Worldwide Stocks, both developed and emerging are bid this morning a few reasons:
• A deal is reached at the EU summit regarding Migration, The positive take from this is that The Countries agreed on Something together even though it has a limited impact on Economy. Italy pushed hard for this deal
• ECB mulling an “operation twist” to keep long term rates low.10 and 30 year yields lower across Europe and Short term rates steady to higher ,with exception of Italy which sees rates lower across entire curve. How the twist is going to work is that ECB will reinvest proceeds from Expiring Bonds into the longer end of the Curve 10+ years and greater.
• The Yuan trading higher vs. Dollar for first time in 10 days, this is a risk on signal For Asian Stocks. Yuan headed for worst month ever vs. Dollar though
• US bank Stress test results showed no Worries for US Banks
• Euro Zone Inflation met expectations
Some negative news:
• President Trump threatening to pull out of the World trade organization (again)
• A major tax probe into European banks is ongoing
• Morgan Stanley warning on Commodities saying they face threats of Demand destruction from mounting trade tension and Slowdown in china-BB
• German retail sales missed expectations -2.1 vs -.5 M/M -1.6 vs +1.9 Y/Y
Month, quarter, and half-year end today will be an excuse for all moves. Stock markets In Italy, Germany and France +1.3%. Shanghai +2%, Taiwan +1.5%, Germany S Long End Buxl +50 ticks Bunds -16.Brent on the Bid +1.17%, WTI sideways trading unchanged. Plenty of Spread activity between the grades driving Flows. Today is last day to trade to August Brent. Major Crop report today at 11:00 one of the Busiest of the year historically.
No World Cup games today but I do not see any pickup in activity due to one-day break.
PCE Core at 7:30 will get plenty of attention but it rarely affects markets.
Mexico presidential elections this weekend.
lets take a look at two Fundamental drivers of WTI over last 2 weeks
Storage levels at Cushing continue to trend lower nearing 2014 levels.
Weekly Crude Oil production has been unchanged the last 2 weeks:
If taken all by themselves these 2 metrics are bullish price of WTI
From Morgan Stanley:
“China’s equity exchange-traded funds saw the biggest outflows of any emerging market in the past week, while spot CNY trading is on its way to having the busiest week of the year as average volume for the past three days is running above US$32bn a day”
Continuation of this week’s/Months theme of worries in Emerging markets causing domestic currencies and benchmark stock markets to trade lower ,Pushing US dollar higher and Increasing the cost of Debt financing. India Rupee all time low vs Dollar, Indonesia Rupiah 3 year low. Yesterday Big Tech Was the Big Loser in US same in Europe this morning. Stoxx 600 tech index -1.7%, tech stocks biggest decliners in Dax, which is trading down 1%, Europes Loss leader. German CPI to be released at 7:00 CST, No surprises expected, Day 1 of EU summit Underway no tape bombs seen yet. Watching the 2700 Level in Spoos touched twice this week but has to crack. NASDAQ is the canary in the coalmine over last few days so keep an eye there for overall stock Direction. Italian Auctions overnight where in line to weak, BTPs have clawed back 50 +ticks to sit unchanged and Bunds trending higher all morning as some angst regarding that EU summit has sellers putting hands in pocket. DXY or dollar index touched last week’s highs which is highest level in year, 95.54.The stronger the dollar=Weak emerging markets which should equate into Higher treasuries.
Regarding the white House Stance on China trade Policy. Confusion still reigns regarding what stance the President is taking on china the Softer approach brought forth by Mnuchin or the harsh hawkish sought by trade advisor Navaroo. Any headline leaning one way or another could have an impact on stocks. Shanghai closed down .9%, South Korean Stocks -1.19%
• Other markets show Silver -.9%, Gold steady, Aluminum and copper-1.1percentage, Spoos and Soybeans Little Changed.
