Fang and A few Graphs

Merrill lynch Fang Index on Pace for  one of best days  in  Months,very well could be end of  month adjustment instead of buying opportunity of lifetime.Reminder that Apple reports tomorrow after the close.

fannn

Europe’s version of “FAANG” is not made up of tech stocks but of  luxury goods companies as it is used as A proxy For Chinese demand.I use the term FAANG in regards to A  trade that is heavily invested in by majority of Funds,not necessarily a group of tech Stocks.percentage  Change histogram below,index had best day in 6 months.

luxx

SPX  & RTY back in harmony after a brief period decoupling,Overlay daily chart below:

rtys

rate hike Expectations creeping higher again,measured by 2y1m forward rate

rate

 

 

 

Employment Cost index

Department of labor

EMPLOYMENT COST INDEX – September 2018

Compensation costs for civilian workers increased 0.8 percent, seasonally adjusted, for the 3-month period ending in September 2018, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.9 percent and benefit costs(which make up the
remaining 30 percent of compensation) increased 0.4 percent from June 2018.

eci

Maybe  if the ECI can break above the  .8% ceiling Inflation might start to become a bigger worry.

Morning 10-31 redux

Gap and Go has held For European bourses, as Earnings from Facebook, French Companies L’Oréal and Sanofi enticed buyers to step in and hold the gap overnight. Cac + 2%, Dax and Spain’s IBEX +1.2%, Italys MIB though little changed. Nasdaq +1.18%,Spooz +.6%.Overnight market’s did not trade higher in a straight line as gyrations caused by Weak Italian Employment data and Firm EZ CPI were evident.. Bank of Japan left current monetary policy unchanged as expected, But tweaked the monthly purchase plan of 1 and 5 year bonds. The Yuan trading up a bit vs Dollar as the overnight repo rate surged the most in 4 years (month end stuff) Stock markets look good today but looking at the Monthly performance the Global MSCI stock index headed for worst month in 6 years.

 

(BB)Stronger stocks=Weaker Bunds and treasuries, a Risk on Theme so far today. Bunds -20 ticks, BTPs +38 all European sovereign Spreads vs Bunds a bit tighter today. Dollar index steady to lower after touching new YTD high yesterday. API reported a bigger build in Oil then expected, both gasoline and Distillates drew down more than forecast, Oil rallied on data. Tight range in copper sitting little changed. Disappointing China PMI numbers weighing a bit on metals.lead -1.8%..Gold -.5% and Silver -1.18%

A few interesting Notes from Bloomberg
The trade war is taking its toll on China’s economy. The official manufacturing PMI slowed more than forecast this month and new export orders slid to the lowest since 2016. The gauge fell to 50.2 from 50.8 in September, approaching a contraction. The services gauge also slipped. The data showed a broad deceleration, with growth unlikely to bottom soon, Bloomberg Economics said.

 

The Bank of Japan bought 867.6 billion yen ($7.7 billion) of exchange-traded funds tracking the nation’s shares in the month through Oct. 29, the biggest amount since the BOJ began buying the investments in 2010. That’s almost double September’s total after the BOJ slowed purchases the previous month following a tweak to market operations in late July. Japan’s Topix index is headed for its worst month since the height of the global financial crisis in 2008.

Calendar:

7:30 Employment cost Index top tier data point

DXY

Spot dollar index touching new 2018 highs and  highest  levels since Jun 2017.GBP,British pound testing 2018 lows of 1.2662  but has not breached them just  yet.Bank Of England holds policy meeting Thursday where no change in rates is expected and likely tone of post meeting Statement will be  one of Caution as Brexit deal still not set.

Crude oil Closed  A dollar off  session lows as the Z8/Z9 spread rallied for most of day settling higher and more importantly back in  slight backwardation.Comments from US state department

“STATE DEPT REITERATES GOAL TO BRING #IRAN OIL IMPORTS TO ZERO U.S. REITERATES IT WILL WORK WITH COUNTRIES ON IRAN OIL CUTS

Approaching 2:00 CST  Roll up Roll up and place your bets on  where the  nasdaq will close. remember what happened yesterday   afternoon after a  very large Negative Tick value,Spoos rallied 40+ handles into close.

