Risk markets still basking in the Glow of news wire comments that both China and U.S. are trying to restart talks in hopes of Ending trade war.Soybeans +3%,NDX + .3%,SPX +.5%,JPY -.8% and the Yuan +.5%.
Soybean Speculators via managed Money Holdings turned net Short last week for first time since March and May Provide fuel for the rally if talks do lead to end of Trade spat.Wheat not Impacted by trade war saw More evidence of a smaller worldwide Crop as Ukraine cut size of her Crop,Wheat +.7%.Bonds have given back some of their gains but still solidly in the green as Month End Forces maybe preventing bond to dip much before today session is over.Today’s Employment cost index and PCE were dollar negative and Bond friendly may also be providing a floor underneath treasury prices.
Wheat has own issues but Soy and corn rallying on Story
The BOJ Less hawkish Then markets feared or priced in. BOJ Said struggle with inflation will last a bit longer and a few tweaks to yield Curve management to help Domestic banks not as severe as feared, 30 year JGB yields closed down 8.2 Bp. and 10s down 3.9, Yen dropped close to .5%. The run up in JGBs along with disappointing manufacturing Data from China and A slight Miss of EZ GDP has Bonds bid. Eurozone CPI is reported higher than the consensus it registered 2.1% vs 2.0% and Core 1.1% f/c 1% the headline number is highest in 5 years. Euro +.26%, Dollar little changed.
NKY closed little changed, Italy’s Mib trading higher 1.1% as banks, helped Credit Suisse earnings trade higher, European bank Index 1.2%.Dax little changed to Lower, Stoxx 50 little changed to higher. Spoos +.2%,7 handles higher trading at overnight highs as I type,2800 big psychological level for Spoos. Earnings season marches on 38 SPX companies report today, the biggest Apple at 3:30 this afternoon. From Morgan Stanley “Morgan Stanley Says Correction Worse Than February Building Morgan Stanley joins a growing number of other banks including BofA, Citi, and Credit Suisse warning of an equity correction” Spoos don’t Like the air above 2800 and with Month End today maybe some pressure develops if and when They trade below this level. Other markets Show Crude -.5%, But Brent little changed as is Copper, Gold, and Silver. Wheat continues its press higher +.9% today after closing higher yesterday 3%. Sideways markets until Fed decision tomorrow afternoon. .
A few political Comments:
“The Trump administration is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives,” the N.Y. Times’ Alan Rappeport and Jim Tankersley report.
“U.S. spy agencies are seeing signs that North Korea is constructing new missiles at a factory that produced the country’s first intercontinental ballistic missiles capable of reaching the United States,” the WashPost’s Ellen Nakashima and Joby Warrick report:
China’s business activity faltered in July. Official surveys of factories and service providers highlighted sluggish domestic demand, and slower production and investment, Liyan Qi and Grace Zhu report. The manufacturing purchasing managers’ index fell to a five-month low, while the import subindex of slipped to a 23-month low. Exports held steady thanks to a weaker yuan. The first official data reflecting the impact of U.S. tariffs adds to signs that trade tensions have started to pinch China’s economic growth.
2 stories from BB indicating a near term supply shortage of Domestic Crude oil.Reason that Calendar spreads are well bid
Theme for Today is plenty of Red,in Stocks ,bonds and Dollar.FANG and related stocks leading Nasdaq and SPX lower as the Information Tech sector -1.72% weighs heavily on the latter. With OIL +2% the SPX energy sector +.8%. JGB ‘s down=Bunds and Gilts=Treasuries lower.Worries That BOJ may alter their Yield curve control has some traders worried about tonight’s decision,Bank Of England Likely to raise rates Thursday,and FED on Wednesday which may lean hawkish doesn’t leave much room for Bonds to trade higher even though NDX -1.2% and Morgan Fang index -2.7%
Something has to give with Dollar index(DXY), Sideways has been trend but near record amount of Net longs leads me to believe that next move is lower and could be quite aggressive as stops are triggered.
below is graph of the 10 yr JGB ATR showing the daily range increasing into tonight BOJ meeting. I don’t know what they may or may not do but with trading activity increasing tonight’s decision could be a market mover for Bond complex
Busy week for Central banks with BOJ decision tomorrow, The Fed on Wednesday, Bank of England on Thursday, and Mexican central bank meets on Thursday as well. The probability of A rate hike for bank of England stands at 75%.The BOJ may indicate more flexibility in their Bond buying program but adjustments are minor, Both Fed and Mexico expected to leave rates unchanged. Caterpillar earnings this morning better than expected they boosted outlook and announced a $10B share repurchase agreement, Stock +3% pre market, pushing the Dow into the green .Earnings continue to roll in this week, Apple reports tomorrow. Economic calendar heats up as well as it turn to August, Employment cost index tomorrow, ISM on Wednesday and of course payroll data on Friday. From China Manufacturing PMI both Official and private reading will be released tonight through Wednesday/
Markets relatively quiet so far today, Spoos unchanged but trading near session highs, European Stock markets either side of unchanged Crude oil though +2% and Counterpart Brent only +.8%.Worries about immediate supply pushing up front Month CL vs back end of curve.US 2s10 yield curve steeper today after 4 consecutive days of flattening. The Treasury will announce on August 1 the funding program for next 3 months and Bloomberg saying that issuance will rise for third consecutive quarter. Grains trading higher this morning. Bunds and gilts heavy and weighing on treasuries, 30 year JGBs closed with yields higher by 1.7 Bps. Still watching 3% for US 10 year yield.
President trump tweet:
I would be willing to “shut down” government if the Democrats do not give us the votes for Border Security, which includes the Wall! Must get rid of Lottery, Catch, & Release etc. and finally go to system of Immigration based on MERIT! We need great people coming into our Country!
…Sell the news NDX -1.55%,Goog -2.5%,FB and Apple -1.1%,Amazon +.2%. SPX -.7% and Dow -.4%. All the hoopla about Strong GDP priced in all the excitement about strong earnings priced in and this what we get plenty of sellers on a Summer friday afternoon.
RISK OFF not contained to Stocks Copper-1%,CL -1.8% but brent -.25%.
.. First 2 months Calendar spread for Brent( purple line) and CL
…Continuation chart with 200 D MA