MACRO MORNING NOTE October 06, 2017

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

It’s jobs day in the United States and here is the short list of analyst projections:

  • Hugh Johnson 153k
  • Standard Chartered 150k
  • UBS 125k
  • JPMorgan 100k
  • Bank of America 80k
  • Citi 70k
  • Wells Fargo 55k
  • Goldman Sachs 50k
  • Deutsche Bank 50k
  • SocGen -25k
  • Jefferies -45k

Analyst and the Federal Reserve have stated today’s job data will be distorted due to the hurricanes in September. World stock markets are mixed in the overnight along with S&P futures levitating at record highs ahead of jobs data. The reflation trade has certainly sparked up with the dollar probing into the 94 handle, after interest rate probabilities in the US for Dec’17 surge to 86% for 125-150bps target range. The UST10Y probes above 2.370 reaching highs not seen since June. Here is the short list for US central bank speakers today: 

  • 9:15am: Bostic
  • 12:15pm: Dudley
  • 12:45pm: Kaplan
  • 1:00pm: Bullard

Tropical Storm Nate, which has left 22 dead in Central America, is expected to become a hurricane over the weekend—headed for US landfall on Sunday. 

Volatility suppression remains in full swing thanks to the Federal Reserve.

US reflation trade surging on rate hike odds for December increase

Over to Asia, where in Hong Kong, the Hang Seng probed it’s best level in a decade ahead of the 19th Communist meeting this month. As we have explained, the PBOC will not allow volatility in regional markets around the twice a decade meeting, as China plans global dominance 5-10 years out. The Nikkei225 closed mixed still above the 20,000 mark with the USD/JPY testing the 113 level.

“It is difficult to say more about the raging optimism in U.S. equity markets,” said Jingyi Pan, a market strategist at IG Group. That includes six consecutive record closing highs for the S&P 500, the longest such streak in 20 years, and Wall Street’s fear gauge — the CBOE Volatility Index, or VIX — finishing at a record low Thursday.

Leading the pack in Asia on Friday was Australia, due to base metals such as copper advancing. The ASX200 rose +70bps due to commodities and financials gain. Volume in Asia remains muted with China and South Korea wrapping up the week long holiday.


Over in Europe, equities traded flat, with underperformance back in Spain’s IBEX35 ahead of next Monday’s meeting for independence of Catalonia. The political crisis in Spain has sent the EUR/USD to the high 1.16 handle, as traders gave the dollar upside into the 94 level. Traders in the Eurozone are muted ahead of the US jobs data. The Pound spikes this morning as the political crisis in UK builds after May says she has ‘Full Support’ of her cabinet.

In commodities, WTI has basically round tripped all of yesterday’s gains now probing in the low 50 handle. Copper surged +250bps prior session to the 3.05 level now fading from highs. Precious metals including gold and silver are flat and have been fading four weeks from dollar pressure.

GSCI precious metals, industrial metals, and energy have stalled

Dow Asia and Dow Europe remain in stress

CRB and BBG commodity indexes indicate symmetrical triangle in play

UST10Y compression major move pending

Commodity/Stock Ratio

US Non-Fin Corp debt % GDP

Corporate America is spending more than it’s taking in

Growth in the working age segment is also key important for equity market performance in the long run. Notice the divergence?