Update

Choppy, nervous  Stock market again this morning not a suprise.IBM did announce an Additional $4B stock buy back which briefly  lifted the major indices.Hope is that more buyback announcements will follow and possibly give  stock markets a sustained boost.Consumer Confidence beat  Expectations,Job metrics continue to be strong and respondents boosted  inflation expectations by .1%  a solid number,But a survey number and not a “hard  data ” number.I am keeping one eye on the russell  as  trading pattern has been sideways last 4 days not  trending down,maybe if it breaks higher it can pull other indices with it.

Dollar index +.3% one reason  is due to tomorrow’s Increase in the Amount that Fed balance Sheet unwind moving to $30B from $24B. Historically, per Morgan Stanley Dollar rises on SOMA day’s so maybe “buy the rumor sell the news” move in DXY

Morning 10-29

Economic News:
Disappointing GDP report from Italy, per Reuters “Data Showed Italian Economy had ground to a Halt” GDP reading was lowest since Q4 2014. BTP HAS tanked on Report, Bunds rallied, as weaker growth does not give the Populist government much evidence that Country can run a high deficit and expect economic growth to pay for it. Euro Zone GDP also missed expectations y/y 1.7% vs. f/c 1.8% down from last quarter’s 2.2%. Euro lower not a surprise as Europe’s growth may have peaked. Spot Dollar Index, DXY trading up towards 2018 highs, have not seen the usual strong negative correlation with Commodities, but that may change if new 2018 highs are scored. Euro trading 1.1349, the 2018 lows are 1.1301. Individual German States CPi released intermittently overnight are pointing to national reading that likely will beat Consensus, this has weighed a bit on Bunds ,capping some of the strength seen overnight.
The new “trade idea” discussed last few day Buy spoos on the Close and Sell on open likely to be a winner again today. Yesterday Afternoon say a massive amount of selling pressure with 15 minutes left in the day as Spooz took out prior day’s lows with big volume only to quickly turn around and rally 40 handles hard into close. This morning European Bourses mixed Dax, Mib and Cac a bit lower after gapping higher then trading/chopping lower. Exact opposite in Bunds gapped lower then eventually filled that gap. Currently bunds 10, BTPs only down 106 ticks yields +8 bps, off worse levels of day. Spoos +14 handles, Nasdaq +32 handles
Oil trading down this Morning 1.2% in Brent .8% in WTI.More production from North Sea and Comments from IEA director saying, “OPEC cuts may not be right course of action amid loss of production from Other OPEC members.” WTI Z8/Z9 calendar trades in Contango for first time this year, a bearish Sign. Copper trading lower for six the consecutive day, any thought or hopes of a squeeze have not materialized just yet.45 SPX company’s report earnings this morning and Facebook reports after the close.
Notes:
• Trade/tariff comments from president Trump regarding China is a reminder that this fight has not ended
• The Yuan traded to 6.9774 this morning, closer and closer to the very important seven handle.
• BP higher on day after adjusted earnings beat consensus by $1B –Bloomberg
• Rio Tinto shrugged off worries about China saying mood is good and order books filler for copper and iron ore due to stimulus-Bloomberg
Calendar:
9:00 Consumer Confidence
No Fed speak as members move into blackout period before next week meeting

WTI weakness

very Simple metrics that help determine if you want to be a buyer or seller of WTI .Obviously plenty more goes  into making this decision but  a Nice overview of Supply and 1 portion of demand.

Z8/M9 CL   calendar spread  trend is down and trading negative=Supply ample

zm

Weekly EIA storage  report show 5  consecutive weeks of Builds  of Oil In storage

oil su

Cl/brent spread continues to trend lower  as pattern of lower highs remains

clll

Rbob crack touching 3 year low,Seasonality does not explain all of this drop

fron crck