Daily Morning Report

Friday, May 10–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly up overnight. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins.

There was no eleventh-hour trade agreement reached between the U.S. and China late Thursday. Increased U.S. tariffs on imported Chinese goods went into effect at midnight last night. China has vowed retaliation. Interestingly, China’s stock market posted a solid rally Friday after this news. It could be a classic case of “sell the rumor, buy the fact” regarding the matter. The U.S.-China trade talks will continue in Washington today. It could also be that the Asian stock market rally Friday was due in part to optimism a deal can be reached soon, as the two sides are still talking. Also, President Trump said China President Xi sent him a “beautiful letter” this week and that the two may talk soon on the matter.

Focus in early U.S. trading today will be on the U.S. consumer price index report for April, which is expected to come in at up 0.4% from March and up 2.1%, year-on-year. A theme in the world marketplace in recent months has been very tame inflation coming out of the major economies.

The U.S.-China trade conflict has this week mostly overshadowed another potential geopolitical flashpoint. Iran’s government said this week it will stop complying with some commitments it made in the United Nations nuclear deal in 2015. The U.S. has a naval task force steaming to the Persian Gulf, including an aircraft carrier, due to what the U.S. says are threats against the U.S. in the region.

The key “outside markets” today see the U.S. dollar index near steady. Meantime, Nymex crude oil prices are firmer and trading just below $62.00 a barrel.

Other U.S. economic data due for release Friday includes real earnings, and the monthly Treasury budget statement.

–Jim

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Thursday, May 9–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly lower overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. The U.S.-China trade war is on the brink of escalation, with both sides apparently digging in their heels and threatening new sanctions on each other. Chinese trade officials are in Washington Thursday to continue discussions. New U.S. tariffs on Chinese imported goods are set to go into effect at midnight tonight, with most now thinking no substantive deal can be reached at this time. President Trump said at a rally Wednesday evening that China “broke the deal.”

World government bond yields are declining amid concerns an escalation in the trade war between the world’s two largest economies will lead to slower global economic growth.

The Chinese yuan Thursday fell to its lowest level against the U.S. dollar since January.

The U.S.-China trade conflict is presently overshadowing another potential geopolitical flashpoint. Iran’s government said this week it will stop complying with some commitments it made in the United Nations nuclear deal in 2015. This week the U.S. sent a naval task force to the Persian Gulf, including an aircraft carrier, due to what the U.S. said were threats against the U.S. in the region. One miscalculation by either side could lead to serious military conflict.

In another interesting and seemingly contradictory development, the United Nations’ Food and Agriculture Organization (FAO) said global food prices rose 1.5% in April from March and hit a 10-month high. This report comes amid several major world economies releasing their producer and consumer price indexes that are generally reading under 2% inflation for the entire year. The FAO food inflation reading for April was 2.3% below the April 2018 reading, however. Many consumers would argue the FAO numbers are the correct ones.

The key “outside markets” today see the U.S. dollar index near steady. Meantime, Nymex crude oil prices are weaker and trading just below $62.00 a barrel.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the producer price index, the international trade report, monthly wholesale trade, and the monthly chair store sales index.

–Jim

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The U.S. dollar index bulls remain very strong as prices are in an uptrend and just recently hit a two-year high. The strong greenback is a negative for most of the raw commodity sector. Given that most raw commodities are priced in dollars on word markets, an appreciating U.S. currency means its more expensive to purchase those commodities in non-U.S. currency. The strong dollar is also punishing many secondary currencies, whose countries are trying to service their debt with their depreciating currencies. There are no early chart clues to suggest the USDX will end its price uptrend any time soon. Stay tuned!

Wednesday, May 8–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly lower in anxious trading overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. The U.S.-China trade war that is on the brink of escalation has roiled the world marketplace this week. Chinese trade officials are due in the U.S. today to continue discussions. President Trump said a deal needs to be done by late this week, or else he will impose new tariffs on Chinese imports into the U.S.

In overnight news, Iran’s government said it will stop complying with some commitments it made in the United Nations nuclear deal in 2015. The U.S. pulled out of the agreement last year and put more sanctions on Iran—namely it’s oil exports. This week the U.S. sent a naval task force to the Persian Gulf, including an aircraft carrier, due to what the U.S. said were threats against the U.S. in the region.

The U.S.-China trade war and the U.S.-Iran heightened tensions have put geopolitics back on the front burner of the marketplace, and it’s bearish for most markets.

China reported today its exports showed a surprising drop of 2.7% in April, year-on-year, compared to a 14.2% gain in March. China’s imports rose 4.0% in the same period. This economic data seems to underscore the damage to China’s economy from several months of U.S. tariffs on Chinese imports.

The key “outside market” today see the U.S. dollar index slightly lower. Meantime, Nymex crude oil prices are weaker and trading just above $61.00 a barrel.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, an ISM semi-annual forecast on business and the economy, and the weekly DOE liquid energy stocks report.

–Jim

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Tuesday, May 7–Jim Wyckoff’s Morning Markets Report

World stock markets were mixed in cautious trading overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins.

The stock, financial and commodity markets are trying to recover from the surprise developments on the U.S.-China trade front that saw President Trump threaten new tariffs on imported Chinese products. However, the marketplace is somewhat assuaged Tuesday morning as the Chinese trade delegation is still headed for Washington, D.C. for talks this week, including their chief negotiator. Also, upon reflection, many traders and investors are wondering if Trump’s threatening tweets on Sunday were just a negotiating tactic. Still, Trump’s trade advisors said Monday that the Chinese commitments on trade had seen “erosion.”

Trump tweeted that some degree of a trade deal with China needs to happen by the end of this week, or new tariffs go into effect. It’s a very hard read on the outcome of this matter. Thus, the keener uncertainty among traders and investors will play better into the hands of market bears.

Gold and silver markets bulls have been disappointed their safe-haven metals did not see more demand amid the heightened geopolitical uncertainty that includes the potential U.S.-China trade war escalation but also increased U.S.-Iran tensions. However, reports say demand from major gold-consuming country India is expected to be significantly higher on the geopolitical tensions, especially as this is the time of stronger seasonal demand for gold.

The key “outside markets” today see the U.S. dollar index near steady. Meantime, Nymex crude oil prices are weaker and trading just below $62.00 a barrel.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the IDB/TIPP economic optimism index, and consumer credit.

–Jim

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The Nymex crude oil futures market bulls are in trouble and it appears a near-term market top is in place. A price uptrend on the daily bar chart has been soundly negated and the bears have technical momentum on their side, to suggest more price pressure is coming. The escalation in the U.S.-China trade dispute is a bearish element for crude, as it suggests slower global economic growth, which translates into less demand for oil. Stay tuned!