Daily Morning Report

Wednesday, June 5–Jim Wyckoff’s Morning Markets Report

European and Asian stock indexes were mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. The U.S. indexes posted solid gains Tuesday after hitting three-month lows Monday.

The world marketplace has been assuaged by notions the U.S. Federal Reserve could lower interest rates as soon as this summer, in an effort to keep U.S. economic expansion alive and to counter the negative effects of the U.S. trade disputes with its major trading partners. This week Fed officials, including Chairman Powell on Tuesday, have hinted the U.S. central bank is leaning toward an easier money policy even though it says it is being “patient” on monetary policy moves. Australia’s central bank may have started the ball rolling on easier money policies by announcing an interest rate cut on Tuesday.

Gold is responding to ideas of lower interest rates and slowing economic growth as prices hit a nearly 3.5-month high overnight. Since late last week gold prices have rallied over $40 an ounce.

In overnight news, the Euro zone producer price index for April was reported at down 0.3% from May and up 2.6%, year-on-year. Retail sales in the trading bloc were also reported today and came in down 0.4% in April and up 1.5%, year-on-year. That downbeat news was somewhat offset by a composite purchasing managers index (PMI) for the Euro zone that came in at 51.8 in May from 51.5 in April. A reading above 50.0 suggests growth in the sector.

The U.S. economic data point of the day comes with the ADP national employment report for May, which is expected to come in at up 173,000 jobs. That report is a precursor to Friday morning’s more important employment situation report for May from the Labor Department. The non-farm jobs component of that report is forecast at up 180,000.

The key “outside markets” today see the U.S. dollar index trading weaker and hitting a three-week low overnight. The greenback bulls have faded recently and the near-term price uptrend for the USDX has been at least temporarily negatged. Meantime, Nymex crude oil prices are slightly lower and trading around $53.50 a barrel after dropping to a nearly five-month low on Monday.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI, the Federal Reserve’s beige book, and the weekly DOE liquid energy stocks report.

–Jim

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Tuesday, June 4–Jim Wyckoff’s Morning Markets Report

European equities were mostly firmer overnight and Asian stock markets were mostly down. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. The U.S. indexes hit three-month lows Monday and are trending down on the daily charts.

Australia’s central bank cut its main interest rate overnight to a record low of 1.25% from 1.50%. It was the first rate cut in nearly three years. The central bank said it made the move due to worries about global trade wars reducing world economic activity. In recent weeks the marketplace is placing much higher odds on the U.S. Federal Reserve lowering interest rates, possibly as soon as this summer. The European Central Bank is also seen as likely easing its monetary policy as soon as this summer.

The notions of easier money coming from the world’s major central banks has boosted gold prices and dropped government bond yields. Notions of lower interest rates are a mixed bag for the global stock markets—a positive due to more financial market liquidity but a negative because the rates would be coming down due to slowing economic growth prospects.

In other overnight news, the Euro zone reported its May consumer price index at up 1.2%, year-on-year, versus up 1.7% in April. The April reading was the lowest in over a year.

The key “outside markets” today see the U.S. dollar index trading slightly up after absorbing solid losses Monday. The greenback bulls have faded recently and the near-term price uptrend for the USDX is in jeopardy. Meantime, Nymex crude oil prices are lower and trading just below $53.00 a barrel after dropping to a nearly five-month low on Monday.

U.S. economic data due for release Tuesday includes the weekly Johnson Rebook and Goldman Sachs retail sales reports, the ISM New York report on business, manufacturers’ shipments and inventories, and a World Bank global economic report. Several Federal Reserve officials also speak today.

–Jim

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The Nymex crude oil futures market dropped to a nearly five-month low to start the month of June. Bears have the firm near-term technical advantage in oil and are now eyeing challenging major psychological support at $50.00 a barrel soon. The accelerating price downtrend suggests more price pressure in crude in the near term. Stay tuned!–Jim

Monday, June 3–Jim Wyckoff’s Morning Markets Report

European and Asian stock markets were mostly down overnight. U.S. stock indexes are also pointed toward lower openings when the New York day session begins and hit three-month lows overnight.

Risk aversion is keener to start the trading week and the month. The ongoing U.S. trade war with China and new worries about a U.S. trade dispute with Mexico have traders and investors jittery. In fact, some analysts are now saying the Federal Reserve will have to lower U.S. interest rates this year to offset a slowing pace of economic growth caused by the trade disputes.

Gold prices hit a nine-week high overnight on safe-haven demand. Meantime, bond yields in the U.S., Germany and other countries are on the decline as investors seek out safe-haven assets and shed riskier assets like equities.

The European banking sector has been hit especially hard by falling government bond yields that equate to lower interest rates, which in turn hurt banks’ profits. The eight largest banks in the European Union now have a smaller combined market value than JP Morgan, despite the European banks having three times as many assets.

The Euro zone got more downbeat economic news today when the May manufacturing purchasing managers index (PMI) came in at 47.7 versus the forecast for 47.9. Any reading below 50.0 suggests contraction in the sector.

The key “outside markets” today see the U.S. dollar index trading modestly down. Meantime, Nymex crude oil prices are higher and trading around $54.00 a barrel after dropping to a nearly five-month low in overnight trading.

U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers’ index (PMI), the ISM manufacturing report on business, construction spending, the global manufacturing PMI, and domestic auto industry sales.

–Jim

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Friday, May 31–Jim Wyckoff’s Morning Markets Report

European and Asian stock markets were mostly down overnight as trader and investor anxiety has up-ticked late this week. U.S. stock indexes are also pointed toward lower openings when the New York day session begins and hit three-month lows overnight.

President Trump late Thursday surprisingly announced new trade tariffs set to go into effect in June against imports from Mexico, in order to persuade that country to help the U.S. battle illegal immigration from the Mexican border with the U.S.

To further rattle the markets, there was more dour economic news coming out of China today. Its manufacturing purchasing managers index (PMI) for May came in at 49.4 versus 50.1 in April and a 49.9 forecast. China’s May services PMI was 54.3, the same as in April and in line with market expectations. A reading below 50.0 suggests contraction in the sector, while a number above suggests growth.

The above news developments underscore a recent theme in the marketplace: increasing concerns regarding slowing global economic growth.

Gold and U.S. Treasury prices are rallying on this last trading day of the week and of the month, on safe-haven demand amid the stock market sell off.

The key “outside markets” today see the U.S. dollar index trading modestly down. Meantime, Nymex crude oil prices are lower, hit a 3.5-month low overnight and are trading around $55.50 a barrel.

U.S. economic data due for release Friday includes personal income and outlays, the ISM Chicago business survey, and the University of Michigan consumer sentiment survey.

–Jim

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The protracted U.S.-China trade war and the resulting concern regarding slowing global economic growth have many world government bond yields down. Wobbly world stock markets recently have also prompted flight-to-quality buying of U.S. and German bonds. Technicals for U.S. Treasury bond and note futures prices remain fully bullish, suggesting more upside price action (lower yields) are likely in the near term. Remember to read my daily reports to get those early clues on potential price trend changes, or price acceleration. Stay tuned!–Jim