MACRO MORNING NOTE DECEMBER 27, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland
There is an end of year rally in commodities for resource-linked stocks and currencies higher in Asia on Wednesday, as traders try to convince themselves the global synchronized growth narrative will continue in 2018.
After Tuesday’s dip, a recovery in Apple suppliers helped Asia markets, as it seems ‘btfd’ was in full effect. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.2% to its highest since late November. So far, the index has advanced +32%, as many world stocks trade at record highs.
Copper tagged a three-and-a-half year high at about 3.298 but has faded this morning -.40% at 3.261. The surge comes with high ‘expectations’ of copper demand from China in 2018. We challenge that narrative and warn of a possible slowdown.
Chris Weston, Melbourne-based chief market strategist at IG said, “if one is holding a long position in Brent, US crude, heating oil, copper, aluminum or silver, or exposed to these commodities through equity then your Christmas has just been extended a little longer.”
WTI probed 60 overnight following armed terrorist blowing up a pipeline at the port of Es Sider on Tuesday. How timely? At all cost, base metals and energy will be jawboned higher, because this is the lifeblood of the synchronized growth narrative. It was formed from Central Bankers printing trillions of dollars targeting commodities, stock, bonds, and so forth, however this time we believe it will fade quickly. Leverage in the system is high and now maintainable.
Japan’s Nikkei225 closed flat at 22,911 with gains in trading houses but exporters were mixed. In Korea, the KOSPI closed higher .38% at 2,436 with tech stocks ‘btfd’. In Australia, ASX200 closed flat with commodity-linked stocks offsetting losses.
In China, the Shanghai Composite lost -.93% at 3,274 with tech and healthcare the worst performers. Greater China stock markets were also in negative territory with the Hang Seng mixed. Profits from industrial companies rose 14.9 percent y/y, Reuters said, reflecting a slowdown.
The dollar has been soft -.28% at 93.04 with the expectation of a lower trajectory to 87.50. Traders have bought the dip in Gold and Silver with the GSCI precious metals index (monthly) forming a hammer.
US Economic Calendar
@EdValleeWx : Overnight European EPS trended back west with the weekend storm. Would imply at least some impact (snow) as it explodes off the coast. Subtle changes will have a big impact on the overall forecast, so stay tuned!
End of Year weakness in Major US Indexes
Weakness in tech, healthcare, and utilities.
Copper/Gold Ratio forcing UST10Y higher?
World stocks continue to print in a linear system since Central Banks printed trillions in 1Q16 to save markets. At some point, it will break.
SPX500 verse BDI
XLF ignores 2s10s curve, perhaps explained by buybacks….
International HY and HY stalled
<USHL5> compressed will breakout, but the question: which direction?
Internals of stock market are weak
How the entire global economy is propped up…..