Dollar pushed higher by the Semi Dovish ECB meeting as Euro drops 100 ticks.I thought Dollar would be somewhat stable as we await tomorrows GDP release,but alas Draghi kept open the possibility of QE ramping up and more Eur weakness if “Conditions Warrant”.Also just in the House has passed the Senate budget thus opening door and moving one step closer For the trump tax overhaul to become law. An official tax plan to be released next week.All good news for Dollar maybe not so much for treasuries as one step closer to tax overhaul is one step closer to Higher deficits.Simple Fib extension on graph as Dollar has broken above resitance gives us some levels above to keep eye on.
NASDAQ having a choppy day as Goog,Msft,Intel,Amazon all report after close. Spoos have been firm most of day as Earnings keep stocks in demand even though The news of the House passing budget resolution provided a small lift to stocks it was short-lived
As expected Draghi/ECB cut Asset purchases by 30B and Extend program for 9 months till September 2018.One Dovish Caveat was kept in Announcement as ECB said “if circumstances change they stand ready to Increase purchases and Duration of Program if needed.” Euro is lower by 55 pips, dollar making new Highs +28 and Bunds, Buxl, BTPs and Stoxx all touched session highs after announcement hit wires. Spoos cared little they stand higher by 4 handles but they were influenced by UPS earnings which were better than expected. Spanish Stocks are on Fire as they stand 2% higher as the Catalonia leaders are moving away from declaring and fighting for Independence and instead called for Snap elections. Snap elections is such a European term isn’t it?
Just crossing wires is Story from politico saying that Yellen is out of running for Next Fed chief. She already was a long shot to be nominated again so market reaction was very short lived. Dollar popped and Treasuries sold off briefly. Then there were two as Taylor and Powell are the last ones standing. Betting sites have Powell the favorite at almost 3-1 over his hawkish peer Taylor but there continues to be talk that both could be nominated as Fed and vice chair.
Gyration in Currencies are driving the action this morning and probably will be the case through Draghi press conference starting at 7:30.US economic calendar shows jobless claims, trade balance and Pending home sales all Second tier data. Politics front and center again as the house is expected to vote on Budget bill sometime today to clear path for tax bill. The latest Buzz word or phrase is what may or may not happen to the amount of tax free money can be invested in 401(k).trump said won’t be touched but Republicans are saying they want to cut amount from current 18K.Stocks responded negatively to this chatter yesterday.
panic has subsided in Stocks for now.In Spoos have found support at a big area panic can ensue if prices break 2545.80 with some confidence.
Weekly oil Numbers were bearish as production jumped 1 ml barrels and weekly storage numbers showed a build in oil stocks.tempering this bearish-ness was another weekly jump in Exports.Gasoline and heating oil were bullish as draws were larger then consensus but price response to upside was limited.Demand for Both gasoline and heating oil/Diesel were strong as Refinery utilization jumped 3% w/w.Somewhat of a head scratcher as to why products are not trading higher.
Some nervousness in Stocks that we haven’t seen in awhile.Spoos only 13 handles lower but seems much worse.A sign of the times I guess when Spoos rarely move a 13 handle drop seems like panic.All SPX sectors are lower I thought a Higher rates worry type trade but financials are getting beat up as well.One thought is that within The Republican tax plan there is a bill that will cut the Limit to $2000 from $14k on how much you can invest in your 401K plan.trump said he will not cut it but tax Chief Brady said this morning that all options are still on table.This hit wires at 9:15 ish a few minutes after stocks started accelerating to downside,just a thought.Dont need much to make investors nervous at these lofty levels Sell first ask questions later.
Dollar has been on a ride this morning Knocked down because mexican central bank will step up Intervention in peso market thus limiting peso downside.MXN rallied .6% after announcement and pressured dollar vs all the majors.Euro +50 ticks as it it will not move until ECB Meeting tomorrow. Vix +7% Stoxx vix +12%
Overnight reasons for Worldwide Bond weakness:
• UK GDP Beat consensus causing Gilts to sell off quickly, all said and done Gilts dropped 60 ticks after number. This beat has caused rate hike expectations for BOE to surge above 90% for next week’s meeting.GBP +120 ticks
• Doubline’s Gundlach said Bonds need to rally immediately or write the obituary for the bond bulls. The impetus for this comment is that 10 year yields closed above big resistance of 2.41%. The breaking of this 2.41% in 10 year yield is a big deal.
• Bonds around the world are lower From China to Canada as hawkish Central bank expectations, Possibility of New Hawkish Fed Chair, reflation trade and Optimism of Worldwide growth are causing path of least resistance to be lower for Bonds
ECB meeting tomorrow has kept Bunds and all German debt at bay as Players don’t want to make big bets with an important ECB meeting tomorrow. How much will the ECB taper tomorrow and how long will QE be extended? Consensus is that they taper to $30B from Current $60B and extended program for 9 months to September. Less taper =Bullish Bunds larger cuts to taper=bearish bunds. Euro in a tight range of 30 Pips, European Stock markets are mixed after a choppy night of Trade. Very Good IFO (German Business confidence) numbers overnight weighed on stocks hmmm! Worried about higher rates causing sell off? Very well could be.
Spoos, NASDAQ and Dow little changed to lower. Roughly 30 Spx companies have reported earnings this morning and majority have beaten expectations.3 Dow components Visa, Coke, And Boeing have beaten expectations but Both Visa and Boeing are trading lower. YTD as Boeing goes so does the Dow. Dollar steady, and Yen down 40 ticks. The strength in the GBP is not just against the dollar but vs. AUD +300 Pips and Jpy +160 pips.
Macro Theme Overnight is higher rate trade.
Oil is little changed as yesterday’s API numbers reported a build in Crude stocks but a large draw in gasoline and Distillates the latter offset any bearish move in Crude oil. Overnight Russia said it will increase output in 2018.base metals are lower as are precious metals. Again A higher rate trade is Theme for overnight.
The Feud between Senators Corker, Flake and trump are making plenty of news Headlines but impact so far on tax deal trump agenda limited so far. The twitter war continues today.
Bank of Canada rate decision today at 9:00 no change expected
7:30 Durable goods, 9:00 new home sales
Dollar chart shows Resistance yet to be broken
Dow stocks YTD and how many points they have contributed to the advance. Crazy Boeing
The 8:30 cash open was relatively normal but some fireworks erupted shortly after as President trump and Sen.Corker took their feud public again. Senator Corker said He will “never vote for Trump again” and Trump said “Corker could not be elected to be Dog catcher” this back and forth caused spoos to take a cautious look at the upcoming Budget vote scheduled for Thursday. Stocks sold off even more after Representative King from NY said he will vote against Budget,A further blow to stock bulls.But alas Speaker Ryan reassured markets that regardless of Fight with trump All senators on Board for tax Plan .Dollar also gyrated on the political comments but now has resumed the up trend not ticking lower over last 30 minutes on a 3 min chart.Ryan said he “would like tax plan on his desk by thanksgiving”. Okay good to Nknow Mr. Speaker
Back Months Cattle scored new contract high this morning as too much supply now will result in not enough later.Dec cattle +1.5% and Feb +1.3%.Dollar movement as also been erratic and thus movement in Gold and silver has been as well.10 year yields have not convincingly broke above resistance levels as it seems another push is needed .ECB meeting on Thursday and GDP Friday are the end of week Event risks,and Political Comments from the Republican Unity luncheon today could surprise markets.
More action then normal this Tuesday morning.