morning 8-31

News and Notes:
• Turkey raised the Tax on Dollar deposits in an attempt to stem the decline in the lira, Brazil, Indonesia and Argentina using measure’s to bolster their currency continues to indicate that EM issues are still present
• Yesterday Argentina raised the Benchmark lending rate by 15% to 60%!
• Italian BTPs trade unchanged as I type but a 90 tick range indicates nervous traders as the Country’s Budget/possible downgrade continues to be an issue
• Trump is threatening to pull out of the WTO unless they treat the USA better
• Trump has rejected an offer from Eurozone to scrap tariffs on cars, The Eurozone said we “will lower our tariffs to zero if US does same”-BB
• Trump is threatening to Levy $200 B in new tariffs on China as early As Next Thursday, as the public comment period on Such measures ends
• China’s manufacturing PMI and Composite PMI better than expected for August but export orders shrank for third month-Reuters.
• Today is the Deadline for Canada to agree to the new NAFTA deal, both sides negotiated well into the evening but no Deal yet-Reuters. If No deal watch for a drop in the Canadian $
The Yuan Fixed marginally higher for third consecutive Day, Base metals lower Copper -.6%,Nickel -1.77%, Gold +.3%,palladium +.8%.European Bourses lower as Auto Sector and Retail both down >1% due to trade worries. Spoos though little changed -4 handles, Bunds +11 and treasuries with a small bid.Dollar little changed against the “majors” but higher against Mexican peso , the Brazilian real and the Rand.Lower against Turkish lira and Ruble
Drivers today same as all week will be Trade/tariffs comments and moves in emerging markets (EM) currencies. Keep an eye for anything Mueller probe related as Politico reporting that the 60 day window prior to midterm elections is next week and if Mueller does not want to seem partisan he needs to release something if he has anything to report Month end may also play a role in today’s activates.

Risk ??

Risk On ,Off  ,sideways trade we have seen it all  so far today.Currency intervention by Brazil central bank,Argentina needing more help from IMF,and a Sell off in the Yuan all made Currency  movements the driver of Flows today.Amazon traded up to 2025 then all the way back down to 1985 and now back  to highs  a microcosm of today’s trade. Europe closed and Spoos have put in a decent rally trading Little changed ,nasdaq +26 handles and Dow down a  touch.WTI +1%,brent +.75% Gasoline +1.3% as plenty of drivers expected over labor day Holiday and thus More oil demand.Crude Oil calendar spreads are bid  and that is all you need to know for crude to be higher on day. Crude oil brent spread trading tighter for first time in 5 days

morning 8-30

Turkish lira -3% today vs USD bringing losses for week to ~8%.South Africa’s rand -1.8% today resulting in a 3 day loss ~5% vs. USD. Argentine peso -9% vs USD this week as well affect any markets outside Currency complex is nil. Emerging markets issues are present but now broader markets are ignoring them.
A Bloomberg story discussing the Canadian Yield Curve a bit too marches towards inversion.2s10 and 2s30s in Canada trading 17bps wide. Compared to the USA 2s30 trading 35 Bps. The Canadian yield curve not as an accurate predictor as US yields are predicting a recession, but it cannot be ignored, Canadian GDP today is an important release. The BOC meets next week, Overnight Interest rate swaps (OIS) indicating at 20% chance of a hike, that probability jumps to 80% for the October meeting. Day 2 of NAFTA discussions is taking place today and an ongoing sense of optimism continues, if sentiment were to turn sour Canadian dollar will be sold.
A 48 hour summit between the EU and Iran is an attempt for the two to try and “work around US sanctions and maintain relations with each other” –Bloomberg. President trump is Now blaming China for Undermining efforts to pressure North Korea, the president has also mentioned that military exercises “will be far bigger than in past if Nuclear talks Stall “-BB
Dollar index unchanged on day and more importantly still trading below 95 handle. The Pound after yesterday’s excitement/rally due to optimism about Brexit deal sits unchanged. Euro little changed as German CPI and Import data a bit weaker Unemployment data in line fail to cause much excitement. A minor Risk Off theme to the trade as all European Bourses are in the red, Spoos -5 handles, Shanghai closed lower by 1.14%,Copper -.5%and Goofy palladium +1% after closing higher by 2.56% yesterday, down 1% on Tuesday and +1.59% on Monday. Crude oil/Brent spread back in focus as it has closed lower, wider the last 4 days and trading lower again today.
Economic Calendar shows PCE core as Highlight, Canadian GDP will get some attention but any excitement will have to come From Trump Comments below find his daily schedule
POTUS Schedule:
11:30 am ET POTUS receives his intelligence briefing – closed to press
4:20 pm ET POTUS departs the White House en route to Joint Base Andrews – open to press
4:40 pm ET POTUS departs Washington, D.C., en route to Evansville, IN – open to press
6:15 pm ET POTUS arrives at Evansville Regional Airport – open to press
6:35 pm ET POTUS arrives at Old National Events Plaza – open to press
6:40 pm ET POTUS hosts a roundtable with supporters – closed to press
7:40 pm ET POTUS delivers remarks at a joint fundraising committee reception – closed to press
8:25 pm ET POTUS delivers remarks at the Make America Great Again Rally – open to press


Why oil is higher

From Bloomberg:

  • A jump in product demand to the highest in ayear — led by record gasoline consumption — countered lower refinery runs in this week’s EIA report. Crude imports from the7 OPEC countries tracked by the EIA fell to the lowest since March.
  • Crude exports rose w/w by 624k b/d to 1.78m
  • Total product demand measured on weekly basis up by 596 b/d
    w/w to 22.1m
  • record gasoline consumption for week



A few bullish graphs

MTUM,  momentum  Factor ETF,that tracks large /mid cap stocks exhibiting relatively higher momentum characteristics


Amazon a stones throw away from $2000 every new high a  new all time high


And Of Course NDX up up and away


Brent Calendar spreads rallying as World wide supply to tighten due to less Iranian exports


zz brent



EIA numbers bullish

Energy complex was already leaning bullish for EIA numbers and weren’t disappointed.larger draw in oil,Higher exports and gasoline demand  +4% and Distillate demand +9% solidifying the bullishness of numbers.The  bullishness of the Oil storage  number is tempered due to 1 mln bbl draw down in west coast

Lean Hog Comments via Allendale

African swine fever in China is not likely going to impact pork demand significantly from the US. First reaction by Chinese consumers is they will become skeptical of the quality and reduce consumption. Chinese pork supplies are burdensome, as it is in the US, causing poor grower profit margins and a possible liquidation environment, creating more pork. Demand could come from other pacific rim countries if they shut off buying from China.

Lean hog futures in recent days provided signals that it would like to rally but runs into heavy selling. The October futures contract has key support at 50.17, the most recent low. A close below that level would suggest retest of contract lows.