Daily Morning Report

Friday, November 22–Jim Wyckoff’s Morning Markets Report

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

Amid a quieter geopolitical front recently, trader and investor focus remains on the U.S.-China trade war and ongoing negotiations between the world’s two largest economies. Late this week the tenor is mixed, highlighted by Chinese Premiere Xi saying China will “fight back” on trade if the U.S. imposes more tariffs on China’s products. Yet, reports from China also say trade officials, including Xi, want to get a deal done, with Xi saying he does not want a trade war. Reports Thursday said Chinese trade officials invited U.S. trade officials to China for more talks in the near term. This pattern of optimism and then pessimism on trade-talks progress continues.

In other overnight news, the German October manufacturing purchasing managers index (PMI) came in at 43.8, which was a bit better than expected but still well below the 50.0 level, indicating contraction in the sector.

The key “outside markets” today see the U.S. dollar index slightly higher. Nymex crude oil prices are weaker and trading around $58.25 a barrel. Oil prices hit a two-month high on Thursday.

U.S. economic data due for release Friday includes the U.S. flash manufacturing and services purchasing managers indexes, the Federal Reserve Kansas City manufacturing survey, and the University of Michigan consumer sentiment survey.

–Jim

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The U.S. stock indexes this week hit more record highs. The charts remain fully bullish, both near-term and long-term, to suggest still more gains and no early clues of market tops being close at hand. Importantly, the fundamental picture for the U.S. stock market has been and is likely to continue to favor the bullish camp. One major reason for the big gains in the stock market is that equities have been “the only game in town” for investors the past several years. With inflation being at historically very low levels, such has put a damper on other markets’ returns. Low inflation keeps commodity market prices tamped down and also presses U.S. Treasury yields down (prices up). As long as global inflationary pressures remain very low—including the potential for the very serious problem of price deflation—owning shares will likely continue to be the main investment asset for most of the investing public. Stay tuned!–Jim

Thursday, November 21–Jim Wyckoff’s Morning Markets Report

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

Once again, the marketplace is focusing on the up-and-down U.S.-China trade talks, and now with a downbeat bias. Reports overnight say China trade officials have contacted U.S. trade officials regarding a meeting in China soon. The reports said the U.S. has yet to respond. This news follows comments from President Trump this week that dented optimism for a partial trade deal being signed anytime soon. Trump late Wednesday said China is not “stepping up” on a trade deal and that the U.S. could slap more tariffs on Chinese imports. A report Wednesday also said China is standing firm on wanting the U.S. to rollback all of its tariffs on Chinese products. Most traders and investors have become numb to the matter.

Hong Kong civil unrest remains high and the protestors got a psychological boost this week when the U.S. Congress proposed official U.S. backing of them. That has also angered mainland China. This situation is likely to get worse before it gets better.

In other overnight news, the Paris-based OECD think tank has forecast global economic growth in 2020 at 2.9% and at 3.0% in 2021. Those numbers are steady to slightly lower than the previous forecasts for the time periods. The OECD also forecast China’s economic growth in 2021 slowing to 5.5%.

The key “outside markets” today see the U.S. dollar index modestly higher. Nymex crude oil prices are weaker and trading around $56.75 a barrel.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, leading economic indicators and existing home sales.

–Jim

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The Nymex crude oil futures market has sold off at mid-week, after prices hit a six-week high on Monday. Importantly, a price uptrend line on the daily chart has been negated, to now suggest crude oil prices will trade sideways-at-best in the near term, if not sideways to lower. Stay tuned!–Jim

Wednesday, November 20–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were weaker overnight and the U.S. stock indexes are pointed toward lower openings when the New York day session begins. There is an uptick in risk aversion at mid-week following comments from President Trump Tuesday, when he said the U.S. could slap more trade tariffs on China. The U.S. Congress is also contemplating passing a resolution in support of Hong Kong’s protesters. And there are ongoing reports coming out of China that no trade deal would be agreed upon by China unless the U.S. lifts all of its tariffs on China’s imports into the U.S. Trump could impose more tariffs on Chinese goods as soon as December 15.

In overnight news, China’s central bank again eased its monetary policy just a bit by lowering its one-year-loan prime rate to 4.15% from 4.2%. The five-year-loan rate was lowered from 4.85% to 4.80%. That’s the second lowering of interest rates this week by the People’s Bank of China.

There was another dour inflation report coming out of the Euro zone Wednesday. The German producer price index for October fell 0.6%, year-on-year, suggesting very low inflation remains a serious problem for the Euro zone.

The U.S. economic data point of the week is Wednesday afternoon’s minutes from the last meeting of the Federal Reserve’s Open Market Committee (FOMC). Traders will be parsing the minutes for clues on the timing of the next monetary policy move by the Fed.

The key “outside markets” today see the U.S. dollar index higher. Nymex crude oil prices are slightly up and trading around $55.35 a barrel.

Other U.S. economic data due for release Wednesday includes the weekly mortgage applications survey and the weekly DOE liquid energy stocks report.

–Jim

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Tuesday, November 19–Jim Wyckoff’s Morning Markets Report

Asian and European stock indexes mixed overnight. U.S. stock indexes are pointed toward firmer openings and new record highs when the New York day session begins.

Focus of traders and investors is turning more to the civil unrest in Hong Kong, which is becoming more widespread and violent, and is bearish for Asian stock markets. Also, it appears mainland China government officials and Hong Kong officials are becoming more at odds on dealing with the protesting. Hong Kong has been a major business hub for years, but the protests in the streets are making the world’s businesses leery of dealing in Hong Kong.

In other overnight news, China’s central bank slightly lowered its short-term repo rate Tuesday, and the People’s Bank of China governor said he will continue to work to lower real lending rates, as the government continues to work to stem the negative economic effects of its trade war with the U.S.

More details emerged overnight regarding President Trump’s meeting with Fed Chairman Powell on Monday morning. Trump late Monday tweeted that he told Powell U.S. interest rates are too high and that U.S. rates should be “lower than all others.” Trump in his tweet also said the U.S. dollar is too strong.

The key “outside markets” today see the U.S. dollar index slightly higher. Nymex crude oil prices are lower and trading around $56.50 a barrel.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and new residential construction.

–Jim

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