MACRO MORNING NOTE| Global Stocks Higher & Trade Wars
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland
Major stock markets in Asia-Pacific advanced on Thursday after a softer tone on tariffs was heard from the White House Wednesday, but, overall, the week has been volatile — sparked by fears of a global trade war. Stocks in the United States have been in a swoon since UST yields started moving higher earlier this year, which led to a deterioration in the low vol strategies complex; nevertheless, added pressure from President Trump’s proposed tariffs on steel and aluminum imports have left global stock markets uncertain at ATH. The primary driver for UST yields moving higher has been the twin deficit explosion.
Global trade wars do not happen in a vacuum, as European Union officials outlined planned retaliatory measures on American exports. The fear of trade wars even led to Trump’s pro-trade top economics advisor Gary Cohn resignation Wednesday. However, for globalists, the White House press secretary Sarah Sanders did say “potential carve-outs for Mexico and Canada” and other countries based on national security.
“There is a feeling that President Trump may be toning down his protectionism push,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Centre.
“Things may not turn out as bad as we feared before,” he told AFP.
Stock markets in Asia-Pacific inched higher on Thursday, with stocks gaining back some losses from the prior session. The Nikkei225 advanced +.54% to 21,368, while the Yen slightly weakened. Elsewhere, Soth Korea’s KOSPI jumped +1.3% to 2,433 on a strong push from technology. In Hong Kong, the Heng Sang moved higher +1.69% as all sectors moved higher. In mainland markets, the Shanghai composite added +.54% to close at 3,2877 and the Shenzhen composite closed higher +1.01% to finish at 1,856. In Australia, the ASX200 closed higher +.69% despite a commodity slump.
“[T]he potential for more, rather than less tariffs for China and Europe, remains the key risk,” said Rodrigo Catril, a senior FX strategist at National Australia Bank, in a morning note.
Markets also found “further reprieve after White House trade advisor Peter Navarro indicated he was not a candidate to replace the outgoing Gary Cohn,” Mizuho Bank economist Zhu Huani wrote in a note.
In the US, S&P futures were flat on the session after a rollercoaster week. WTI is lower on Thursday -.23% at 61.17, following a bearish API/EIA report this week. The dollar is holding steady in the 89 handle, but there is no confirmation of a higher timeframe reversal. The UST10Y has been bracketing from 2.79-2.95 — forming compression which indicates a significant move is nearing.
Today’s economic calendar:
Compression in precious metals, reversal underway in industrial metals, and a failed breakout in the CRB index.
For March, UST yields, S&P, and Oil have been positively correlating, but oil diverged from the party prior session after a bearish EIA report.
SPY sectors cannot breach ATH from Jan.
UST yields are basing here this morning with the UST10Y at 2.886.
SPX500 channel of death
SPX500: acceptance or rejection developing on R1 2536, then projection to either R2 or Pivot…
WTI weekly R1 61.25 starting to reject, if confirmed, then pivot migration to 54-handle.
DXY monthly S1 90.82 rejection
UST10Y bracketing with R3 2.97 ceiling
SPX500 daily rejecting 20/50ema
Libor rocketing higher but US and EU financials stalling
Heck of a run in transports
Credit is the causation for unemployment