Daily Morning Report

Monday, August 5–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets tumbled overnight, amid heightened worries about an escalating trade war between the world’s two largest economies—the U.S. and China. U.S. stocks are set to open solidly lower when the New York day session begins.

The Chinese currency, the yuan, depreciated to a new record low against the U.S. dollar Monday, at 7.1087 to the dollar. This is leading to ideas China has thrown in the towel on any trade agreement with the U.S. coming anytime soon. China’s central bank appeared to condone the decline in its currency, saying the yuan’s fall is the result of U.S. protectionism and that the yuan remains stable. In the past, China’s central bank had stepped in to boost the yuan when it reached 7 to the dollar.

President Trump announced late last week that on September 1 he will slap another 10% tariff on Chinese imports into the U.S. The U.S. stock market has dropped, U.S. Treasury futures prices have hit new contract highs, the yield on the 10-year U.S. Treasury note has dropped well below 2.00%, the U.S. dollar has dropped, and grains and crude oil prices have also fallen. The gold market has rallied sharply and hit a six-year high overnight, on safe-haven demand.

The escalation of the U.S.-China trade war has other implications, too, including significantly increasing the likelihood the Federal Reserve will again lower U.S. interest rates in the coming months.

Major protesting in the streets of Hong Kong also has the world marketplace uneasy to start the trading week.

The key “outside markets” today see Nymex crude oil prices weaker and trading just above $55.00 a barrel. The U.S. dollar index is also weaker.

U.S. economic data due for release Monday includes the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI, and the employment trends index.

–Jim

Continue Reading

Friday, August 2–Jim Wyckoff’s Morning Markets Report

Asian and European stocks were lower overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. A busy trading week got unexpectedly much busier at midday Thursday when President Trump announced he is going to slap another 10% tariff on Chinese imports into the U.S. The U.S. stock market dropped, U.S. Treasury futures prices soared to new contract highs, the yield on the 10-year U.S. Treasury note dropped to 1.84%, the U.S. dollar dropped, grains and crude oil prices tanked, while the gold market rallied sharply on safe-haven demand.

The escalation of the U.S.-China trade war has other implications, too, including significantly increasing the likelihood the Federal Reserve will again lower interest rates in the coming months.

The Chinese yuan on Friday dropped to its lowest level against the U.S. dollar since last November. Trump has called out China for devaluing its currency to gain trade advantages.

Traders are now awaiting Friday morning’s U.S. employment situation report for July, arguably the most important monthly report for the U.S. economy. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.

In other overnight news, the Euro zone producer price index for June came in at down 0.6% from May and up 0.7%, year-on-year.

The key “outside markets” today see Nymex crude oil prices higher and trading just above $55.00 a barrel. The U.S. dollar index is weaker.

Other U.S. economic data due for release Friday includes the international trade report, the ISM New York report on business, manufacturers’ shipments and inventories and the University of Michigan consumer sentiment survey.

–Jim

Continue Reading

The gold market has set back late this week after the Federal Reserve on Wednesday did not lean as easy on U.S. monetary policy as most traders reckoned they would. The surge in the U.S. dollar index this week is another negative for the precious metals. Gold prices are still in a near-term uptrend, but the bulls need to stabilize the market yet this week, to avoid serious near-term technical damage being inflicted. Stay tuned!–Jim

Thursday, August 1–Jim Wyckoff’s Morning Markets Report

Asian and European stocks were mixed to weaker overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins.

Traders and investors are still digesting Wednesday afternoon’s Federal Open Market Committee (FOMC) statement and Fed Chairman Powell press conference. The FOMC cut its main interest rate, the “fed funds rate” by 0.25%, to a range of 2% to 2.25%, as expected. A few did look for a bigger 0.5% rate cut. This was the first rate decrease by the Federal Reserve in 11 years. The FOMC statement said the rate cut was enacted due to very low inflation pressures and concerns about global economic growth. While the FOMC statement suggested the door is opened to more interest rate reductions in the months ahead, Powell took the marketplace aback when he said the Fed is not planning a long series of U.S. interest rate reductions. He added that this week’s interest rate cut was a “mid-cycle” adjustment. That spooked the stock and financial markets and U.S. stock indexes sold off. The U.S. dollar index rallied solidly to a new high for the year and is seeing follow-through upside today.

Gold prices are sharply lower and U.S. Treasuries are also weaker Thursday on the apparent less-easy lean on monetary policy from the Federal Reserve.

Traders are now awaiting Friday’s U.S. employment situation report for July, arguably the most important monthly report for the U.S. economy. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.

The other key “outside market” today sees Nymex crude oil prices lower and trading just below $58.00 a barrel.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, the U.S. manufacturing PMI, the ISM manufacturing report on business, the global manufacturing PMI, domestic auto sales, and construction spending.

–Jim

Continue Reading

Wednesday, July 31–Jim Wyckoff’s Morning Markets Report

Asian and European stocks were steady to weaker overnight. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins. Global equities traders and investors have been taken back a bit this week by the apparent setback in the U.S.-China trade negotiations, which resumed at a high level this week in Shanghai.

The Euro zone gross domestic product in the second quarter was released today and came in at up 0.2% from the first quarter and up 1.1%, year-on-year. Those numbers were about in line with market expectations.

In other overnight news, Germany auctioned its 10-year bond (bund) for a record low average yield of -0.41%. The results reflect two important factors: still-very-low inflation in the major economies of the world, and European investors’ worries about the health of the European Union economy.

The main economic event of the week concludes Wednesday afternoon when the Federal Reserve’s Open Market Committee (FOMC) issues its statement on U.S. monetary policy. The Fed is expected to lower interest rates. Most market watchers think a 0.25% interest rate reduction is in the cards, but a few do look for a bigger 0.5% rate cut.

On Friday the U.S. employment situation report for July is out. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.

The key “outside markets” today see Nymex crude oil prices higher and trading around $58.50 a barrel. The U.S. dollar index is slightly up and not too far below the new high for the year hit on Tuesday.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the employment cost index, the Treasury quarterly refunding announcement, the ISM Chicago business survey, and the DOE liquid energy stocks report.

–Jim

Continue Reading

The U.S. stock index futures last week hit record highs as their steady, unassuming, low-volatility price uptrends continue. This type of market action is just what the stock market bulls should want to see continue, as it suggests more of the same in the cards for at least the near term. Stay tuned!–Jim