Daily Morning Report

Thursday, May 29–Jim Wyckoff’s Morning Markets Report

European stock markets were mostly up overnight on corrective bounces from recent selling pressure. Asian stocks were mostly down, on continued worries about slowing global economic growth amid the U.S.-China trade war that shows no sign of ending any time soon. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, after hitting 2.5-month lows on Wednesday.
Escalating rhetoric from the U.S. and China suggest diminishing chances the world’s two largest economies will reach any trade agreement before the G-20 meeting in Japan on June 28-29.
The key U.S. economic data point so far this week comes with this morning’s second estimate of first-quarter gross domestic product. GDP is expected to grow 3.0%, year-on-year, versus the last reading of up 3.2%.

The key “outside markets” today see the U.S. dollar index trading near steady following good gains so far this week that have the index trading near its recent two-year high. Meantime, Nymex crude oil prices are slightly higher and trading around $59.00 a barrel. Oil hit a three-month low Wednesday and prices are trending lower on the daily chart.

Other U.S. economic data due for release Thursday include the weekly jobless claims report, preliminary corporate profits, pending home sales, and the weekly DOE liquid energy stocks report.

–Jim

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Wednesday, May 29–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly down overnight as risk aversion is back on the front burner of the marketplace. The main concern is the prolonged trade war between the U.S. and China (the world’s two largest economies) that sees no end in sight and appears to be escalating. U.S. stock indexes are pointed toward lower openings when the New York day session begins.

Also unnerving European traders is news today Germany’s unemployment rate unexpectedly surged in May, at up 60,000 versus expectations for a decline of 8,000 workers. Germany is the economic workhorse of the European Union.

It’s summertime again and some European Union instability is due. This time, concerns are rising among Europeans as Italy and Greece are balking about conforming to EU rules on fiscal discipline. And the U.K. can’t seem to figure out how to leave the EU in a smooth fashion.

A feature in the markets this week is falling government bond yields, partly due to “flight-to-safety” buying amid keener risk avoidance among traders and investors. More and more market watchers are thinking the long bull run in equities has ended. Germany today sold a five-year debt instrument today at a record low yield of -0.56%.

The key “outside markets” today see the U.S. dollar index trading slightly higher following good gains Tuesday, while Nymex crude oil prices are solidly lower and trading just below $58.00 a barrel.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, weekly Goldman Sachs and Johnson Redbook retail sales data, and the Richmond Fed business survey.

–Jim

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Corn futures Tuesday hit a nearly 12-month high, with wheat hitting a three-month high. It’s a full-blown weather market in the grains, and it’s not even June yet! Soggy U.S. Midwest weather, and more of the same in the forecast in the next week, will keep many U.S. farmers out of their fields and continue to keep the seeding of corn at a pace that is the slowest in recent history. As each wet day in the Corn Belt passes, lower production levels for corn and soybeans are more likely and even highly probable now. If soybeans and corn continue to rally, wheat will, too. Part of the gains in the grain market just recently are due to the large speculative “fund” futures traders getting squeezed out of their short positions that were record large just a few weeks ago. At some point, if not already, those funds will likely move to the long side of the grain markets. Stay tuned to my daily reports to get those early clues on price “turns” or acceleration in the grains.–Jim

Tuesday, May 28–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly down overnight. U.S. stock indexes are also pointed toward weaker openings when the New York day session begins.

There are several matters on the minds of traders and investors following the long U.S. holiday weekend. The U.S.-China trade war continues with no agreement in sight and both countries appearing to dig in their heels as a trade agreement anytime soon appears unlikely.

European elections last weekend produced gains in the populist parties in the U.K., while Greece’s prime minister said he will call for a general election in an effort to lower taxes. It seems that every couple of years, during the summertime, that political turmoil in the European Union moves closer to the front burner of the world marketplace.

The key “outside markets” today see the U.S. dollar index trading higher, while Nymex crude oil prices are firmer and trading just above $59.00 a barrel. The greenback has been strong recently and the USDX is not far below its recent two-year high. Meantime, crude oil bulls are working to stabilize prices after last week’s steep downdraft that shaved about $6.00 off the price of a barrel of crude.

U.S. economic data due for release Tuesday includes the quarterly house price index, the S&P-Case-Shiller home price index, the consumer confidence index and the Texas manufacturing outlook survey.

–Jim

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A feature in the marketplace late this week is the dramatic sell off in crude oil prices. Nymex crude oil on Thursday dropped to a low of $57.33 Prices on Tuesday closed at $63.13. Prices recovered a bit Friday morning. Plentiful U.S. supplies and worries about slowing world economic growth are mostly to blame for the downdraft in crude prices. The spike down in oil prices is a warning signal to other raw commodity market bulls, as oil is arguably the leader of the raw commodity sector. With oil prices in a tailspin, other commodity markets will find price uptrends very hard to sustain.–Jim

Friday, May 24–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly higher overnight. U.S. stock indexes are also pointed toward firmer openings when the New York day session begins. Markets were rattled Tuesday as the U.S.-China trade war was ratcheted up yet another notch, as both governments stepped up their rhetoric against each other. The U.S. is also now targeting China’s communications giant, Huawei, for sanctions. A New York Federal Reserve report said the trade war with China will cost Americans an average of $813 a year.

In overnight news, U.K. Prime Minister Theresa May said she will resign within two weeks, in order to allow another leader to try to clear up the Brexit mess. Meantime, India’s Prime Minister Modi was a solid victor in his country’s elections.

Parliamentary elections in the U.K. and The Netherlands got under way Thursday, with the populist parties (euroskeptics) possibly doing well. Other European countries’ election results will be announced Sunday.

A feature in the marketplace late this week is the dramatic sell off in crude oil prices. Nymex crude oil on Thursday dropped to a low of $57.33 Prices on Tuesday closed at $63.13. Prices have recovered a bit Friday and are trading around $58.50. Plentiful U.S. supplies and worries about slowing world economic growth are mostly to blame for the downdraft in crude prices.

Meantime, the U.S. dollar index has backed off after scoring a contract and two-year high on Thursday. Technical price action shows a bearish “key reversal” down has occurred in the USDX, which is a chart clue the index has put in a near-term top.
And, world government bond yields are falling this week, on some flight-to-safety buying in U.S. and German bonds, while other countries’ bond prices gained on worries about slowing economic growth keeping interest rates very low.

U.S. economic data due for release Friday includes the advance report on durable goods.

–Jim

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