Daily Morning Report

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

Wednesday, June 19–Jim Wyckoff’s Morning Markets Report

European stock indexes were mostly weaker overnight, while Asian shares were mostly up. Asian investors were encouraged by a tweet from President Trump on Tuesday that said he and Chinese President Xi had a good telephone conversation and they will meet at next week’s G-20 conference in Japan. The U.S. stock indexes are pointed toward steady to slightly lower openings when the New York day session begins, following strong gains Tuesday that put the bulls back in good shape to challenge or even surpass this year’s record highs.

Focus of the marketplace at mid-weekl is squarely on the Federal Open Market Committee (FOMC) meeting that began Tuesday morning ends this afternoon with a statement. The majority of Fed watchers believe the Fed will not raise interest rates at this meeting, but FOMC members may lean toward a more dovish stance on monetary policy, to set the table for a rate hike in the coming few months. However, a few do think the Fed will move to lower U.S. interest rates today. Look for more active trading in many markets in the immediate aftermath of the 2:00 p.m. EDT FOMC statement.

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

Geopolitics is still not far from the front burner of the marketplace. The U.S.-Iran tensions have been ratcheted up a notch as the U.S. is sending 1,000 more troops to the Persian Gulf region to bolster is task force that is already patrolling waters. Iran’s government on Monday said it is producing more enriched uranium that could be used in a nuclear weapon. This situation could very quickly escalate and is not just going to fade away.

The key “outside markets” today see Nymex crude oil prices near steady and trading just below $54.00 a barrel. Meantime, the U.S. dollar index is a bit weaker on a corrective pullback from recent good gains.

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

–Jim

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Tuesday, June 18–Jim Wyckoff’s Morning Markets Report

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

Traders and investors worldwide are on central bank alert this week. European Central Bank President Mario Draghi gave a dovish speech on monetary policy today by saying the ECB could cut interest rates and/or expand its bond-buying program (quantitative easing). Draghi’s comments came as dour trade data was released from the Euro zone today.

The Federal Open Market Committee (FOMC) meeting begins this morning and ends Wednesday afternoon with a statement. Most believe the Fed will not raise interest rates at this meeting, but FOMC members may lean toward a more dovish stance on monetary policy, to set the table for a rate hike in the coming few months. The Bank of Japan also holds its regular monetary policy meeting this week.

Meantime, the yield on the benchmark German government 10-year bond fell to a record low of -0.299% today. World government bond yields are declining amid very low inflationary pressures in major economies and on slowing world economic growth.

Geopolitics is still near the front burner of the marketplace this week. The U.S.-Iran tensions have been ratcheted up a notch as the U.S. is sending 1,000 more troops to the Persian Gulf region to bolster is task force that is already patrolling waters. Iran’s government on Monday said it is producing more enriched uranium that could be used in a nuclear weapon.

The price of Bitcoin has surpassed $9,000 this week and hit a 13-month high. Facebook is launching its own crypto currency, which gives the cryptos more legitimacy.

The key “outside markets” today see Nymex crude oil prices weaker and trading around $51.50 a barrel. Meantime, the U.S. dollar index is firmer in early U.S. trading.

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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The U.S. Treasury bond futures market has seen prices pause at higher levels, in an overall uptrend. This pause is not bearish and suggests the bulls are storing up energy for their next upside assault. Bulls still have the solid overall near-term technical advantage and more price gains are likely in the near term. Stay tuned!–Jim