday see Stock higher this morning by 1%
  • Republicans say Nothing will derail tax plans, Senator Collins of Maine has some concerns with Current republican Plan
  • Two day Fed meeting starts today

 

Data Recap:

  • China manufacturing PMI  6 vs. F/C 52. Copper Traded lower on release.
  • French CPI, GDP and PPi were all in line or a slightly higher than expectations. Per Bloomberg the Run of higher GDP, fifth consecutive quarter of gains is best run in 6 years.
  • Eurozone GDP and Unemployment rate a beat. CPI missed consensus core .9 vs. f/c 1.1 and headline 1.4 vs f/c 1.5

 

Markets:

 Theme overnight: Risk On

  • Euro trading a little bit lower on the disappointing CPI but has very narrow range overnight of 30 Pips.
  • Bunds -15 ticks, Bonds -5 ticks Gold -$4 and Dollar steady to higher. Oil little changed overnight.
  • Spoos +5, NASDAQ +21 handles, Stoxx+ 20 ticks, Nickel trading higher again as it trades above 50 d MA for 16 Th consecutive day (BB).Electric car boom the cause for the Love.

Markets leaning risk on and Why not, nothing seems to derail the stock market Euphoria Right Now .Manafort investigation/indictments are more of a distraction then anything. The focus should be on the official tax plan to be released later this week and what if any Changes are in the final disclosure. Month end activity could dominate flows today as the Economic calendar even though light has the Employment cost index at 7:30 which could cause some excitement in the Trade. Chicago PMI at 8:42 and then Consumer confidence at 9:00.Weaker European CPI data has had a very short lived impact on European markets but it is important to remember that Inflation did disappoint overnight.

Earnings comments from MS

Enough of the macro influences, now that 63% of the S&P 500 market cap has reported earnings (and a further 24% will report next week), let’s take a look at where we stand so far. 77% of the S&P 500 has come in above expectations on EPS and 18% below expectations, which continues to be a superior ‘beat rate’ than the historical average since 2004. On revenues, two thirds of companies have beaten revenue expectations. As I look at the magnitude of beats, companies have been beating consensus EPS expectations by 4.9%, 60bps higher than the historical median since 2004. Similarly, sales results have beat expectations by 88bps, also higher than historical median. As I look to the stand-out sectors with the highest positive surprise ratios, beat margins, and Y/Y growth, look no further than Technology and Materials sectors. Looking at Info Tech, 97% of tech companies have met/beat EPS expectations with a beat margin of 11.9%. Holistically, Tech is projected to see +9.2% sales growth and +14.7% earnings growth that has driven relative outperformance on the day of reporting. Meanwhile, Materials have seen the highest positive surprise ratio with 92% of companies beating consensus estimates. Y/Y growth rates are holding up nicely, with +14.4% sales growth and +5.7% earnings growth, and stocks have been rewarded on day of reporting more than any other sector. Looking overseas, European earnings have delivered modest EPS beats this week, with more beats than misses for the 11th consecutive quarter and have beaten by 2.7% so far. Some of the higher quality beats I would highlight include: ABB (ABBN SW), DSV (DSV DC), Santander (SAN SM), and Technip (FTI FP).

cattle

Find below a seasonal grid for front month cattle contracts  Average net changer per month over the last 5 years.

LC avg

After down months for August and September  the Winter months see Cattle prices on Average increase.This seasonal pattern may be the reason for Speculators to increase net longs in cattle over the last 3 weeks after decreasing them for 3 months,(see below).Winter brings lower cattle weights  and possible destruction of herd due to winter storms thus the reason for historical bias for higher prices.Spot trade jumped on Friday  but today’s Box beef values  were unchanged.Market waiting to see if increase in Spot prices has/will  cause box beef prices to be forced higher.

cattle longs

Stock Market weakness

Reports that  the  Corporate tax rate might  not be cut to 20% within Trump tax plan has caused sellers to  have upper hand over the last 30 minutes.Google and Amazon have given almost all of there Daily gains   Spoos made a new session low  and treasuries caught a small bid.This Is just a trial balloon to see how stocks would respond.Paul Ryan asked about manafort Investigation  Said this “will not derail tax plan” No reason it should as any ties to president Trump in these Mis -dealings are not present as of now.