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

Asian stock markets were mixed on Wednesday after Wall Street declined, with traders anxious for the final votes on U.S. tax cuts expected Wednesday. Bond yields increase in China with CN10Y 4.008, and in Japan with JP10Y .055.

Japan’s Nikkei225 eked out a small gain, while the KOSPI and ASX200 were flat. S&P futures are modestly higher .26% with bond yields accelerated as the UST10Y probes 2.455. Meanwhile, the dollar had faded to the midpoint of the 93 handle with a failure to break 94.  European bond yields also increased in the overnight session.

Some analyst see tax reform boosting bond yields and perhaps popping the decades-long bond bubble.  As noted, the advance in yields did little to help the dollar, which traded lower to 93.41. WTI climbed overnight on a sizeable draw via API, as traders will focus on EIA this morning. Copper advances +.81% to 3.174 after it dipped around 12-5-17 forming the v-shape recovery. Gold and Silver have caught bids, especially after last week’s rate hike. Precious metals, industrial metals, and energy have all stalled in December.

Since 1Q16, the S&P500 has advanced nearly +50%, with the pricing in of tax reform being the recent energy to spur new highs. Some analyst think valuations are stretched and once tax reform is passed, it could sell the news. By no means are equity markets in the United States are cheap and that is a major concern even though low rates “justify” high valuations.

Upcoming key events:

  • The Bank of Japan meets on Thursday to set monetary policy.
  • Catalonia votes in an election Thursday that will pose a test for the Spanish region’s secession movement.
  • The US and UK publish updated estimates of third-quarter GDP.


Tax reform hype has sent UST yields skyrocketing with a lower dollar. S&P futures and WTI are elevated.

Regional stock markets in Europe decline with government bond yields surging

Surging bond yields in China, leaves stock markets mixed.

Surging bond yields in Japan has made the BOJ job just that much harder. JP10Y .10 is the panic point.

How much longer can central banks continue to force hype and hope in global markets?

HYG Stalls

SPLV Low Vol stalling

USHL5 linear systems tend to break

Risky Party stalling

Small, Mid, Large cannot break above Oct’17 highs

SPY/VIX Ratio at extremes

Sub-sectors of S&P500


Real Estate Ratio signals stress

2s10s death cross. Ready for a quick steeping?

Next target for UST10Y <tnx> 200SMA 33.16 ?