After cancelling trade talks with the US, yesterday morning China released a White Paper accusing the US of intimidation adding that negotiations ‘’cannot be carried out under the threat of tariffs’’. The White Paper set a wary tone to price action with the tech heavy NASDAQ the only major equity index closing in positive territory. ECB President Draghi remark of ‘relatively vigorous’ pick-up in underlying inflation triggered a short lived Euro uplift, but the jump in Bunds yields was sustained with core yields also heading higher buoyed by a pick-up in oil prices following OPEC’s decision not to increase output. The souring in sentiment weighs on AUD and NZD and Sterling outperforms on M&A news, but UK/Brexit politics take some of the gloss off.
To mark my 1675th issue of TraderNoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoblecom for details
For anyone following my Platinum Service it made 61 points yesterday and is now ahead by 1093 points for September, having made 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. 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
The ongoing US China trade tensions have seen risk assets begin the new week with a wary tone and as a result the AUD and NZD are among the G10 underperformers. AUD now trades at 0.7240, 0.47% lower relative to levels 24 hours ago and NZD is down 0.66% currently trading at 0.6643. The new round of US China tariffs came into effect yesterday. Yesterday morning, China’s Cabinet published a White Paper accusing the US of intimidation adding that negotiations ‘’cannot be carried out under the threat of tariffs’’. The paper defended China’s policies, indicating how foreign companies have ‘’taken the initiative’’ to work voluntarily with Chinese companies and how American companies have received ‘’huge returns through technology transfer and licensing’’. This paper followed weekend reports that China would not meet with the US this week for planned trade talks.
For now AUD and NZD price action remains mainly driven by sentiment emanating from US-China trade tensions. But with China’s tariffs likely to come into effect today (China was on holiday yesterday), may be focus will shift away, at least temporarily, from trade tensions with the Fed and RBNZ later this week taking centre stage. For now the AUD seems unable to sustain moves above 73c and as long as the pair does not move above 0.7350/7400 the downtrend established late in January will remain in place, encouraging AUD bears to retain their positions.
Yesterday afternoon, ECB Draghi repeated his message from the mid-September policy meeting noting the 9.2mln jobs created since the trough in 2013 and rising wages. But he then embellished the message adding that wages are up from 1.5% in 2017 to 1.7% in Q1 2018 to 2.2% in Q2. In addition he also introduced the phrase of a ‘relatively vigorous’ pick-up in underlying inflation. The comment saw the Euro jump from 1.1752 to an intra-day high of 1.1815, but the move proved short lived with the Euro now trading at 1.1748.
The souring in sentiment evident in equities alongside the steady rise in oil prices appears to have supported the USD later in the session. That said Sterling has been the G10 outperformer up 0.4% to 1.3120, recovering some of the chunky 1.5% fall seen on Friday. The move was supported by the weekend M&A news, with US company Comcast winning the bid to buy Sky. There have also been a number of Brexit headlines, too numerous to mention. The Opposition Labour party conference is underway and there has been some intense debate on whether to allow another referendum on Brexit. Spokesman Starmer confirmed that the party will vote against any deal PM May brings back on Brexit that does not meet Labour’s tests.
Commodities
Oil prices were the big movers yesterday following OPEC’s decision to leave production steady at its weekend gathering. Brent now trades at $81.39 (+3.26%), a four year high as market grapples with the idea of supply shortage with Iran sanctions coming into effect in November while mounting evidence suggests the increase in supply from other countries will not be enough to offset the Iranian decline (WTI gained 2% to $72.27).
Copper (-1.05%) and metals (LMEX -0.40%) underperformed amid heightened US-China trade tensions and implicit concerns over global growth outlook
Bonds
Higher European yields have helped underpin US Treasury yield with ECB Draghi’s vigorous comment pushing 10y Bund yields by 4bps to 0.51bps while comments from UK labour party officials renewing the party’s intention to renationalize the nation’s power and gas networks, if Labour wins the next election, pushed 10y UK gilts by 6bps to 1.612%. The move higher in oil prices has also been a factor keeping core bond yields on the up. 10y UST gained 1.5bps to 3.088% and, like last week, meeting some resistance at 3.09%.
