Originally published by AxiTrader
Welcome to my daily Markets Musings.
This is essentially my little black book, the diary of market moves I’ve been writing for myself since April 1988.
It’s not supposed to catch everything – just the things that help me build the fundamental narrative I need around what’s happening in the markets I watch, and which then readies me to take the technical signals when they come.
Feedback always welcome
Greg
Market Summary
(Bitcoin) is going mainstream.
Whether it’s the FT, Business Insider, Reuters, Bloomberg, or CNBC that’s the big story across markets overnight as the CME announces plans to launch a cash-settled Bitcoin future in Q4 this year. That’s huge for Bitcoin as it will drag in big investors – so it rallied again as a result and is at $6,351.
On other markets stocks in Europe and the US are higher again this morning after more solid earnings and some solid consumer confidence data in the US. At the close the S&P 500 is up 0.09% at 2,575, the Dow Jones Industrial Average is a similar amount at 23,377 and the Nasdaq 100 is doing what it is want to do and has risen another 0.34% to close at a new record of 6,248.
Those moves, and the rallies in EU stocks, have emboldened SPI traders who have added 26 points overnight after yesterday’s 10 point loss on the physical S&P/ASX 200 index which saw it close at 5909.
On forex markets the battle between the US dollar and euro continues. Euro bears had an excuse last night but didn’t take it, so EUR/USD is stable at 1.1650 with the US Dollar Index also unmoved day on day at 94.54. The pound has had another cracking night though on positivity toward Brexit talks – it’s up 0.6% at 1.3283. Other than that the US dollar is mostly strong with the yen (USD/JPY 113.64) down 0.4% and the Swiss franc (USD/CHF 0.9971) off 0.3%. And it’s been another poor day for the commodity bloc. Weak data in Canada, the ban on foreign real estate buyers in New Zealand, and the weaker than expected Chinese PMI’s yesterday hurt each of the three currencies.
So this morning we have the Aussie down 0.35% at 0.7660, the kiwi at 0.6842, off 0.5%, while the Canadian dollar also lost half a percent with USD/CAD1.2894.
On commodity markets gold is lower down 0.5% to $1269. Copper is sitting at $3.09 and still looking pressured while oil’s rally continued with WTI up 0.4% at $54.38 and Brent up 0.7% to $61.32. Iron ore futures look like they have stabililsed around $60 a tonne.
On the data front the new month kicks off with a bang today. South Korean inflation and trade data along with a raft of Asian, European and America’s manufacturing PMI data. Of particular note traders will be watching the Caixin China manufacturing PMI in our timezone today. And of course at 5am tomorrow morning we get the result of the Fed’s latest meeting. No one is expecting any chance in rates or the taper but the statement from the FOMC will still be important.
Here's What I Picked Up (with a little more detail and a few charts)
International
- As noted above Bitcoin is going mainstream now that the CME has announced that it will be launching a cash settled futures contract in Q4. You can’t underestimate the potential impact of this move on Bitcoin prices, volumes, and interest. I say that because one of the issues with the product from a trading/investment sense for larger traders and investors has been the unregulated nature of the exchanges on which Bitcoin has been trading. We’ve all heard the horror stories of theft and hacking. But for investors to be able to trade Bitcoins in what big investors would see as the “legitimate” environment of the CME will give them more confidence in the integrity of the market and of Bitcoins.
- So this is an important step in the evolution of Bitcoin. But comments from Terry Duffy, CME president and CEO, that the move is a response to “increasing client interest in the evolving cryptocurrency markets” also reflects that there has been growing interest in the cryptocurrency. And on an editorial note that is the way I’m going to treat Bitcoin – as a currency. Hard to value, but easily priced and traded against other currencies.
- AxiTrader launched a USD Bitcoin CFD (BTCUSD) recently – here’s the graph showing the break above the recent high at $6100 and also how nicely it charts.
- When you are all done chatting about Bitcoin today make sure you read this interview in the AFR with BlackRock CEO Larry Fink. It is so rich in content on so many markets with links out to other stories. There are two key takeaways I wanted to share with you. First Fink noted that after the 19th Congress in China there is currently a level of uncertainty about the reform process and the slowdown that may cause in China. But he added that “I think his first five years have shown that the Xi Government has done very well in terms of navigating the economy and improving the quality of life for more Chinese. In theory, some elements of the society may have less rights, but on the other hand I would say the majority of society in China have done very well. I would qualify the Chinese leadership as one of the best leadership teams in the world”. SPOT ON.
- Secondly, on Australia, Fink said while “the biggest problem you have in Australia is the amount of leverage in the housing market” he doesn’t see a housing bubble. He explained “You have a housing bubble if your economy sputters, you have a housing bubble if you reduce immigration…If you allow immigration you have new entrants in society who are looking for housing. If you are now going to find ways to reduce immigration, which is the big issue in so many countries right now, you may have a change in housing valuations. Right now, I don't see that…Household debt is only a problem if household income rises slower than inflation and or you have rising unemployment. Over the last three years or I think the Australian banks have been pretty good at keeping a good loan to value ratios and low default rates." Again, SPOT ON.
- Brexit Minister David Davis said overnight that the UK and EU will be able to agree a “basic” deal on Brexit even if a trade deal ultimately fails. That reduced fears of a super hard Brexit and helped the Pound rally hard for the second day in a row against both the USD and the Euro.
- NZ Prime Minister Jacinta Ardern has fast-tracked legislation to ban foreign purchases of NZ property as she fights to make New Zealand property more affordable. Leaving aside the fact that this means either no rises or house price falls through time – and the consequent economic impacts of same – this is a deft move as she is doing it under legislation exempt from the TPP which is currently being negotiated as the 11 remaining members seek to get a deal done. The news certainly hurt the Kiwi yesterday though.
- You probably read yesterday morning that Chinese 10-year bonds had spiked as fears grew that the reform push in China would lead to deleveraging and economic problems for the world’s second-biggest economy. PBOC governor Zhou’s Minsky Moment perhaps. So the spike certainly caught the PBOC’s attention with China’s central bank injecting liquidity to take pressure off rising 10 year rates yesterday. It was the fourth straight day of injections, so it did take traders some time to get the message. But in the end 10’s stabilised at 3.89%. That’s a pretty good yield for China debt compared to other countries – just saying.
- A wall of worry for stocks? It seems that US fund managers still aren’t convinced about the market. Reuters reported this morning that, “US fund managers increased recommendations for bond holdings in their model global portfolio to a five-month high in October on expectations the current economic cycle is nearing its end”.
- DATAWATCH: US consumer confidence hit a fresh 17 year high in October data released overnight showed. The Conference Board’s confidence index rose to 125.9 from 120.6 in September and against expectations of a 121.5 print. That’s solid So too is the present conditions index which rose to 151.1 from 146.9 the previous month while consumer expectations rose to a 7 month high of 109.1. “Jobs plentiful” also hit a 16 year high at 36.3%.
Have a great day's trading.