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MACRO MORNING NOTE FEBRUARY 20, 2017

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

After an uneventful Monday, global stocks were mixed as the United States was on Holiday. Connor Campbell, a financial analyst at Spreadex summed up yesterday:

The lack of news from the US likely didn’t help, with investors seemingly craving reassurances that the Dow Jones is willing to continue last week’s recovery before following suit. Regardless, the fact that the markets have turned negative on a day almost completely devoid of anything interesting news-wise perhaps gives an indication where sentiment currently lies.”

 

“The worry is that the US will follow this pattern when it reopens tomorrow, which would accord with the historical norm; another test of the lows, and a possible new low, before the ‘ball held underwater’ springs higher once again, catching everyone off guard.”

BBG’s most important headlines overnight:

  • Treasury 10-year yield touches 2.93%;
  • WTI oil rises above $62 Investor,
  • U.S. debt auctions of $258 billion

Overnight, bonds declined globally, with traders driving the UST10Y to 2.928 or up to four-year highs. The dollar surprising rebounded to the midpoint of the 89-handle from last week’s low of 88.26. WTI is lower -1.15% at 61.73 following a stronger dollar in the early 6 am est. hour. European shares are mixed this morning despite lower EUR/USD at the midpoint of the 1.23-handle, but the weakness in stocks can be attributed to a rollover in negativity or scarce liquidity from the prior session. Asia stocks were mostly lower on Tuesday heading into the Chinese Lunar New Year holiday.

The U.S. Treasuries market is under pressure overnight into Tuesday following a whopping $258 billion auction today sending the UST10Y 2.928 level. This has induced selling in equity futures with /es -.48% to 2,719 and a VIX to surge to 21 +10%. As we have explained before, the twin deficits in the United States is starting to be concerning for traders and could explain why the debt market is selling off along with the dollar. There will be a lot of treasury supply hitting the auctions this year coupled with a lower dollar policy, which is not the right policy. Making America Great Again is spending the money you don’t have, which we think, elevated yields could stifle the economy. This could lead to a dollar crisis…

BBG lists key events scheduled for this week:

  • The Federal Reserve will release minutes on Wednesday of its Jan. 30-31 meeting, Janet Yellen’s last as chair, where officials kept the rate unchanged.
  • Fed policy makers speaking this week include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic. Cleveland Fed President Loretta Mester is among speakers at the U.S. Monetary Policy Forum in New York City.
  • Companies announcing earnings this week include Walmart, Home Depot, Glencore, and Barclays.
  • Chinese markets reopen on Thursday.

Updated Central Bank balance sheet figures shows that overall there is no tapering.

Is the 35-year party nearing an end?

All bank credit at commercial banks rolled over with <WLSH5000>, will this indicate a slowdown in 1Q/2Q?

South Florida economic conditions <0. Bad Omen signaling for stock markets….

Via @OccupyWisdom

Does the year 2000 and 2007 ring any bells? As the household net worth (purely debt) as a % of disposable income (“wealth effect”) gets above 600%, savings rates seem to drop sub-5% in unison; then net worth dissipates rapidly. 2018 has the largest divergence in modern history.

Silver compression…

SPX500 .618%-Fib resistance