Welcome to my daily Markets Musings.
You’ll see things are different from now on. That’s because the full note was approaching 2,000 words some days and I’m breaking it up into a number of reports on the Axi Blog each day now.
That way traders can subscribe to the Axi Blog easily and then cherry pick the yarns and markets of interest
Feedback always welcome
Market Summary (8 am Wednesday September 12)
Markets are waiting on the announcement of the next tranche of US tariffs on Chinese goods. But it was the Chinese that rattled markets a little last night with the announcement that they were seeking WTO approval to impose US$7 billion in sanctions on US goods over non-compliance with a dispute initiated by China in 2013.
It’s a kind of arcane plan which could take years to work through. But it certainly caught the eye of market watchers. Not so much US stock traders though who were more interested in the recovery in tech and the big surge in oil prices which helped drive the energy sector.
So at the close the S&P 500 is up 0.37% to 2,888, the Dow has risen 0.44% to 25,971 and the Nasdaq 100 is up 0.81% to 7508. Within that 0.81% index move however are some very big individual gains for stocks like Apple and Netflix…among others. Europes stocks, for the most part, missed the memo with the DAX down 0.13%, the the FTSE off 0.8%, Milan down 0.31% but in Paris the CAC was 0.3% higher.
As I guessed in my Australia Today piece yesterday it was turnaround Tuesday for the ASX with the first rally in a week seeing the 200 index up 38 points, 0.6%, to 6,179. SPI traders are a little more circumspect though and have knocked 12 points off overnight. Certainly the miners were mixed globally last night but energy might do okay today.
Indeed on commodity markets, the rally in crude has been spectacular. But in many ways it’s the move in copper which is most remarkable with a massive liquidation of around $300 million in positions (121 million pounds) in a three minute window. knocking the good doctor for six. But it’s back at $2.60 this morning down just 0.34%. That’s solid. Back to oil then and the Hurricane(s) bearing down on the US and apparently renewed concerns about supply disruptions saw prices spike close to 3% and Brent now sits at $79.50 while WTI is at $69.25 up close to 3%. Gold is still at $1195 while Bitcoin is down 1% at $6,240.
To forex then and the USD was getting pummelled at one point with Euro up at 1.1643 and the Pound up at 1.3086 before a little flash crash in Sterling saw it back under 1.30 very quickly before recovering. UK employment and labour data last night was fairly positive for the economy as wages growth rose to 2.9% and as Mark Carney agreed to stay on. As it stan this morning Euro is at 1.1595 – flat day on day – while Sterling is flat as well at 1.3026. USDJPY is higher though with stocks and yield differentials at 111.56, up 0.42%.
For the commodity bloc the big news this morning is the breaking news NAFTA might be getting closer to a deal. Apparently the Canadians are prepared to discuss dairy. The result is a rally in the CAD which has seen USDCAD fall from a high of 1.3174 to 1.3072 as I write for a CAD gain of 0.7%. The Aussie, which had been knocked from its highs as Euro pulled back is a little higher and just in the black now at 0.7116 for a 0.05% gain. The Kiwi is at 0.6518, down 0.1%.
Now for the potentially huge story of the week and weeks ahead. US rates are climbing again – slowly, but rising. The 2 year Treasury is at 2.75% and the 10 year Treasury is at 2.979%. Last nights NFIB and JOLTS data reinforced the tight labout market and with it Fed tightening in 2018 and 2019.
Looking ahead the Westpac Consumer Sentiment data today will be important. Where yesterday’s NAB business survey showed a dip in confidence but resilient underpinnings consumer confidence could print poorly given all the headwinds. We’ll see. Otherwise it’s a fairly quiet 24 hours of data. The EIA inventory data tonight is going to be important – especially after the massive draw (8.6 million barrels) just announced for API. We also have PPI in the US, mortgage applications and speeches from the Fed’s Bullard and Brainard. Before that the Euro Area has industrial production.
Macro Stuff that affects everyone and everything - either today or eventually
Have a great day's trading.
Chief Market Strategist
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With the Fed content to frame rising US treasury yields as an echo of economic optimism, bond markets take a breather while oil prices have blown off course