European and US markets have started the week with a risk-on slant, even European stocks managing some net gains despite heavy European bank stocks and another step up in Italian Interest Rates as the market re-prices back to a more expansive fiscal setting. Global bond yields were generally higher, the big mover in commodities was oil (and met coal yesterday), WTI and Brent up around 3%. China is out for holidays this week so no daily CNY fix and limited Asian bulk commodity trading. Meanwhile the Canadian Dollar was supported from 11th hour ‘’NAFTA’’ Agreement.
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For anyone following my Platinum Service it made 14 points yesterday on the first trading session of October, having made 1276 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Currencies
There have not been especially big moves in currencies. The DXY has been drifting, as has the Euro, with commodity currencies outperforming a little, but at 0.7190, the Aussie is only back to territory at the start of the week. The standout in the past 24 hours has been the Canadian dollar that began appreciating as Canada and the US working towards stitching up a revised NAFTA and then a little further with the announcement that a deal was done in a tripartite arrangement with Mexico. For Canada it avoids auto tariffs but has apparently given some ground on US access to its dairy markets.
This morning the Italian Markets are again under pressure, leading to a small sell-off in the EUR/USD to currently trade at 1.1540.
Bonds
Italian bond yields re-priced higher as the market moves to price in a more expansionary fiscal stance. Italian Finance Minister Tria has well and truly become the meat in the sandwich between his political leaders and now-emerging lectures from Europeans over the Government’s revised stance. ‘’One crisis was enough,’’ EC President Juncker said at an event in Germany. ‘’After the toughest management of the Greece crisis, we have to do everything to avoid a new Greece – this time an Italy – crisis.’’ EU Commissioner Moscovici said he could not see how Italy’s preliminary budget figures would be compatible with the bloc’s rules, noting that plans for a budget at 2.4 percent of economic output is a ‘’very, very significant’’ deviation from commitments. (Tria had apparently been pushing his leaders for a 2.0% deficit but been effectively over-ruled.)
Yesterday, not only have global markets taken this news in its stride, but even in Europe. However this scenario is changing today with European Markets opening weaker.
Economics
The ISM Manufacturing survey for September was another punchy number, printing at 59.8, down from an even higher 61.3 and almost bang on the 60.0 consensus. New orders (61.8), priced paid (66.9), and supplier deliveries (61.1) eased, though they remain high. Notwithstanding the tariffs and Hurricane Florence, the Index remained high. It will be interesting to see how priced paid tracks in coming months on the back of the mid-September 10% tariffs on $200bn of Chinese imports.
Three Fed Presidents have been speaking though without breaking too much new ground. Atlanta Fed Bostic spoke of job disruptions happening at a faster pace (he is a FOMC voter this year), while noted dove Minneapolis President Kashkari (not a voter this year) spoke of the US Dollar’s strength reflecting in part the domestic economy, that some firms are using tariffs to raise prices and that the tax cut has not led to a huge uptick in capex, which is being led by oil. He said also that they are not seeing a big uptick in wages and he cited risks to the outlook as including emerging markets, trade wars and the Fed hiking. Boston Fed President Rosengren (also not a voter this year) said in response to a question on financial stability that while he does not think ‘’there is an alarm going off, but I do think there are a bunch of yellow lights’’, comments addressed to over-valuations and over-building worries in US commercial real estate.
As the UK Tory Party Conference continues (PM May is speaking tomorrow), the UK Manufacturing PMI did a little better in September, up from 53.0 to 53.8. There was a Bloomberg story that May has been working on a revised approach to the Irish border question (from within the Conference?) but it has not been picked up by other news wires. Sterling has been little moved.
Commodities
The big mover in the commodity space has been oil with WTI and Brent both up over $2/bbl (~3%), WTI at $75.47 this morning and Brent at $84.94, the highest since 2014 when oil was on its way down from over $100/bbl in the aftermath of the first phase of the US shale boom. There is lots of talk on the wires about supply concerns, not just Iran and Venezuela but pipeline congestion and production issues in the US shale industry. Even so, US production has pushed up to 11.1mb/day and US inventories continue to trend lower.
This morning on the Economic Front we have Euro-Zone PPI at 10.00 am. This is followed at 2.45 pm by the ISM New York Index. Finally and most importantly we have the Fed Chair Powell at 5.45pm. He is speaking about the Outlook for Employment and Inflation to the National Association of Business Economists in Boston that will draw understandable interest though the same contained inflation picture argues for the same rates strategy to continue.
December S&P 500
The S&P rallied to an intra-day high of 2942 before having a small sell-off into the Chicago close. That sell-off has continued this morning with Italy the blame for the weak US Markets. With Fed Chair Powell speaking this evening I would expect any sell-off to be contained ahead of his speech. Today I will now lower my buy level slightly to 2907/2915 with a 2899 stop. Despite the late sell-off in the S&P I still do not want to be short the market at this time.
EUR/USD
Early this morning the Euro traded lower to my 1.1540 buy level. I am still long and I will now lower my T/P level on this position to 1.1555. I will only look to add to this trade on any further move lower to 1.1500 with the same 1.1470 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
December Dollar Index
The Dollar has again just missed my buy levels with the market rallying as expected. I am now going to chase the Dollar higher from here and I will leave my 94.10/94.50 buy level unchanged with a 93.75 stop.
December DAX
The DAX rallied from the off yesterday morning but this rally soon faded with the market back under pressure this morning. I am still flat and today I will leave my DAX buy level unchanged from 12050/12130 with the same 11995 stop.
December FTSE
Earlier this morning the FTSE traded lower to my 7430 buy level. Subsequently I emailed my Platinum Members to exit any long position at 7437 and I am now flat. With Sterling again under pressure I would expect to see limited downside action in the FTSE. Today I will again look to buy the market from 7365/7405 with a 7330 stop.
Dow Rolling Contract
Yesterday the Dow traded to new all-time highs before a late sell-off took some of the shine off yesterday’s positive trading session. I am still flat and today I will continue to be a buyer on any dip lower to 26320/26480 with the same 26230 tight stop.
December NASDAQ
As long as the NASDAQ can hold the key 7530/7570 support level then the market should trade higher to my key 7800 resistance level. I am still flat and today I will be a buyer on any dip lower to 7560/7600 with a tight 7520 stop.
December BUND
Frustratingly the Bund just missed my 158.30 buy level with a 158.37 low print. This morning the Bund is trading over 100 points higher at 159.40. Today I will now raise my buy level to 158.50/158.90 with a 158.15 tight stop.
Gold Rolling Contract
Gold continues to trade sideways between 1185 and 1200 which it has done for most of the past 10 weeks. Gold has strong resistance at 1212 and if we can break and close over this key level for 2/3 days then we could see the start of a large move higher. Today I will now raise my buy level slightly to 1176/1184 with a 1169 stop.
Silver Rolling Contract
Silver traded lower to my 14.40 buy level. As I wanted to bank some points for yesterday’s session I covered this position at my revised 14.47 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 14.00/14.40 with a 13.55 stop.
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