MACRO MORNING NOTE August 28, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
S&P futures are flat this morning following historical flooding on Texas’s coast from Hurricane Harvey. Billions in economic losses are expected considering the state is the second largest GDP in the U.S.. Asia and Europe are mixed after last Friday’s Jackson Hole was a dud. The reflation trade in the U.S. remains suppressed with economic and political uncertainties flourishing with a dollar in the 92-handle and UST10Y 2.175.
The greatest impact of the storm has advanced /RB gasoline +4-5%, meanwhile WTI is down -80bps…
On the commodity front, base metals continue an upward move with copper and iron ore catching bids. A support in base metals is likely into China’s 19th communist congress event this fall. Precious metals including gold and silver are catching bids this morning with a weaker dollar. Gold nears the 1300 handle with silver probing above 17. Soft agri continues to show downside. Bitcoin compresses above 4000-4300 waiting for the next major move.
In currencies, the dollar hovers in the midpoint 92-handle following a non-event Jackson Hole. The EUR/USD has been dangerously strong probing into the midpoint of the 1.195 area fading in the last hour. USD/JPY is weaker after last Friday’s meeting sustaining the low 109 level.
Asian stocks closed mixed this morning with oil markets digesting the impact of Hurricane Harvey in Texas. Markets take Jackson Hole with Draghi and Yellen as a non-event last Friday—except for a weaker dollar and stronger EUR/USD.
Japan’s Nikkei225 closed flat at 19,499 earlier this morning with the noticeable rejection of 20,000. Across the Korean Strait, the KOSPI declined -.35% with more North Korean missile launches and threats of the weekend. On to China, where the Hang Seng Index was mostly flat, but the Shanghai Composite closed up nearly 1%. We believe the PBOC will continue to prop base metals and regional stock markets in China ahead of the 19th communist meeting this fall and continue the illusion that everything is awesome.
Last week, Yellen and Drahi provided a non-event at Jackson Hole. She argued that reforms implemented post-financial crisis have “made the system safer.” That could be possible in the past 7-8 years, but the illusion is running thin heading towards the debt ceiling with a political crisis in Washington…
Energy markets digested the impact of Hurricane Harvey hitting the U.S. Gulf Coast with WTI -80bps and /RB +4-5%…Shell and Petrobras are among the companies that have closed their refineries in the Houston area due to “severe weather,” including heavy rainfall and flooding. Refiners are reported to have closed as much as 10% of the supply chain. Details of the total damage are still unknown, but we expect it to be devastating for areas such as Houston.
Over to Europe, where regional stock markets are under pressure with a strong EURO to blame. Oil and gas products fall with traders asses impacts of Hurricane Harvey slamming into Texas. Considering Texas is the 10th largest GDP in the world, this could be a global problem. EURO strength is said to hurt exporters as it can erode revenue from overseas.
“Draghi didn’t repress the euro bulls at his Jackson Hole speech on Friday,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group. “This has been perceived as a green light for speculation that the ECB may announce the much-expected quantitative easing tapering plans [at the bank’s] September 7 policy meeting.”
Paradox: With The S&P At All Time Highs, US Stocks Suffer Longest Streak Of Outflows In 13 Years.. h/t zerohedge
Reminder of global rates…. We know easy money policies are starting to reverse..
G4 Central Bank balance sheet % of GDP appears to be topping in the near term..
American’s have too much debt leads to stagnate economy..
Monies are starting to shift on an ex. U.S. basis
Global markets have stalled
S&P HY Dividend Aristocrats Index monthly bearish MACD crossover
Small and Mid cap stocks breaking down first, then large cap.. Usually is a sign of market topping process, but what we know is a stabilizer fund can come in and force the next short cover..
ULTA and LB Brands rolling over signals consumer stress with SPX500 ignoring… It’s not as much Amazon that is a half truth from mainstream media, it’s because 96m people out of the workforce. E-commerce sales only account for 10% of all retail sales and Amazon is a fraction of that…
S&P Retail ETF could undergo a major clear. Seems like it’ll be dominos starting in the consumer space then vibrate out.