MACRO MORNING NOTE DECEMBER 21, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland
Global stocks are mixed on this pre-market Thursday morning, considering the passage of a comprehensive tax bill in the United States. Most of Asia closed mix overnight with a bright spot in Greater China stock indexes.
Starting in Japan, the Nikkei225 closed mixed -.11% at 22,868 after the BOJ held monetary policy steady, a move that most analyst priced in. The BOJ said the economy was “expanding moderately,” while price rises remain significantly below the BOJ’s 2 percent target. Simply, the BOJ is a failed experiment of debt and nothing more.
In South Korea, the KOSPI declined 1.72% to close at 2,429. Losses on the index were spurred after tensions increase on the DMZ with North Korea. Tech stocks declined as well, Samsung Electronics declined -3.42% and Hynix fell -3.87% EOD.
In Australia, the ASX200 closed lower -.25% at 6,060, with declines in financial services and natural resource companies. Also to note, the sub-index for real estate investment trust declined 1.27%, as the country suffers from a housing bubble that is in a late stage.
Over to China, where the Hong Kong’s Hang Seng advanced +.64% and the Shanghai Composite increased .40%. According to Xinhua, Chinese leaders attended a key annual conference overnight and said the stride towards structural reforms will be evident in 2018. The country said it will focus on quality growth rather than the pace of growth. This is another way of saying a slowdown is coming to China.
Stateside, House Republicans voted for a second time to pass a tax plan on Wednesday, after their first vote on the bill ran into a procedural snag. The Senate had approved the bill in the early hours of Wednesday. The bill now goes to President Donald Trump’s desk to be signed into law, although the exact timing of that ceremony is unclear. Trump on Wednesday said cutting corporate taxes was “probably the biggest factor” of the legislation and that it was “above all else a jobs bill.”
S&P500 futures have been fairly mixed over the past few sessions, as the development of tax reform is passed by Congress and now heads to President Trump’s desk. Meanwhile, UST yields have surged with the UST10Y probing 2.47-2.50, meanwhile, the dollar sinks to 93.35.
As government bond yields soared, the risk parity crowd had no other choice to sell stocks. As what we saw prior session, the deleverage: sold bonds and stocks at the same time… (AQRIX bad day? or a stockcharts miss print?)
“We’re at the tail end of the tax reform rally, but if the U.S. government avoids a shutdown and President Trump signs the tax bill into law, we could get a final push before profit taking takes over,” Kathy Lien, managing director for FX strategy at BK Asset Management said in a note, adding that dollar/yen could touch the 114 handle on that.
In commodities, WTI is mixed at 57.94 after climbing prior session. Gold and Silver are flat on the session, but still, maintains a bid produced by a rate hike prior week. NatGas is lower -.79% to 2.625 after a nasty fall in recent weeks, following a much warmer winter season on the East Coast for the Dec time period. Copper has mysterious dipped under 3 and now ramped to 3.19 in 2-weeks as a hockey stick save by a large entity was seen. For the most part, precious metals, industrial metals, and energy have stalled EOY.
US Economic Calendar
US Corporate Calendar
How long will we re-price Trump taxes over-and-over-again?
International HY and US HY continues to stall
SPLV Low Vol starts to develop stress
Valuations are stretched, but you’re told it’s “justified”
Stocks over 50 for small, mid, and large cap cannot break above Oct highs
S&P500 sub-sectors stocks over 50. Biggest take away is XLU smash
TLT starting to show signs of stress on a weekly timeframe, head and shoulders pattern developing?
Interest rate senstive real estate industry falls under pressure
2s10s monthly death cross followed with a hammer?
UST10Y about to surge to 3?