MACRO MORNING NOTE January 03, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland
S&P futures are higher in the premarket with /ES +17bps at 2,697, ahead of the latest Federal Reserve minutes that could provide rate hike trajectories for 2018.
The positive trading mood has rolled over from 2017 into 2018 as Central Banks around the world continue extraordinary measures to boost asset prices. Asia and European stock markets rose on Wednesday after a mixed Tuesday.
Global stocks advance despite geopolitical concerns in North Korea. China has been reported in shifting military assets to border cities on the Tumen River on the North Korean border. Overnight, the risk of an ICBM launch by Kim was greatly increased, according to American sources. More geopolitical concerns in Iran, where 22 people have died in protests against the government. It seems that it’s U.S. intelligence psyop, where electronic information warfare was waged, and it hints at us, we’re just that much closer to physical war.
Today’s economic calendar for the United States:
Today’s main event will be the Dec 12-13 FOMC meeting released at 2 pm. Traders will look for hints at interest rate trajectories and more clues on the economy’s health.
Reuters in the overnight pitches the idea that 2018 will be another year of ‘synchronized global growth’. As we note, the narrative has been created after trillions of dollars from Central Banks were printed targeting all types of things, but the biggest driver was the target of commodities.
MSCI’s index of global stocks, which tracks shares in 47 countries pushed to new records as Central Banks continue to jam asset prices higher, despite the gap forming in wealth inequality around the world leading to adverse political environments. Europe was on the right foot this morning adding +.30% to the pan-European stock index.
Reuters further notes that traders see “very muted downside risk,” which in our opinion, the timing of the linear system break is hard because of OMO via CB, but when it does break, it’ll be quick and swift.
The one thing traders don’t want to hear this year is that the ECB’s extraordinary bond-buying program could be ending. That would disrupt the narrative of everything is awesome and lead to asset readjustments in price.
MSCI index of Asia Pacific ex. Japan advanced .40%, in addition to yesterday’s 1.40% gap up. The breadth of the global markets is hype driven by Central Bank easy money policies, which at some point will reverse in a very big way. The problem is liquidity, as many assets have been pushed to extremes, the underline auctions lost participants because price discovery is absent mind when it comes to fundamentals.
The US reflation is mixed this morning with a dollar at 92.06, but UST Yields dipping after EU open. The UST10Y prints at 2.453. In commodities, WTI rips higher to 60.65, as EIA will report this morning on holiday hours.
In the Eurozone, EUR/USD and yields are starting to dive, but that hasn’t been all too bullish for regional equities.
Over in Japan, the spread between the Nikkei225 and USD/JPY widens.
GSCI precious metals and industrial metals, along with CRB (monthly).
Copper/Gold Ratio verse UST10Y
When it comes to a commodity bottom there is still no confirmation via CRB/SPX Ratio.
SPX500 premium print verse the ribbon
Global Stocks euphoria
What is the negative divergence in BDI signaling?
SPLV Low Vol undwinding
SPX500 valuations are “justified”
Underneath market is weak
Real Estate Ratio is weak
UST10Y about to break out?
2s10s and Libor