MACRO MORNING NOTE June 19, 2017
SPX Up, DXY Flat, WTI Up
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
Global stocks advance in most region with S&P futures +30bps constructing a V-shape recovery from Friday morning. Regional stock market indexes in Europe have advanced on the backs of a Macron victory in the French parliamentary elections. In Asia, regional Chinese stock market indexes were risk on with the PBOC keeping the daily CNY fixing unchanged. In Japan, the Nikkei225 is higher with a USD/JPY probing the 111 handle. Overall, central banks have primed global stock markets to start the week despite various terrorist attacks over the weekend most notably in London.
There will be no economic data releases in the United States, although two Fed speakers Fed Dudley 8am and Fed Evans 7pm. On Wednesday in Japan, the BOJ is planning to release minutes from April, along with speeches from Kuroda and Iwata.
Brexit negotiations are set of rollout today in Europe. The Sterling is muted in the high 1.27 handle. In terms of currencies, the dollar is flat in the low 97 handle attempting to find a floor. The EUR/USD continues multi-session resistance in the high 1.11 handle. USD/JPY is constructing lower highs form last Friday’s mega-run 108 to 111 handles.
In commodities, oil futures surge to the 45 handle despite concerns about a supply glut continuing. Last week, the US adds yet more rigs in an oversupplied market with production ticking up as well. New details released by Jodi about Saudi Arabian oil data as follows:
- Crude exports fell by 0.226min BPD M/M to 7.006min BPD in April
- Crude Stocks fell 3.927min BBLS TO 263.927min BBLS in April
- Domestic refinery crude throughput rose 0.390min BPD to 2.651 min BPD in April
- Crude output rose by 0.046min BPD M/M to 9.946min BPD in April
For the most part in US, reflation trade continues to decline. WTI surges to the 45 handle amid an oversupplied market. SPX500 continues to levitate ignoring the trend in the reflation trade.
Over in China, HKG33 and SHCOMP are in risk on mode to close out the first session of the week. Meanwhile, CN10Y and CNYUSD are negative diverging. What’s rare to see in China are the inverted 3s/10s and 5s/10s curve.
In Japan, multi session reflation of the Nikkei225 and the USD/JPY. Reflation starting stalling in Japan.
Multi-session risk-on in EU equity markets with regional Gov’t 10Y yields slope upwards. EUR/USD in an upward trend probing the high 1.11 handle. Odd yield out is the IT10Y negative diverging the rest.
The overall reflation trade in the US is deteriorating, meanwhile widening the gap verse the SPX500.
ATL and NYFED GDPNow 2Q17 forecasts deteriorating.
Finally, showing the critical role of “excess liquidity”, in this context through loan creation (or the lack thereof), Deutsche Bank presents the following six charts, showing their impact on everything from global momentum, to inflation, to sentiment surveys such as PMIs. What is clear is the the next leg in both regional and global economies is clearly lower.
Yield Curve, Fed Funds, & SPX500
DXY monthly/weekly pivot 99.26 unlocking overhead with downside projection of S1 94.78. Compression on a weekly signaling a release of energy near term.
UST10Y monthly/weekly pivot 2.13 reversion completed with compression on a weekly. Using 2.13 as line in the sand for the next projection. Stay tuned.
WTI monthly/weekly pivot 44.78 reversion completed with overhead supply unlocking from upper 1/2 of P-Shape distribution. Trend is heavy prepare for an OPEC headline of engineered event usually occurs on these technical sells. If no headline and pivot 44.81 is rejected prepare for deeper prices in a quick fashion.
CRB Index monthly/weekly pivot 181 unlock with downside projection S1 165.
SPX500 monthly/weekly R2 2398 continues to hold support with no upside targets as of yet.