MACRO MORNING NOTE November 14, 2017

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

Global stock markets are mixed this morning with S&P futures lower -17bps. Strong German growth data overnight night drove the EUR/USD to a three week high to 1.17266. Regional equities in Europe are mixed with DAX -25bps to 13069, IBEX35 flat at 10044, and UK100 flat at 7425. In response, the reflation trade in the United States is under pressure with the dollar at 94.25 -28bps on the session and UST10Y at 2.393. Sentiment in China was disappointing after Chinese industrial and retail figures came in flat. Regional markets in Hong Kong and mainland China were mixed.

A pullback in commodity shares dragged the ASX200 -60bps to 5987 on Tuesday, while other regional markets were flat to mixed. Copper has struggled this morning -73bps to 3.102 and still cannot break a high timeframe resistance level at 3.19. Oil is weaker -42bps to 56.47 as a descending triangle is forming since Nov 06 after Saudi turmoil. After days of selling, the Nikkei225 was able to find stable ground +50bps with a USD/JPY at 113.670. In Korea, the KOSPI was down -20bps, led by declines in tourism shares.

Eyeing the yield curve investors are watching the flattening in US might be an a sign of a global slowdown. Tom Porcelli, chief U.S. economist at RBC Capital Markets, said history suggested a flatter, and particularly an inverted, yield curve was “compelling as an early warning sign” of recession.

Taking a look at futures this morning natural gas is getting smoked -237bps to 3.092. Gold and silver are under pressure despite a weaker dollar contributed by strong German growth data sending EUR/USD higher. WTI futures hit resistance and risk reversal after the news flow in the Middle East of turmoil subsides. Dow, Nasdaq, and S&P futures are all lower this morning.

Trump finished up his Asia tour and is headed back to the United States. If you’ve noticed, Trump hasn’t tweeted about the stock market since Nov 07 and it has stalled since. When he returns the debate over the tax reform will resume considering the prospects of corporate tax cut relayed until 2019— by the way the debt ceiling debacle is next month. Central Bankers gather in Frankfurt with panelists Federal Reserve Chair Janet Yellen, the euro zone’s Mario Draghi, and Japan’s Haruhiko Kuroda. S&P Global Ratings declared Venezuela to be in default after it missed to interest servicing payments on its debt.

US Event Calendar

  • 8:30am: PPI Final Demand MoM, est. 0.1%, prior 0.4%; Ex Food and Energy MoM, est. 0.2%, prior 0.4%; PPI Ex Food, Energy, Trade MoM, est. 0.2%, prior 0.2%
  • 8:30am: PPI Final Demand YoY, est. 2.4%, prior 2.6%; Ex Food and Energy YoY, est. 2.2%, prior 2.2%; Ex Food, Energy, Trade YoY, prior 2.1%

BBG Headlines <24hrs

  • Energy stocks are the winner of Europe’s earnings season
  • Gold’s future path looks distinctly rocky
  • The forks and fights behind bitcoin’s turbulence
  • Ikea counts the cost of Brexit
  • Japanese university graduates make far less than Americans
  • Global real rates since 1311
  • These women are taking on a traditionally male industry

Dow (monthly): Dow Composite and Dow Europe show the most signs of stress. Dow Global forms bearish shooting star above R3.

Taking a look at the US this morning: US Dollar imbalances to the downside in the lower 94 handle with UST yields fading. Oil is lower to the midpoint of the 56 handle with geopolitical headlines subsiding from Middle East. S&P futures are lower.

Strong EUR/USD sends regional 10y yields declining in Europe with lower equity markets.

Surging CN02Y and CN10Y has produced resistance in regional stock markets in China.

Overnight ramp in USD/JPY brought no buyers into Nikkei225.

Prior session industry declines..

International ETF declines…

US commodity declines

Dow Theory signals massive divergence

World Stocks <FAW> (monthly) Stall

EEM/SPY Ratio (monthly) nearing golden crossover

2s10s verse XLF

Domestic High Yield and International High Yield under pressure

NYAD Cummative (daily <25sma

Small, Mid, and Large Cap stocks S&P over 50ema (daily) unwinding


Risk Parity Fund <AQRIX> (monthly) bearish shooting star

SPX500 monthly/weekly R3 2578 resistance

US Dollar monthly/weekly S1 94.78 rejection