Daily Notes 083010
Daily Notes 083010
Note: Monday is a bank holiday in London and the markets are closed today. Markets are open in the US, but trading will be light in this week.
Top of the Wire
BOJ Emergency easing backfires
UK markets closed for bank holiday
NIkkei up strong 1.76%
Europe up .9%
Oil rallies above $75/bbl
Gold steady at $1237/oz
Overnight News
AUD HIA New Home Sales m/m -7.0% vs. -5.1%
AUD Company Operating Profits q/q 18.9% vs. 5.9% eyed
NZD Trade Balance -186M vs. -28M
NZD NBNZ Business Confidence contracts to 16.4 vs. 27.9 prior
Event Risk on Tap
USD Core PCE Price Index m/m expected at 0.1%
USD Personal Spending m/m expected at 0.4%
USD Personal Income m/m expected at 0.3%
Last night all eyes were on the yen as the BOJ held an emergency meeting that resulted in an expansion of their QE program. The amount is somewhere between 20-30 trillion yen. The market response was less than impressive and the yen dropped to 85.00.
BOJ Shirakawa returned from Jackson Hole early and convened a special session to address the yen’s appreciation.
This move will be complemented by more fiscal stimulus that is going to be announced Tuesday. The market is not impressed with these actions which are seen as late to the party.
I have not been an avid trader of the yen lately. Specs have been selling the daylights out of the USD/JPY. My guess here is that the pair’s strength or weakness will be set by the BOJ but by what is happening here with the US economy and dollar.
One thing that the currency markets are telling us is that there is risk of a double dip recession. For all the talk on both sides of the issue, the market is screaming volumes about what it thinks.
This week, we have an onslaught of numbers that include: Chicago PMI, ISM Manufacturing and the all important Non-Farm Payroll on Friday.
I have been a buyer of Oil and Natural Gas lately and saw some commentary earlier about record supply and that crude oil could see $200/bbl or less.
I don’t know about this but one thing it does show is that demand is lessening and may be a cause for concern done the road.
Daily Notes 082610
Daily Notes 082610
Top of the Wire
German Consumer confidence hits 2 year high but EZ money supply sputters
All eyes on Jackson Hole meeting
Everyone looking to divine what comes next for Fed
Nikkei up .69%
Europe up more than 0.5%
Oil at $73/bbl
Gold runs to $1242/oz.
Overnight Notes
AUD CB Leading Index m/m 0.1% vs .0.4%
AUD Private Capital Expenditure q/q -4.0% vs. 2.35 eyed
CHF Employment Level 3.97M as expected
EUR M3 Money Supply y/y 0.2% vs. 0.4% forecast
EUR Private Loans y/y 0.9% vs. 0.4%
GBP CBI Realized Sales n/a
Today
USD Initial Jobless Claims expected at 483K
Last night was a quiet one. The word meandering comes to mind. The euro and aussie dollar spend the early part of the European session giving up their Asian session gains.
The stock markets in Asia followed through on the upside continuing the bounce coming out of New York.
Europe opened to a bout of profit taking.
On the economic front the data was mixed with German consumer confidence rising to a two year high, but money supply figures showing that growth in the financial sector was still sputtering. The GFK Consumer sentiment reading hit 4.1 versus a forecast 4.0. In the underlying components, business expectations rose to 46.6 from 36.8 the month previous while income expectations jumped to 36.0 from 21.0. On the negative side the willingness to buy remained unchanged indicating that consumers are still cautious, but that attitude will likely improve if overall economic conditions stay at current levels into the fall.
The market’s focus on monetary policy will shift from ECB to the Fed as North American session opens and all eyes turn to the symposium at Jackson Hole, Wyoming. Bernanke is scheduled to speak tomorrow and currency traders are speculating as to whether the Fed chief will signal further QE steps to stimulate the US economy. A double dip is looming and this is exactly what no one in the government wants.
Today’s weekly jobless claims will be the focal point for the market and if they do not ease from their current high of 500K the pressure on US monetary officials to ease further will mount as markets start to panic about a possible US contraction.
Despite the frustrated rallies in the high beta currencies overnight, the US dollar is vulnerable to more sell offs as the market’s reaction to risk aversion flows begins to wane and traders start to consider the underperformance of the US economy.
8:30AM is the witching hour.
Alaska’s dark horse Senate candidate Joe Miller, the tea party insurgent who drove incumbent GOP Sen. Lisa Murkowski to the brink of defeat in Tuesday’s Alaska primary, talks about the conservative prescription for an America he believes has already gone bankrupt.
Incumbent GOP Sen. Lisa Murkowski’s stunning setback in Alaska sends a powerful message to political insiders in both parties: Former Alaska Gov. Sarah Palin is now the GOP’s clear No. 1 kingmaker.
PresBo will address the nation from the Oval Office next Tuesday to mark the end of U.S. combat operations in Iraq. White House press secretary Robert Gibbs announced the address in a statement and Twitter post on yesterday. The speech will mark only the second address Obama has made from the Oval Office.
Vice Liar Biden is stepping in it again by saying that Republican assertions that small businesses would suffer if all of the expiring Bush tax cuts aren’t extended are a “bunch of malarkey.”
Biden said Wednesday that few small businesses would benefit if the tax cuts are extended for everyone. Doing so, he said, would cost $700 billion, worsen the nation’s already dire financial situation and, in his words, is “just bad economic policy.”
