MACRO MORNING NOTE January 02, 2017

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

Asian stock markets closed higher in the new year as traders ignored Wall Street’s weak 2017 close. Greater China stock markets advanced with Hong Kong’s benchmark hitting a 10-year high overnight, as yields are steady ( CN10Y 3.890 & CNY02 3.838). Mainland markets saw increases following a strong print of the Caixin mfg PMI at 51.5 verse expected 50.6. The Shanghai Composite advanced 1.27% to 3,349 and the Shenzhen Composite closed up 1.05% at 1,1913. Financials and energy led the way.

Markets in Japan, New Zealand, and Thailand were closed for holidays. But the USD/JPY is lower -.39% at 112.161, as the dollar tumbles to 91.83 handle. Nikkei225 futures are lower -.88% to 22,640.

In Australia, the ASX200 declined .06% to 6,061. Telecommunications and resource stocks helped offset the losses in health care and financial stocks. In South Korea, the KOSPI advanced .49% to 2,479 as technology stocks gained while autos declined.

Geopolitical instability over the holiday week, as per CNBC,

North Korean leader Kim Jong Un had declared his country a nuclear power during his New Year’s Day address on Monday, but also acknowledged that he was “open to dialogue” with the South, Reuters reported. Last week, South Korea seized a second vessels suspected of violating sanctions by smuggling oil to North Korea.  

Stock markets in Europe declined in the first trading day of 2018, while S&P futures are steady +.28% at 2,679 and markets in Asia-Pacific advance. The DAX -.38% at 12,813, IBEX35 -.18% at 10,026, and the UK100 -.49% at 7,656. Stronger EUR/USD probing 1.20656 could be the culprit of declining equity markets in Europe.

NatGas futures round tripped overnight’s gap up following. Copper’s +13% move from December 2.94 to 3.30 has hit resistance this morning. Industrial metals and commodities as a whole have been ramped up to justify the Central Bank induced ‘global synchronized growth narrative’. Meanwhile, gold and silver are breaking to the upside, as the dollar tumbles below the 92 handle.

It’s important to understand how we got here:

Taking a look at UST Yields

Central Banks next move is the attempt to boost commodities with a lower dollar narrative.

Dollar pressure came from Asia and Europe

The reflation trade is starting to unwind with a weak dollar

DXY 3box PF risks a major downside break


CRB Commodities index watching the neckline for a bullish trigger

The theme of various desks in Baltimore is that commodities are cheap relative to stocks.

SPY 3box P&F long tail up could be met with a new signal of a high pole reversal.

Winter weather will continue with a weak La Nina registering…

East Coast threat for WED-THUR

The pivot shifts lower on the dollar, which could further indicate a lower trajectory or a downside continuation.

UST10Y holding the demand line

WTI 60-62 heavy area of resistance. We’re still waiting for the unfair high to short.

The narrative is that commodities are rebalanced and it’s time for a countertrend.. We’ll see if that is the case very shortly.

SPX500 pivot shifted up at R1 2,711 resistance