Just voted upon ” House Democrats adopted a resolution adopting procedures that will govern the public portion of their impeachment inquiry into President Donald Trump, but no Republicans joined them in supporting the measure despite requesting the probe be conducted transparently” via Rollcall alerts

Risk OFf continues helped by an Ugly Chicago PMI number which was near a 4 year low,Some idiosyncratic features such as GM strike and Boeing issues may have skewed number to downside. Spoos down 17 handles,nasdaq -24 handles , loses could be bigger if it wasn’t for the Strength in FB and Apple still basking in the glow of good earnings.Treasuries rallying hard and Curve flattening for the Second day,December rate cut probasilites 10% higher then yesterdays close via BB.

Copper possibly experiencing a bit of End of Month profit taking after trending higher the entire month, copper -2%. Crude following risk lower -1.6%,Nat Gas -1.45 % . Dollar looking at a 4th consecutive lower close trading off .3%.

From mizuho “Today is the last day for many funds to sell their energy shares. Many mutual funds have today as their fiscal year end, so it makes sense that there is some tax-loss related activity. Worst performing sector is energy today. “

Morning 10-31

News Driving the Risk Off move this morning:

(BN) China Said to Doubt Long-Term Trade Deal Possible With Trump

   (Bloomberg) — Chinese officials are casting doubts about reaching a comprehensive long-term trade deal with the U.S. even
as the two sides get close to signing a “phase one” agreement. In private conversations with visitors to Beijing and other
interlocutors in recent weeks, Chinese officials have warned they will not budge on the thorniest issues, according to people
familiar with the matter. They remain concerned about President Donald Trump’s impulsive nature and the risk he may back out of
even the limited deal both sides say they want to sign in the coming weeks.

China is manufacturing PMI 49.3 vs f/c of 49.8   Adding to the risk off sentiment

Yesterday’s Fed Decision and press Conference resulted in less rate cuts being priced by markets, December 20 % March 2020 40% Chance of a cut. More bad news regarding trade talk and these probabilities will go up. European Sovereign 10 year yields lower on Day Germany -5bps, bonds higher by  a handle and ultras +2 handles 10 year yield roughly 10 bps lower then  this week’s highs. Payroll data tomorrow is e expected to show monthly job gain of 80k, bank of America is expecting 25k. The Just finished GM strike will be a factor but regardless tomorrow’s number leaning towards a bond friendly outcome. IFR news talking about a handful of big block trades in the treasury complex helping with the bid.

 Spoos – 6 handles 9 handles off spike down lows, Dax -.2%  Cac -.3% Oil following spoos lower Gold +.8% ,Silver +.9% and Copper -1%. Month end activity and any Trump China tweets will drive flows. Today the   House of Representatives vote on the public phase of Impeachment inquiry, it will pass along party lines.

Earnings”

AAPl everyone still loves Iphones   Stock +2% earnings and forecast better then expected

Facebook also better then expected stock +5%

Cushing

Oil held at Cushing increased some 7 mln barrels,19% since Mid September,graph below…

…This could be reason that Cl calendar spreads and CL-Brent spreads are trending lower as of late.

Cl Z-F spread

Morning 10-30

Markets in A holding pattern, Spoos 6 handle range awaiting Fed decision, GDP, ADP, and Bank of Canada meeting. GDP expected to be 1.6% down from 2% last quarter, ADP expected to show job gains of 110K down from 135K last Month. Crude Oil trading sideways, yesterday’s API numbers leaned a bit bullish let us see what EIA has to say later today. Fed expected to deliver a hawkish Cut, Deliver 25bps cut and indicate they are on hold for a while, Good luck with that. Bloomberg out with a study showing the press conference causing more market volatility then the Fed statement so all eyes on Powell at 1:30. Besides monetary policy, be listening for all repo comments. After market closes both apple and Facebook to report earnings and tonight at 8:00 China PMI.

FOMC commentary from Morgan Stanley

Weak profit growth… US economic growth has lost its lead, which was always to be expected when a fiscal expansion is not accompanied by a rise in economic growth potential. In retrospect, the 2018 economic boom may be classified as a textbook example of a sugar rush economy coming at the cost of weakening the long-term trade-off between growth and inflation. An economy printing higher costs (inflation) for each unit of economic growth will not progress within a favourable environment for corporate profits. It seems the US has entered this stage. This means, in the absence of productivity gains, it will be the US bond market determining the equity market outlook. Higher bond yields and rising equity prices may not co-exist for long. One or the other will have to come down.

…leaves markets at the mercy of bond yields: Hence, today, all eyes will be on Fed communication. A 25bp rate cut is baked in, otherwise the Fed would have used its communication channels before the blackout window to change market expectations. What will be important is its forward guidance. With capex weak and inflation surprisingly subdued, the Fed may have little incentive to sound less dovish in its forward guidance, as this would lead to an unwanted tightening of financial conditions by catapulting rates and yields higher, with the yield curve undergoing a bear flattening move. Should the Fed – against our expectations – turn hawkish, we would not hesitate to sell the rally in USDJPY.

News:

  • Futures Exchange Reins In Runaway Trading Algorithms– CME takes emergency measures to combat surging data volumes in Eurodollar futures https://www.wsj.com/articles/futures-exchange-reins-in-runaway-trading-algorithms-11572377375
  • UK will have a Dec 12 election as MPs act to end Parliamentary ‘stasis’-Guardian
  • Exclusive: U.S.-China trade deal might not be ready for signing in Chile: U.S. official– “If it’s not signed in Chile, that doesn’t mean that it falls apart. It just means that it’s not ready,” the administration official said. “Our goal is to sign it in Chile. But sometimes texts aren’t ready. But good progress is being made and we expect to sign the agreement in Chile.”( Reuters