• From WSJ macro-Economic advisors see 5.3% Q2 US GDP. Yesterday treasury secretary Mnuchin hinted at a very Strong Q2 GDP
• Today’s Economic Calendar Shows last look at Q1 GDP, Shouldn’t matter
• Feds Bullard speaks 9:45
MS “FANG” Index down .7% ,NDX -.6% and Spoos off highs by Some 33 handles as Risk On turned into Risk off.Consensus on Catalyst is hard to Come.Tick Data which measure buying or selling pressure equaled lowest level in 6 weeks indicating some big sell orders coming through today.Quarter end Month End activity possibly the cause and also just a convenient excuse when no one has an answer.
2s10 yield spread new lows as spread traded as low as 31.97,trend is down recession fears higher.A break of Most recent lows might have caught Stock traders attention and helped to push stocks lower.
Dollar trading above the danger zone the 95 handle. Market does not like when dollar is above this level especially Emerging market bonds and Stocks ETF they are testing session lows as dollar presses higher. Risk On To Risk off,Upside Momentum stalled whatever may be reason you have to pay attention to 2700 handle below In spoos as this is the new major support area.
Weekly EIA surprisingly Bullish even with big lead in from API.production unchanged for second week in a row and Exports higher again add to the Bullishness.One not so bullish metric is that the PADD 5,West coast showed a hefty draw of 2.5 Mln and does weaken the Bullish Storage draw as Players to like to exclude padd 5 from Equation..gasoline Demand +4% and Distillate demand -4% last week.
lets see what happens here ,go/ no go zone of 2746-2756. “Pit “spoos trading towards Mondays Pit high/ bottom of gap, the question, is momentum Strong enough to push through? or resistance strong?.We shall see
Event Risk from 2-day EU summit via IFR news”
The euro will take a hit if German Chancellor Merkel’s CDU-CSU/SPD coalition government collapses next week, with the outcome of the two-day EU summit, which gets underway in Brussels Thursday key to gauging that risk. Pressure on Merkel ahead of the summit has been upped by her Bavarian CSU allies insisting that they want to unilaterally re-impose border controls from next week in contravention of EU rules. SPD leader Nahles, meanwhile, says she doesn’t know whether her party should start preparing for a new federal election. Investors may take fright if the political situation in the largest euro zone nation takes an uncertain turn weeks after the formation of a populist government in Italy, the third largest euro zone nation. The alliance between the CDU and CSU stretches back 70 years, so its breakup would be a major event. A Bavarian regional election will be held in October, with a recent poll suggesting the CSU is on course for its worst-ever result. EUR/USD-
Overnight action was a repeat of yesterdays, Chinese Stock Markets closed lower, yuan lower as worries about strength of China’s economy continue to grow. Any move by the Central bank is seen as desperation or an attempt to limit Damage instead of Moves to bolster confidence in an economy. European Bond yields Lower, US yields Lower majority of European stock markets and US Indexes were trading lower as well. This all changed in a heartbeat this morning as president Trump said he will “not seek harshest measures on Chinese investments “Dollar, yen, Bonds traded lower and Stocks and Euro rallied smartly. President trump will rely on CFIUS, the Committee on Foreign Investment in the USA to make decisions on foreign investments not Use national emergency laws, which have been the main tool He has used for Policy Action. In practice, this should allow a more sensible and thought out Response to Foreign transactions in US companies not a fly from your seat of pants unilateral move that has been guiding policy so far.
RISK ON from Risk OFF theme this morning
Big Draw, 9 mln barrels reported in yesterday’s API oil storage report has sent WTI higher again +.75%, Brent +1% as some countries are hinting that they may indeed Follow USA advice and Switch from Iran oil supplies.
• Durable goods and pending home sales highlight Economic calendar
• 10:00 Fed Governor Quarles speaks
• 11:15 Feds Rosengren Speaks
After yesterdays Rout Spoos trading today in the middle of yesterday’s Range.Where do we go from here depends on whether we Trade higher into yesterdays Gap or take out yesterdays Pit lows and downside momentum continues.Until one happens a choppy trade will take place
Net changes are from the recent highs scored on June 7th.
china CSI 300 tech index:
China Shanghai Index: