Stocks: US Equity indexes continued to make new highs, with exception of the Transports which are attempting a key bullish reversal after a recent price correction. Russell-2000 small caps also failed to achieve a new high and may be encountering some resistance. Lately, the real standout has been the interest rate sensitive Utilities index, which cleared resistance for a new all-time high. Volatility: Judging from the performance of the VIX, perceptions toward market risks remain complacent. If one is concerned about the market, it certainly makes for a cheap way to insure a portfolio. Bonds: Both 10 and 30 year treasury rates extended th...
EUR/USD made an attempt to move higher but never went too far. The highlight of the upcoming week is the ECB decision. Will Draghi upgrade the assessment? Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD. ECB President Mario Draghi kept things balanced when expressed optimism about growth but worries about inflation. Inflation indeed fell back, with core CPI retreating from the highest levels since 2013 at 1.2% to 0.9%. That was primed by reports from Germany, France, and Spain. Subsequent reports about the ECB were already more upbeat: the sources said that Draghi and his colleagues wil...
EUR/USD made an attempt to move higher but never went too far. The highlight of the upcoming week is the ECB decision. Will Draghi upgrade the assessment? Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD. ECB President Mario Draghi kept things balanced when expressed optimism about growth but worries about inflation. Inflation indeed fell back, with core CPI retreating from the highest levels since 2013 at 1.2% to 0.9%. That was primed by reports from Germany, France, and Spain. Subsequent reports about the ECB were already more upbeat: the sources said that Draghi and his colleagues wil...
On a day when the US unemployment numbers showed a noticeable number of people leaving the workforce amid a pale 138,000 jobs created – expectations were for 185,000 jobs — traders are nonetheless preparing for a 25 basis point increase in the Fed Funds June rate hike. Traders expect June Rate Hike Financial analytics firm S3 Partners, Ihor Dusaniwsky, Head of Research, is out with a new report on the topic. He notes that as of Friday afternoon there was a decided move by traders to position themselves before the expected June 14 rate hike when the Federal Open Market Committee meets. Amid a steady chorus of Fedspeak that indicates a...
Don’t expect Fed to cause Apocalypse The Fed has ample room to shrink its balance sheet by draining excess commercial bank reserves held at the Fed without causing either the economy to crater or debt and equity markets to crash. Indeed this has been rapidly underway since the start of 2016. As mentioned previously the Fed has been engaged in Quantitative Contraction, QC, from its post Lehman peak of US$4.075 trillion in August 2014. First gradually, then more rapidly in 2016, to the recent low of last December at US$3.532 trillion. The 13% drop over the 16 months amounted to US$0.543 trillion. All of this was the result of a 30% reduction,...
When looking at the bond market or eurodollar futures, both tugged by JPY, I don’t think it was just the payroll report that pushed new levels of anti-reflation today. Instead, there is too much that is consistent with a weak payroll report, and by that I mean a string of them. Yesterday, for example, automakers released their sales estimates for the very important month of May. Memorial Day looms large on their calendar and can often set the tone for the summer season. Instead, it was another largely negative month. If GDP and all its constituents suggested weakness in just Q1 (transitory as always) as Janet Yellen’s FOMC still believes,...
Although the EIA showed a larger-than-expected drop in crude oil inventories, the black gold closed the day only four cents above Wednesday’s closure. Where are the oil bulls? Fundamental Factors and Crude Oil Yesterday, the Energy Information Administration showed that crude oil inventories dropped 6.4 million barrels, exceeding the 4.4 million-barrel drop forecast. Additionally, gasoline inventories declined sharply (by 2.85 million barrels), easily beating analysts’ forecasts. Despite these bullish numbers the price of crude oil moved higher only temporarily and the commodity erased earlier small gains very quickly, closing the day onl...
Market Digest – Week Ending 06/02/2017 Following the holiday weekend, U.S. and international stocks were relatively flat amidst myriad political news and economic data points. Equities subsequently rebounded Thursday with ADP reporting stronger than expected private payroll figures and oil stabilizing after recent declines. Gains continued into Friday despite mixed data on U.S. labor, where hiring slowed but the unemployment rate dropped to a 16-year low. Bonds and gold also ended the week higher. Weekly Returns: S&P 500: 2,439 (+1.0%) FTSE All-World ex-US: (+1.3%) US 10 Year Treasury Yield: 2.15% (-0.10%) Gold: $1,278 (+0.9%) EUR/USD: ...