MACRO MORNING NOTE August 01, 2017

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

Asian and European markets have advanced this morning after postive data from each respected region. Starting in China, where July Caixin manufacturing PMI printed 51.1 vs 50.4 advancing regional stock markets, such as the HKG33 (+135bps)  and SCHOMP (+60bps).

From DB’s Jim Reid Morning Note: “Staying with China It’s fair to say that consensus expects China’s economic growth to slow slightly in 2H, which is DB’s base case too. However, our China economists now see the risk to the H2 growth outlook shifting to the upside, in part driven by high frequency data that suggests land supply and auctions remained hot in July. With the land market this strong, the fiscal revenue in H2 will strengthen and support infrastructure spending”

In Europe, data showed July’s manufacturing basically unchanged with the flash PMI 56.6 v. flash reading 56.8. Regional stock markets CAC40 (+41bps), DAX (+52bps),  UK100 (+31bps) advanced. Growth in Europe is nothing to dance about but it shows a slight economic hope of a recovery. Nevertheless, the ECB has hinted at winding down its bond purchases, which would lead to economic turmoil in the region. In a round of new US-sanctions against Russia, it will push Europe and Russia further apart heightening geopolitical turmoil. On the subject of geopolitical tensions, North Korea appears to be the most likely area where a hot flare up could occur. Stay tuned.

The US economic calendar is full today with Personal Income and US Manufacturing PMI. Turning to FX markets, the dollar remains weak probing into the 92-handle. Turmoil in Washington continues to add downward pressure in the US-dollar where our projection is the low 92-handle. Commodities overnight have started to sell with WTI (-66bps) probing back into the 49-handle. Gold and silver are fading into August following some strength in the dollar but it’s nothing to dance about. Copper and Iron Ore are the highest in months, where it seems base metals have had a recent period of risk-on.

  • 8:30am: Personal Income, est. 0.4%, prior 0.4%; Personal Spending, est. 0.1%, prior 0.1%
    • Real Personal Spending, est. 0.1%, prior 0.1%
    • PCE Deflator MoM, est. 0.0%, prior -0.1%; PCE Deflator YoY, est. 1.3%, prior 1.4%
    • PCE Core MoM, est. 0.1%, prior 0.1%; PCE Core YoY, est. 1.4%, prior 1.4%
  • 9:45am: Markit US Manufacturing PMI, est. 53.2, prior 53.2
  • 10am: ISM Manufacturing, est. 56.5, prior 57.8; ISM Prices Paid, est. 55.8, prior 55; ISM New Orders, prior 63.5; ISM Employment, prior 57.2
  • 10am: Construction Spending MoM, est. 0.4%, prior 0.0%
  • Wards Total Vehicle Sales, est. 16.8m, prior 16.4m
  • Wards Domestic Vehicle Sales, est. 13.1m, prior 12.8m

WSJ:  The greenback’s decline is causing analysts to cut earnings forecasts for many overseas companies

World Stocks via <FAW> on a Point and Figure  3-box traditional has signaled an ‘Ascending Triple Top Breakout’. At some point, this breakout will throwback.

World Stocks ex. US/ SPY Ratio…. Warning for US stock markets at all time highs that global flows will be ex. US, if trend continues.

SPY/TLT Ratio has flatlined since April 2017..

Compression in <USHL5> will eventually lead to major move…

Libor 1-month rate verse European and US Banks

Total disconnect of 2s102s curve verse US financials. Perhaps, the decoupling in bank stocks is due to buybacks..

Weekly PMO signals SPX500 trend has stalled— waiting for major move..

Declining Dow Transports are being ignored..

2s10s and 2s30s yield curve continues a flattening trajectory signaling economic uncertainty in the United States.

WTI monthly/weekly pivot 44.81 support signaled with a countertrend probing into the 50 handle from the recent turmoil 55-42. Bearish crossover in weekly cloud with a 10sma 50.45 monthly resistance. Average fill price on short is 48.92.

UST10Y monthly/weekly the recent central bank induced 2.13- 2.40 advancement has been faded. Rotating around 2.13 pivot until the next major imbalance is the plan.

SPX500 monthly/weekly R2 2398 reverse polarity with the expectation of a blowoff top from R2 2398- R3 2578.

US-Dollar monthly/weekly S2 92 projection.