Daily Morning Report

Tuesday, June 25–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. Many markets are in a pause mode, awaiting fresh news on the geopolitical front.

The U.S.-Iran tensions in the Persian Gulf region continue to simmer near the front burner. President Trump said Monday there will be major new sanctions put in Iran and called the country the world’s number-one sponsor of terrorism. Traders and investors are wondering how Iran will respond, and if Iran is itching for a military confrontation with the U.S. Trump appears unwilling to start a fight, but he also will not likely stand by idly while being provoked. This situation is likely to linger for quite a while and will likely get worse before it gets better.

Meantime, U.S. President Trump and Chinese President Xi are scheduled to meet in Japan at the G20 meetings late this week—possibly after all the markets are closed on Friday– and discuss their ongoing trade war. The outcome of that meeting is uncertain and could have huge implications for many markets, especially if an agreement is reached to end the trade war. Many reckon a final deal will not be announced this week, but instead the two countries will likely say they’ve made some progress and will keep talking.

Gold prices are sharply up again Tuesday and hit a six-year high on safe-haven demand amid geopolitics in play, and on a slumping U.S. dollar index.

The key “outside markets” today see Nymex crude oil prices weaker and trading around $57.50 a barrel. Meantime, the U.S. dollar index is slightly up on a mild corrective bounce after hitting a three-month overnight.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the monthly house price index, the S&P/CoreLogic house price index, the Richmond Fed business survey, the consumer confidence index and new residential sales. Several Federal Reserve Board officials are also scheduled to speak today.

–Jim

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Monday, June 24–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mixed to weaker overnight. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. This is likely to be a more important trading week, amid big events upcoming.

The U.S.-Iran confrontation in the Persian Gulf region continues to simmer on the front burner of the marketplace. News over the weekend surfaced that the U.S. last week employed a cyber-attack on Iran, specifically its ability to track big ships at sea, and to launch missiles. Also, President Trump says there will be “major” new sanctions put in Iran this week.

U.S. President Trump and Chinese President Xi are scheduled to meet in Japan at the G20 meetings late this week and discuss their ongoing trade war. The outcome of that meeting could have huge implications for markets, especially if an agreement is reached to end the trade war.

The key “outside markets” today see Nymex crude oil prices higher and trading just below $58.00 a barrel. Meantime, the U.S. dollar index is weaker and hit a three-month low overnight.

U.S. economic data due for release Monday includes the Chicago Fed national activity index and the Texas manufacturing outlook survey.

–Jim

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Gains in corn, wheat and soybeans on Thursday put the bulls back on track, amid near-term price uptrends in place on the daily bar charts. U.S. Corn Belt weather still favors the bulls. Rainy and stormy conditions are forecast for the U.S. Midwest the rest of this week and into next week. Focus has turned to the June 28 USDA U.S. planted acreage report. That report will be one of the most important grain market reports of the year. Grain analysts are saying it’s wide open on the numbers the Agriculture Department assigns to corn and soybean planted acres. That means price action will likely be subdued next week, ahead of the Friday report. However, next Friday’s price action in the grains is expected to be highly volatile. Late next week is also when the U.S. and Chinese presidents meet to discuss trade. Ideas are also widely mixed on the outcome of that meeting, which also argues for more subdued trade in the grains until late next week. Stay tuned!–Jim

Friday, June 21–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were flat to mixed overnight, pausing from gains seen this week. U.S. stock indexes are pointed toward weaker openings when the New York day session begins, on corrective pullbacks from this week’s solid gains that have prices at or near record highs.

Gold prices today hit new five-year highs above $1,400 on safe-haven demand amid Persian Gulf tensions and the easy money stances of the major central banks of the world.

The U.S.-Iran confrontation in the Persian Gulf region has escalated this week with the shooting down of a U.S. drone by Iran. President Trump has appeared to downplay that situation by saying it the downing of the drone could have been a mistake by Iran’s military. Reports overnight said the U.S. was planning a retaliatory strike, but the mission was called off. The report also said the U.S. strikes against Iran remain on the table. Still, this matter will likely intensify before it fully plays out. Traders in some markets are likely to even up their positions heading into the weekend, on worry U.S. warships or warplanes could attack Iran’s military.

The marketplace is still basking in the easy-money stances taken by the Federal Reserve and European Central Bank this week. Stock markets have rallied, government bond yields have dropped, and so has the U.S. dollar. Commodities have been given a shot of adrenalin on ideas more money in world financial system will mean more consumer demand for commodities.

In overnight news, the Euro zone composite purchasing managers index (PMI) came in at 52.1 in June, which was better than the expectations of 51.8. A reading above 50.0 suggests expansion. However, the German manufacturing PMI came in at 45.4. That’s a downbeat reading coming from the Euro zone’s main economic workhorse, Germany, and is a worrisome factor for Euro zone economic conditions in the coming months.

The key “outside markets” today see Nymex crude oil prices higher and trading just at $57.65 a barrel. Meantime, the U.S. dollar index is slightly lower as the greenback bulls are in trouble after this week’s drubbing of the USDX.

U.S. economic data due for release Friday includes the U.S. flash manufacturing PMI, the services PMI, existing home sales, and the Federal Reserve releases stress test results from U.S. banks.

–Jim

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Thursday, June 20–Jim Wyckoff’s Morning Markets Report

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

Traders and investors are still digesting Wednesday’s conclusion of the Federal Open Market Committee (FOMC) meeting that saw no change in U.S. interest rates, but the Fed did lean significantly more dovish. The FOMC statement said the committee would lower interest rates in the coming months if U.S. economic growth begins to slow down. The FOMC expects the U.S. economic expansion to continue but “uncertainties about this outlook have increased,” the statement said. About half of the FOMC members now expect the Fed to make at least one interest rate reduction this year. The FOMC statement also eliminated the word “patient” from its monetary policy stance.

Markets are continuing to react to the dovish Fed meeting and also to European Central Bank President Mario Draghi’s easy stance on monetary policy in comments he made earlier this week. The U.S. dollar index has sold off, the Euro currency has rallied, gold has soared to a five-year high, crude oil prices have surged and U.S. stock indexes have pushed higher and within easy striking distance of their record highs.

The Bank of England and Bank of Japan also hold their regular monetary policy meetings yet this week.

Gold is also seeing safe-haven demand today on reports Iran’s military shot down a U.S. military drone in Iranian territory. Also, a missile struck a Saudi Arabian water plant, and Iran is being blamed. The U.S.-Iran stare-down just got ratcheted up another notch. President Trump is now likely closer than ever to unleashing some degree of a military operation against Iran. It’s a good bet this situation will get worse before it gets better.

The key “outside markets” today see Nymex crude oil prices solidly higher and trading just above $55.00 a barrel. Meantime, the U.S. dollar index is lower on good follow-through selling from solid losses posted Wednesday afternoon in the wake of the dovish FOMC statement.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, leading economic indicators and international transactions (current account).

–Jim

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The U.S. stock index futures bulls have made dramatic rebounds from the June lows, and have gained upside technical momentum to suggest a challenge of this year’s highs, or above. Fundamentally, the specter of a more accommodative Federal Reserve monetary policy is helping to drive U.S. shares higher. The monkey wrench that could be thrown into the bullish stock market machine would be an escalation of the U.S.-China trade war, or a serious geopolitical event that involves the U.S. miltary. Stay tuned!–Jim