Equities
European equities closed in negative territory across the board amid growing concern about the outlook for global trade, industrial shares led the S&P 500 Index lower after China warned it won’t meet with American officials unless they stop threatening to expand tariffs. The Nasdaq 100 edged a small gain as the largest tech shares advanced and Comcast Corp. shares stabilised after initially falling on news agreeing to buy Sky Plc.
Economics/Politics
– German IFO marginally beat expectations with Business Climate at 103.7 against expectations of 103.2, but still down from last month’s 103.9.
– President Trump instructs Secretary of State Mike Pompeo to arrange second North Korean summit
– ECB’s Nowotny (Austria) reiterates his hawkishness, stating: ‘’We are in a really very good economic situation …I think the normalization should perhaps take place somewhat more quickly, I am not entirely alone in my opinion but it is still an open discussion,’’.
This morning on the Economic Front we have no Economic data of note from either the UK or the Euro-Zone. However the ECB’s Praet and the Bank of England’s Vieghe are both speaking at an FT event in London this morning. At 2.00 pm we have the US FHFA House Price Index. Finally we have the Richmond Fed Manufacturing Index and the Conference Board’s Consumer Confidence at 3.00 pm.
December S&P 500
Frustratingly the S&P just missed my initial 2917 buy level with a 2917.75 low print before the market rallied 10 Handles and I am still flat. With the FOMC Meeting tomorrow I would expect the S&P to trade sideways to higher ahead of the Rate announcement at 7.00 pm. Today I will again look to buy the S&P on any dip lower to 2908/2915 with a 2901 stop. I will now lower my sell level slightly to 2949/2956 with a 2963 stop.
EUR/USD
Shortly after I posted yesterday morning the Euro hit my 1.1745 T/P level on my early morning 1.1725 long position. Subsequently I emailed my Platinum Members to re-buy the Euro at 1.1735 and this price was hit overnight. As I wanted to get all members on the same page I covered this position at 1.1746 this morning and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1680/1.1720 with a 1.1645 stop. I still do not want to be short the Euro at this time especially with Bond Yields finally breaking higher.
December Dollar Index
My Dollar plan worked well with the market trading lower to my 93.50 buy level before rallying to an overnight high at 93.96. As I wanted to continue with my theme of banking points when available I cut this position at my revised 93.63 T/P level and I am now flat. Today I will again look to buy the Dollar on any dip lower to 93.10/93.50 with a 92.70 stop.
December DAX
I am still flat the DAX with the market trading in a narrow range yesterday. Despite the Bund selling off over 100 points the DAX held firm. Today I will lower my buy level slightly to 12170/12240 with a 12115 stop.
December FTSE
The FTSE just missed my buy level overnight before having a small rally and I am still flat. Today I will lower my buy level slightly to 7335/7375 with a lower 7295 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
While the NASDAQ left a buy extreme from yesterday’s low print the Dow was heavy all-day with the market worryingly closing back below its January 26 high after two sessions closing above this level. I did not buy the Dow myself yesterday due to the negative price action. However if any member did buy the Dow they are still small ahead and I would take my gain here and go flat. Today my only interest in buying the market is on a further dip lower to 26300/26450 with a 26180 stop. I will now lower my sell level slightly to 26850/27000 with a 27110 stop.
December NASDAQ
Shortly after I posted yesterday morning the NASDAQ came close to my 7465 stop with a 7474 low print before the market turned around to rally over 120 points and in the process left a ‘’Buy Extreme’’ which is bullish. This move higher enabled me to cover my 7523 long position at my revised 7540 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7490/7530 with a 7455 lower stop.
December BUND
The BUND got hit hard on Dragi’s ‘’Vigorous’’ comments with the Bund trading lower to my 158.40 buy level. This morning I have added to this position here at 158.00 for a now average long position of 158.20. I will now lower my T/P level on this position to 158.30. Meanwhile I will leave my stop unchanged at 157.80 which is just below this morning’s 157.91 low print.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1180/1188 with a higher 1173 stop.
Silver Rolling Contract
Silver has been somewhat stronger than Gold over the past few trading sessions. I am still long at 14.30 and today I will now lower my T/P level on this position to 14.40. Meanwhile I will now raise my stop on this position to 13.95. If any of the above trades are hit I will be back with a new update for my Platinum Members.
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