MACRO MORNING NOTE MAY 11, 2017
SPX Down, DXY Flat, WTI Up
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
Asian stocks are mixed with HKG33 flat and SCHOMP +30bps. Over in Europe, regional equity indexes were undecided. On the other hand, US equities are under pressure, which started in the Asian session. US markets are still digesting the turmoil in Washington, D.C. after Trump dismissed FDI Director James Comey. In recent sessions, the reflation trade seems to have briefly returned with the dollar probing into the midpoint of the 99 handle and UST10Y 2.398 level. Global sentiment has been boosted due to a reversal in WTI now probing the 48 handle following bullish draws in the latest EIA Report. Alastair Williamson thinks “the energy rally could be short lived amid the global oil glut”. Stock Board Asset’s Baltimore Desk is still worried about deflationary trajectories in commodities as China clamps down on leverage. With the global credit impulse going negative for 2017, this could mean slower economic growth heading into the second half of the year, as well as lower commodity prices.
US Event Calendar
- 8:30am: PPI Final Demand MoM, est. 0.2%, prior -0.1%
- PPI Ex Food and Energy MoM, est. 0.2%, prior 0.0%
- PPI Ex Food, Energy, Trade MoM, est. 0.2%, prior 0.1%
- PPI Final Demand YoY, est. 2.2%, prior 2.3%
- PPI Ex Food and Energy YoY, est. 1.6%, prior 1.6%
- PPI Ex Food, Energy, Trade YoY, prior 1.7%
- 8:30am: Initial Jobless Claims, est. 245,000, prior 238,000; Continuing Claims, est. 1.98m, prior 1.96m
- 9:45am: Bloomberg Consumer Comfort, prior 50.9
EIA Report prior sessions showed a draw across the board with production tick up in crude. According to @TheRapidanGroup’s Fareed Mohamedi tells an audience yesterday that the oil market might not rebalance until 2020. Could see prices in low $30s/b in early 2018.
Fear is building in CREs
Fear is building in Auto Loan Bubble
Wholesale Inv. to Sales, Motor Vehicles & Parts SA similar to 2009
Commercial Bank Loan Creation Y/Y % Change in US is declining
Global Credit Impulse heads negative in 2017. Expect slower economic growth and lower commodities on the near term horizon.
SPX500 verse Asia shows a major negative divergence in SCHOMP. SPX500 verse World <VT> shows US markets starting to lag. SPX500 verse Europe starting to lag Europe. SPX500 verse Americas shows South America lagging.
Overnight Asia and Europe have not been a fan of reflation trade nor SPX500, but have been bidding WTI higher.
Overall reflation trade has stalled post March 2017 during the rate hike.
In the 7am est. hour, we’ve noticed that global equity indexes are being dumped.
Right now entering the 8am est. hour, the US is selling SPX500, UST Yields stalling, and dollar surging. Over in Europe, EUR/USD, regional equity indexes, and regional yields are declining. In Japan, USD/JPY is probing lower into the 113 handle with an after hours Nikkei225 lower. In China, CN02Y/CN10Y with HKG33 positively diverge CNY/USD and SHCOMP as the PBOC cracks down on leverage.
Most important understanding in Forex this morning is dollar demand surges with GBP/USD liquidation into 1.28 handle. Selling in the SPX500 is being forced via USD/JPY probing into the 113 level.
Major commodity indexes under severe stress due to China’s crack down on leverage rolling into commodity deflation.
UST10Y monthly/weekly R1 2.63 resistance with downside reversion pivot 2.13. Current counter trend with 2.45 resistance 100sma monthly.
WTI monthly/weekly R1 55 resistance with pivot 44.81 reversion. Major line in sand is 320sma monthly 47.60.
US Dollar monthly/weekly R1 103.74 resistance with pivot 99.26 spring up. Re-entered bracket.
SPX500 monthly/weekly R2 2398
<CRB> monthly/weekly pivot 181 downside break with projection S1 165