MACRO MORNING NOTE September 05, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
As a whole, Dow Asia, Composite, and Europe have stalled on a monthly timeframe into September. U.S. markets are coming off an extended holiday weekend with S&P futures mixed following the latest geopolitical escalation in North Korea. Pyongyang conducted their sixth overall nuclear test and the first since President Trump took office. This comes at a time where Pyongyang sent a missile over Japan, which has freaked out the international community. Overnight, Japan made preparations for evacuations from South Korea if war breaks out. In more wonderful news overnight, North Korea is said to be moving an ICBM for the preparation of launch. The threat of a pre-emptive strike from the West seems likely by the day, as developments continue to escalate. The rhythm here is a push for war, especially by Western economies, who are in sub par economic growth patterns and high debt/GDP.
S&P futures opened lower on Sunday evening -53bps following the North Korean episode. Since then, traders are attempting to buy the dip to close the gap. Dip buyers came online into Asia but faded the reflation trade and S&P futures into the European start. European traders ripped WTI higher +100bps around the 3:45am est. hour. Stocks in all regions are mixed following geopolitical tensions on the Korean peninsula.
Asian markets were cautious overnight despite positive Caixin services PMI as North Korea denoted a nuclear bomb over the weekend. Starting in Japan, the Nikkei225 declined -.63% still rejecting the 20,000 to close 19385.81 with USD/JPY in the low 109-handle. South Korea’s KOSPI index reversed from slight gains closing -.13% despite it’s neighbor to the north exploding a nuclear bomb. Down under, Australia’s ASX200 closed mixed at 5706, due to lower utilities, but offset by precious metal stocks. Over to China, where stock markets as a whole closed mixed following both Caixin and mfg PMI for August beating expectations. Stabilization in China’s economy is of utmost concern ahead of the 19th Communist Congressional meeting in October. In Central Bank news, the RBA left the cash rate unchanged at 1.5% on Tuesday, as widely expected.
Stock markets in Europe are higher to mix following North Korea’s nuclear bomb detonation over the weekend. The CAC40 is flat, DAX +.38%, and the UK100 -.27%. The EUR/USD fades from the 1.19 handle overnight trading in the high 1.18 level with minor dollar strength this morning. Basic resource stocks in the region were to the upside on positive Chinese data with copper soaring the 3.16 spot. Ahead of the emergency UN meeting overnight, South Korea had reported that it had seen signs the North was preparing to launch more missiles in the near future.
US Economic Data
- 10am: Factory Orders, est. -3.25%, prior 3.0%; Factory Orders Ex Trans, prior -0.2%
- 10am: Durable Goods Orders, est. 1.0%, prior -6.8%; Durables Ex Transportation, prior 0.5%
- 10am: Cap Goods Orders Nondef Ex Air, prior 0.4%; Cap Goods Ship Nondef Ex Air, prior 1.0%
- 7:30am: Fed’s Brainard Speaks on Economic Outlook and Monetary Policy
- 12:30pm: Fed’s Kashkari Speaks at University of Minnesota
- 1:10pm: Fed’s Kashkari Holds Townhall Event in Minneapolis
- 7pm: Fed’s Kaplan Speaks in Dallas
Commodities: GSCI Metals (monthly)
Dow Global Index (monthly)
In China, the stabilization policy is in full swing ahead of the 19th Communist meeting in October. Regional equity indexes plus yields are higher in a linear fashion..
Over in Japan, the Nikkei225 and USD/JPY continue to ratchet down on a multi session basis. Regional yields whipsaw overnight due to geopolitical tensions in the Koreas.
In Europe, regional yields are lower as traders head into bonds amid geopolitical tensions in the Koreas. Regional equities levitate ignoring all global risks. EUR/USD attempting a reversal in the high 1.18 handle following a minor overnight dip. Brent Oil surges with WTI around the European cash start.
In US, reflation trade fades at the European start, along with SPX500. WTI surges near the 48 handle +100bps attempting the prop the SPX500…
Hurricane Irma is now Cat-5 heading to F.L.
Back to back hurricanes targeting 2/5 largest states by GDP..
SPX500 ignores all…
SPX500 (monthly) BB%B rejects overbought range…