Originally published by AxiTrader
Market Summary (7.18am)
Not the most exciting night in global markets. But I’ve managed to pick up a few interesting things – so have a look below.
But in terms of moves, after a mixed day on Asian bourses yesterday Europe had a similarly mixed day although most indexes weren’t too far from home. And that’s the story in the US overnight with the big three indexes less than 0.1% either side of where they finished the previous session.
And that lack of direction has left futures traders and the SPI a bit nonplussed as we head toward another day’s trade here in Australia. After a disappointing day yesterday - where the early rally faded to a flat close - SPI traders have added just 1 point overnight.
That’s despite the strength in copper and the generally solid performance in mining shares over the past 24 hours.
That strength though has buoyed the commodity bloc and the Aussie dollar is the standout of the G10 with a 0.6% gain to sit at 0.7772 this morning. The Canadian dollar and kiwi are stronger as well, although less so. Of the bigger pairs the euro is up 0.3% and its sits around 1.19 while the yen is flat at 113.27 and the pound is at 1.3393. Thin markets certainly. But the commodity bloc moves might be instructive of where things might head in 2018.
On other markets, gold is still bid and is at $1288 now this morning. So much for the lack of interest in the yellow metal. Silver and palladium are also higher – both have gained 1% over the past 24 hours. Copper has stalled a bit and is flat day on day after surging earlier while oil has dropped back after yesterday’s surge.
US 10's are now at 2.41% and the 2-10 curve is at 50.9 points!!!
On the day the API crude data at 8.30am AEDT will be interesting as will Korean and Japanese retail sales and industrial production. Overnight its fairly quiet until we get to US wholesale inventory and trade balance data, the Chicago PMI and of course the EIA inventory and production data for US energy markets.
Here's What I Picked Up (with a little more detail and a few charts)
International ( everything is in this section till the new year)
- US consumer confidence dipped off recent 17 year highs in December with a print of 122 against expectations of 128 and from a revised 128.6 in November. That was a little disappointing which helped bonds and hurt the US dollar. But I’d point out that the survey also showed consumers view of their present conditions rose to 156.6 from 154.9. And Bloomberg reports consumers see increased expectations for wages rises. That’s the highest read for present conditions since 2001. So it’s another sign the US economy is doing well.
- As a result of the above US bonds, and their German counterparts, rallied a few points overnight with US 10’s at 2.415%. So far it looks like the 10’s will close the month and year inside this very long run down trend I’ve been discussing lately. But it remains something to watch in 2018.
- It may not have been Monday but the start of the week for most forex traders went as many Monday’s have recently - the US dollar weakened. Why that may be is difficult to know exactly. But it again highlights that the pain trade for 2017 continues to be long dollar’s. The yen was under a little pressure again and is at 113.6 while the euro went the other way and is back above 1.19 at 1.1920. The pound was also higher and is at 1.3396 this morning. But it’s the Aussie dollar, and it’s commodity bloc cousins the kiwi and Canadian dollar, which are the standouts over the past 24 hours. AUD/USD is up at 0.7777 this morning up 50 points from yesterday’s levels. The kiwi is at 0.7070 and the Canadian dollar is right down at the bottom of its recent trading box and is trading at 1.2639 this morning. 1.2589 is the level to watch though…it’s the 38.2% retracement of the USD/CAD rally. A break of that level would signal a move in the Canadian dollar – and I think, the US dollar. For the moment though the range – even my extended one – is the range.
- It was a disappointing day for local stocks yesterday amidst a mixed day of Asian market trade. Initially the ASX 200 lived up to expectations and was higher. But as the day lengthened the resolve of the bulls seemed to wane and the index ended back where it had finished last Friday at 6069, essentially unchanged. And that’s where we are this morning again with SPI traders having only added 1 point overnight. So it seems like we might have a range high in for the moment and my idea that the physical ASX market could run to 6,100 maybe even 6,150 (yesterday’s high was 6,092) might be a little optimistic.
- Something I missed last week on oil - and it’s important. BP (LON:BP) boss Bob Dudley said he doubts that shale oil can actually be the swing producer many of us think it can. The FT reported Thursday last week that Dudley said “there are cracks appearing in the model of the Permian being one single, perfect oilfield”. That’s a really interesting and important observation and as a result he added, “I don’t think [US shale] will be the perfect swing producer now. For a while, I was worried. But I think it is going to be less solid”. Just something to think about as we head into 2018. And something that suggests Dudley sides with OPEC not the Paris based IEA when it comes to the supply demand balance. Anyway, this morning WTI is down 0.75% at $59.52 and Brent is off 0.81% at $66.48. Something I should have written yesterday is that recently the day after a pipeline outage news breaks we see a reversal of the strength. Just something I’ve noticed.
- I know I don’t often write about Bitcoin in this note but I’ve taken an interest now that there is two-way volatility not just the one way moves we saw for a bit. I tweeted the heck out of it Friday and then did a technical update yesterday. The reason I mention that is because Bitcoin charts so nicely. And last night’s highs respected a little trendline I highlighted yesterday. Anyway, for what it’s worth my system is short. That’s not a guarantee it will fall. But a suggestion we could see last Friday’s lows once again. Oh, and Mohamed El-Erian has an interesting piece on Bloomberg saying this may be Bitcoin’s moment of truth.
- And before I go. Yesterday I wrote about Apple (NASDAQ:AAPL) and floated the idea that the FAANGS might actually come under a bit of pressure in the year ahead and we may see a sector rotation away from them in the year ahead. That’s especially the case because of growing regulatory scrutiny. I raise this again today so that I can highlight an article by John Kehoe in the AFR which makes this very point. Kehoe quotes Eric Goldman, a former Silicon Valley lawyer turned tech policy academic, who says the pendulum has swung hard against the likes of Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL). "For a long time the internet community was viewed as a saviour or part of the solution, whereas now they're seen as the enemy or the problem," he says.
- He also highlights what economist Ken Rogoff says about the tech giants being anti-innovation. “Any little innovative company, they buy it up,” Rogoff says. What’s interesting about that last comment is what’s going on in the craft beer brewing industry right now where the global giants are snapping up the little guys. The AFR has an article on Anheuser-Busch doing just that in Australia this morning. Big companies, little companies - it was ever thus. But my sense is that we will see the tech giants under a little pressure regardless in the year and years ahead. The pendulum has swung.
Have a great day's trading.