This moron, who is proud to be a politician, should get out and meet a few more folks. Instead of bashing business owners, he should roll up his sleeves and find out what they really do make this country what it is.
This is important — Small investors withdrew a staggering $33.12 billion from the domestic stock market during the first seven months of the year, according to The Investment Company Institute.
“For a lot of ordinary people, the economic recovery does not feel real,” Loren Fox, a senior analyst at Strategic Insight, a New York research and data firm, told The New York Times.
“People are not going to rush toward the stock market on a sustained basis until they feel more confident of employment growth and the sustainability of the economic recovery.”
If the pace of this market exodus continues, ICI notes, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, except 2008.
New Recommendation
I am adding to 2 positions today.
I am adding to TBT and VALE.
TBT is shaping up to be the trade of the decade because for the first time since 1962, the dividend rate on the S&P 500 is not greater than the 10yr. US Treasury Bond.
VALE – is the best in class in Brazil and I want to own as much of it as I can.
Daily Notes 082010
Top of the Wire
No event risk in the US today
RBA’s Battelino “must remain alert to risk of inflation”
Nikkei slips nearly -2%
Europe flat to negative on open
Oil drops to $74.50/bbl
Gold off the highs to $1230/oz.
Overnight
NZD Credit Card Spending y/y 2.7% vs. 4.4%
NZD Visitor Arrrivals 1.4% vs. 0.7%
AUD/USD drops below .8900 as risk aversion outweighs Battelino’s hawkish comments
GBP/USD moves towards 1.5500 due to risk selloff
EUR/USD breaks below 1.2800 as risk aversion picks up
I think today is going to be a quiet one – barring any surprised. The event calendar is empty and risk aversion is going to be the theme heading into the weekend.
Yesterday’s weak US data which showed a 500,000 jump in jobless claims continues to worry business. Also the surprising contraction in the Philly Fed data did not help matters.
The Aussie dollar was pushed under .8900 by risk flows. I have been trading the Aussie dollar every day this summer and find it to be a good commodity trade.
Even the comments by RBA Deputy Governor Ric Battellino didn’t shake the market up. Here’s what he said to the Moreton Bay Regional Council. Mr. Battellino stated that, ““History tells us that inflation can be a problem during resources booms, and while there are grounds for thinking it will be less of a problem this time than in the past, we need to remain alert to the risks.” Adding, “It is reasonable to expect that further growth lies ahead.”
I take this to mean that the RBA is not done tightening credit and may raise rates sometime in the next quarter if the global demand for commodities sustains the current pace.
Today is an options expiration Friday and that will dominate trade later in the day. As summer wanes, everyone will be heading out early to take in what’s left of summer.
I am making 2 trades today adding to 2 positions – one long and one short. Members should check the board to see those trades.
Daily Notes 081910
Top of the Wire
UK Retail Sales much stronger than forecast at 1.1% vs. 0.4% eyed
GE PPI hotter than forecast at 0.5% vs. 0.2% eyed
Nikkei up 1.32%
Europe reverses gains -0.5% in early trade
Oil above $75/bbl
Gold trades to $1230/oz.
Overnight Notes
JPY All Industry Activity Index 0.10% vs. -0.30%
NZD PPI Input q/q 1.4% vs. 0.6%
CHF Trade Balance 2.89B vs. 1.82B
EUR GE PPI 0.5% vs. 0.2%
GBP Prelim Mortgage Approvals 47K as expected
GBP Public Sector Net Borrowing 3.2B vs.5.2B
GBP Retail Sales m/m 1.1% vs. 0.4% forecast
Event Risk
USD Unemployment Claims expected at 479K
USD Philly Fed Manufacturing Index expected at 7.2
USD CB Leading Index m/m expected at 0.2%
The British Pound recouped Asian losses after a strong Retail Sales report. The boost came from World Cup spending.
The global soccer tournament ran from June 11 – July 11 positively impacting demand at the front of the month. Demand for non-food items gained 1.8% but food sales actually declined by 1.0% on the month – their sharpest drop in more than a year and half as analysts attributed the fall off to rising prices. Overall it is difficult to draw any meaningful conclusions from July’s data given the one-off impact of World Cup activity.
The euro is running into problems again. Overhanging Greece problems are the culprit.
‘Der Spiegel’ has an article suggesting that the austerity measures enacted to contain Greek spending are having a negative impact on the Greek economy and may trigger further problems if the country is unable to mount any type of economic recovery.
The yield on 2 year Greek bonds has jumped to 10% in the last couple of days.
Today, our calendar shows the LEI and Philly Fed data as well as the weekly jobless claims data. The jobless numbers have disappointed the market the past few weeks by remaining well above the key 450K level. Today the market anticipates a small decline to 478K from 484K the week before. If the data comes in better than expected, it would bode well for euro and Aussie dollar.
In my view, the jobless claims are the more important number. If we have a jump in claims, then the stock market is likely to get hammered.
I am sitting tight. Something tells me that the market is going one way or the other in a big way soon. I am concerned about the double dip which I have forecasted for some time. I am also concerned about the Iran nuclear situation. If they have the capability of going live, who’s to say what they are capable of doing.
It’s going to be interesting as we close out the year. I think the stock market is going to be rough going. Currencies on the other hand are the place to be.
