Daily Morning Report

Friday, August 16–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were higher overnight. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Risk appetite is more upbeat to start the last trading day of the week.

The U.S. stock market got a boost in afternoon trading Thursday when reports hit the wires that European Central Bank rate-setting official Olli Rehn said the ECB will be rolling out new economic stimulus measures in September. The U.S. fed funds futures market now shows a 100% chance the Federal Reserve will lower its key interest rate in September. Asian and European stock markets also saw gains Friday due in part to the ECB news.

On the U.S.-China trade war front, President Trump late Thursday said he will be talking to his counterpart, President Xi, “soon.” Trump also made comments that could be construed as both negative and positive regarding progress on resolving the dispute.

The key “outside markets” today see Nymex crude oil prices higher and trading around $55.50 a barrel. The U.S. dollar index is modestly higher.

U.S. economic data due for release Friday includes new residential construction and the University of Michigan consumer sentiment survey.

–Jim

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U.S. Treasury and world government bond yields continue to fall, mostly due to worries about world economies stagnating amid the world’s two largest economies fighting a trade war. The three-month U.S. Treasury bill and two-year note yields are trading above that of the 10-year note, to produce a partially inverted yield curve, which in the past has signaled U.S. economic recession forthcoming. The yield on the U.S. 10-year note dropped to a three-year low of 1.545% on Thursday. The U.S. 30-year Treasury bond yield dropped below 2% for the first time ever early Thursday, hitting 1.966% in Asian trading, before later pushing back just above 2%. The bull market run in U.S. Treasury prices, which move in the opposite direction of yields, is likely to continue for at least the near term. That means more contract highs set in U.S. T-Bond and T-Note futures. Stay tuned!–Jim

Thursday, August 15–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mixed overnight and trying to stabilize from recent selling pressure. U.S. stock indexes are pointed toward lower openings when the New York day session begins, after posting gains when the overnight session began.

Global stock markets were trying to stabilize earlier Thursday and then news hit the wires that China plans to retaliate against the U.S. for the new U.S. trade tariffs, some of which go into effect on September 1. China is demanding the U.S. lift all of its trade tariffs on Chinese products. President Trump tweeted Wednesday evening that China’s “humane” response to the Hong Kong protesters is tied to a trade deal being reached with the U.S. These developments appear to have the U.S.-China trade war taking another step back, regarding an agreement being reached anytime soon. Earlier this week the U.S. pushed back the timeline on some new tariffs being imposed on China, which briefly buoyed world stock markets.

U.S. Treasury and world government bond yields continue to fall, mostly due to worries about world economies stagnating amid the world’s two largest economies fighting a trade war. The three-month U.S. Treasury bill and two-year note yields are trading above that of the 10-year note, to produce a partially inverted yield curve, which in the past has signaled U.S. economic recession forthcoming. The yield on the U.S. 10-year note dropped to a three-year low of 1.545% on Thursday. The U.S. 30-year Treasury bond yield dropped below 2% for the first time ever early Thursday, hitting 1.966% in Asian trading, before later pushing back just above 2%.

News reports said China last year curtailed its gold imports by 300 to 500 metric tons, in order to prevent capital from leaving the country in the form of gold purchases amid the weakening Chinese currency, the yuan.

The key “outside markets” today see Nymex crude oil prices lower and the U.S. dollar index modestly down, too.

It’s a very busy day for U.S. economic data Thursday, including the weekly jobless claims report, the Empire State manufacturing survey, the Philadelphia Fed business outlook survey, retail sales, preliminary productivity and costs, industrial production and capacity utilization, the NAHB housing index, manufacturing and trade inventories, and Treasury international capital data.

–Jim

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Wednesday, August 14–Jim Wyckoff’s Morning Markets Report

Asian stock markets were mostly higher overnight and European stock markets were mostly lower. U.S. stock indexes are pointed toward lower openings when the New York day session begins.

Asian markets were lifted on an apparent thawing in the U.S.-China trade war. It appears the U.S. “blinked” Tuesday when U.S. trade officials said they are delaying until December some of the tariffs on Chinese imports that were set to go into effect on September 1. Economic data coming out of China Wednesday showed the number-two economy in the world has been significantly damaged by its trade war with the U.S.

The civil unrest in Hong Kong remains in focus among traders and investors worldwide. The Hong Kong airport has fully reopened Wednesday, but protestors are still there. President Trump said Tuesday that U.S. intelligence shows Chinese troops have moved to the border with Hong Kong.

Germany’s gross domestic product contracted by 0.1% in the second quarter from the first quarter and was up a paltry 0.4% year-on-year, it was reported Wednesday. Meantime, the Euro zone GDP growth was 0.2% in the second quarter from the first quarter, and up 1.1%, year-on-year. Those numbers were in line with expectations.

U.S. Treasury and world government bond yields continue to fall. The three-month Treasury bill and two-year note yields are trading above that of the 10-year note, to produce a partially inverted yield curve. However, the yield on the 30-year bond is still above that of the 10-year note. Still, the falling government bond yields, globally, paint a dim picture for the marketplace. The German bund hit another new record-low yield again Wednesday.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, import and export prices and the weekly DOE liquid energy stocks report.

–Jim

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The U.S. stock indexes have seen a solid sell off turn into a solid rebound and then turn into choppy trading just recently. The bulls and bears are now on a level overall near-term technical playing field. That suggests more sideways and choppy trading in the near term. One thing the stock index bears have working in their favor at present is the heightened geopolitical tensions that are prompting keener risk aversion. Stay tuned!–Jim

Tuesday, August 13–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly lower overnight. U.S. stock indexes are also pointed toward modestly lower openings when the New York day session begins. There is more protesting by the citizens of Hong Kong, which has again shut down the city’s main airport. This situation is escalating and the world marketplace is now sensing some real trouble brewing in the Asian region. Pressure is building on mainland China to quell the civil unrest. The U.S.-China trade war is also escalating, with some Wall Street firms now advising their clients the U.S.-China trade conflict could deteriorate into a “cold war” similar to what the U.S. and Russia had for three decades. Throw in North Korea test-firing missiles, the U.S.-Iran stand-off and political unrest in Argentina and traders/investors have a whole bunch of worry simmering and maybe coming to a boil on the front burners of the world marketplace.

Gold prices shot to a six-year high overnight, while U.S. Treasuries and world government bond yields are dropping again. The German bund hit a new record-low yield of minus 0.617%.

The U.S. dollar index and crude oil prices are fairly stable today, however.

Worries about slowing global economic growth were further stoked Tuesday when the closely watched German ZEW economic current conditions index in August had a reading of -13.5 versus -1.1 in July. The economic expectations component had a reading of -44.1 in August versus -34.5 in July. Germany is the economic workhorse of the European Union.

On tap in the U.S. today is the July consumer price index, expected to be up 0.3% from June and up 1.7%, year-on-year.

Other U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the NFIB small business index, and real earnings.

–Jim

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