MACRO MORNING NOTE October 05, 2017

SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland. 

Global stocks in all regions are mixed this morning ahead of today’s economic data/tmrw NFP, along with an abundance of Fed speakers. Here is the shortlist:

  • 9:10am: Powell
  • 9:15am: Williams
  • 10am: Harker
  • 4:30pm: George

Stress in Asia continues for the third month, with new stress forming in Europe, due to the Catalonia and Spanish political crisis. Dow Global  is probing a R3 monthly.

In the United States, Trump is dealing with the Puerto Rico bond crisis of 2035s hitting an ATL. Trump made comments of a debt jubilee, which would be detrimental to Wall Street.  After all, Trump is the king of bankruptcy….

Southeast Asia stock markets traded cautiously on Thursday ahead central bank speakers in the United States and Jobs data on Friday. Australia rocked overnight markets with the country’s retail turnover falling -60bps in August—with forecasts of rising +30bps. This is the worst decline since 2013 according to RTRS. The heaviest declines were in food retailing, cafes, restaurants and takeaway food services, household goods and clothing, footwear and personal accessories. This is a warning that the consumer is weak amid a housing bubble in the country. The ASX200 finished flat with the financial sector weighing down the index. Elsewhere, Japan’s Nikkei225 closed mixed at 20,628.49 with a USD/JPY 112.510 -21bps, as traders long Yen. China and South Korea markets continue a holiday session.

“It seems markets are treading water ahead of [U.S. nonfarm] payrolls on Friday given more than usual uncertainty over the numbers due to possible hurricane effects,” NAB’s Strickland

Overnight, the dollar traded slightly higher +13bps to the midpoint of the 93 handle, ahead tomorrow’s NFP.

“Stronger than expected U.S. data helped the greenback shake off its initial weakness to end the New York trading session much closer to its highs than lows,” Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said in an early-morning note. Lien added that the greenback “should actually be trading much higher given the unexpected strength of the non-manufacturing ISM report.”

A peak into European markets, where regional stock markets were mixed. The IBEX35 recovered +136bps on the session following -10% correction move since May. ECB minutes turned out to be a dud this morning with the EUR/USD failing to move much at all. The minutes did not disclose any new market generated information. Yields in the Eurozone continue lower following the EUR/USD into the lower 1.17 handle.

US Event Calendar

  • 8:30am: Initial Jobless Claims, est. 265,000, prior 272,000; Continuing Claims, est. 1.95m, prior 1.93m
  • 8:30am: Trade Balance, est. $42.7b deficit, prior $43.7b deficit
  • 9:10am: Fed’s Powell Speaks on Treasury Markets and the TMPG
  • 9:15am: Fed’s Williams Speaks at Community Banking Conference
  • 9:45am: Bloomberg Consumer Comfort, prior 51.6
  • 10am: Factory Orders, est. 1.0%, prior -3.3%; Factory Orders Ex Trans, prior 0.5%
  • 10am: Durable Goods Orders, est. 1.7%, prior 1.7%; Durables Ex Transportation, prior 0.2%
  • 10am: Cap Goods Orders Nondef Ex Air, prior 0.9%; Cap Goods Ship Nondef Ex Air, prior 0.7%
  • 10am: Fed’s Harker Speaks at Workforce Conference
  • 4:30pm: Fed’s George Speaks at Workforce Conference

In the United States, economic data and central bank speakers will be plentiful. The main event will be tomorrow’s NFP figures. The reflation trade has stalled as oil probes the 49 handle. S&P futures are mixed.

In Japan, gov’t yields are declining with the USD/JPY chasing lower. The Nikkei225 stalls out on the 20,605 handle.

Weakest links in Asia is Australia and Singapore

Weakest link in Europe is IBEX35

Relative Rotation Graph this week for US industries

Relative Rotation Graph this week for US sectors

Rotations out of consumer staples, real estate, and utilities

What the recent reflation trade looks like in the United States

GSCI (weekly) precious metals, industrial metals, and energy index have stalled

WTI monthly/weekly compression 43-50 mature the high volume node prepping for major imbalance.

SPX500 monthly stair stepping to R3 2578 in blowoff top

UST10Y monthly/weekly >2.311 = further upside. <2.311 = reversion back to pivot 2.136

US Dollar monthly/weekly >92.87 = 94.78 projection. <92.87 = 87.50 projection