There is a full data calendar Tuesday, with the UK public finances and German ZEW survey set to dominate the morning session.
The UK public finances will be published at 0830GMT.
Since early 2015, UK government monthly borrowing has followed a downward trend, with each month's borrowing figures coming in below its respective year-ago level. Recent data, however, seems to confirm that this trend appears to have broken down, owing to the higher inflation, slower growth environment.
July, traditionally a key a month boosted by self-assessment and corporation tax receipts, will see borrowing recede from the levels seen in the last few months but remains in line to come in worse than July 2016. Borrowing last July was stg0.4bn and the median of our analysts' forecasts places this July's borrowing figure stg0.5bn higher at stg0.9bn.
At 0900GMT, the German August ZEW survey will cross the wires.
The August CBI Industrial Trends numbers will be released at 1000GMT.
Production and manufacturing data from the Confederation of British Industry (CBI) has come in a lot stronger than both official data and market surveys in recent months, leaving analysts trying to decipher the true shape of industry.
ECB Vice-President Vitor Constancio participates in a lunch session "Inequality and the Distributional Impact of Macroeconomic Policies" of 32nd annual congress of the European Economic Association (EEA) in Lisbon, Portugal, starting at 1100GMT.
Across the Atlantic, the US calendar gets underway at 1230GMT, with the publication of the Philadelphia Fed Nonmanufacturing Index.
At the same time, the Canadian July retail sales data will be released.
The latest US Redbook Retail Sales Index will be published at 1255GMT, followed by the FHFA Home Price Index at 1300GMT, when both monthly and quarterly data will be published.
The Richmond Fed survey will be released at 1400GMT, followed by the preliminary Treasury Allotments data at 1800GMT.
SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session: - Nikkei 225 up 24.21 points at 19417.34 - ASX 200 up 21.948 points at 5747.8 Shanghai Comp. up 1.91 points at 3289.444 - JGB 10-Yr future down 3 ticks at 150.74, JGB 10-Yr yield up 0.7bp at 0.038% Aussie 3-Yr future flat at 98.03, Aussie 3-Yr yield up 0.2bp at 1.994% - Aussie 10-Yr future flat at 97.365, Aussie 10-Yr yield up 0.1bp at 2.639% - US 10-Yr future down 3+ ticks at 126.23+, US 10-Yr yield up 1.05bp at 2.1922%
US TSY/RECAP: Treasuries ended higher Mon on light risk-off bid (N.Korea, US political jitters, weak oil, mixed US stocks). US,S.Korea began 10 days of military drills; N.Korea did saber-rattling. - Tsys improved with EGBS but range into Fri Jackson Hole's Fed's Yellen, ECB's Draghi speeches T-Notes Open Asia at 126.27+, 10-Year yield last 2.182%
US EURODLR FUTURES: Lower across the strip, under pressure since late US trade and coming off US session highs, still within ranges. Quiet Asia trade with Trump press conference on Afghanistan providing little fodder for markets.
OIL: Oil is modestly higher in Asia-Pac trade, WTI last up $0.13 at $47.50. Oil took a hit in the US afternoon on Monday with sources noting longs closing positions ahead of this week's supply data after a sharp jump at the end of last week. - OPEC compliance figures for July also engendered some negative sentiment, the latest reports are that compliance for the output cuts are at an aggregate 94% in July from 98% in July. - The decline comes as well after the Kuwait oil minister said that OPEC will discuss ending or extending the output cuts at their November meeting, leaving the future of the programme somewhat uncertain. The minister did add though that OPEC is still working to push oil stocks below their 5-Year average. - Oil bounced off lows in the US session after the news that Libya had again halted shipments from the Sharara oil field, the largest in the country, due to further tensions with local armed groups.
GOLD: Gold is lower in Asia-Pac trade, the yellow metal last down $3.66 at $1,288.22. Gold rose on Monday helped by continued US dollar weakness with DXY dropping 0.63% during the session to hit 93.00. This pushed gold to its highest level since June 6, touching $1,293.85. The move higher was supported as markets were reminded of the US/North Korea political tensions with the US and South Korea holding military drills and as US military commanders issued a warning to
North Korea in a South Korean press conference. - The decline in Asia has come amid a mild USD rebound, DXY last at 93.202 after US President Trump laid out a steady plan with regard to Afghanistan. - Markets will now look ahead to the Jackson Hole press conference with speeches from Fed's Yellen and ECB's Draghi scheduled, rumours are already swirling as to what the content of the speeches could be after a WSJ article that said Draghi could talk QE exit. – MNI technical analysis sees support at $1280.6 - Hourly support Aug 21, resistance is seen at $1293.9 - High Aug 21.
FOREX: Slightly firmer US rate yields sees the dollar recovery modestly in quiet Asia trade. Dollar-yen pushed higher from Y108.89 to Y109.34 and was last at Y109.27. Euro-dollar edged lower from $1.1824 to $1.1803 and was last at $1.1805. Aussie-dollar initially rose from $0.7932 to $0.7951 on Aussie-yen demand from Japanese investors, once that demand was absorbed the Aussie faded to $0.7935. Meanwhile, Cable trekked lower from $1.2909 to $1.2882 and was last at $1.2888.
*RES 4: 165.44 High June 26
*RES 3: 164.89 Falling daily TL
*RES 2: 164.79 Low June 21 now resistance
*RES 1: 164.64 High Aug 10
*PREVIOUS CLOSE: 164.52
*SUP 1: 164.32 Hourly support Aug 21
*SUP 2: 164.00 Hourly support Aug 18
*SUP 3: 163.97 Daily Bull channel base
*SUP 4: 163.69 Hourly support Aug 16
*COMMENTARY: The 164.00 support provided the base for Monday’s rally with the close above 164.21 seeing immediate focus back to 164.64-89 where the falling daily TL is noted. Bull now look for a close above the falling daily TL to confirm focus on tests of 165.44-55 where June highs are situated. Layers of support remain with bears needing a close below 163.69 to ease immediate bullish pressure and below the 55-DMA (163.17) to target 162.50-63.
EUROSTOXX50: Bears Dominate While 3456.15 Caps
*RES 4: 3497.29 High Aug 16
*RES 3: 3484.66 High Aug 17
*RES 2: 3456.15 Low Aug 17 now resistance
*RES 1: 3448.39 High Aug 18
*PREVIOUS CLOSE: 3423.53
*SUP 1: 3412.65 Bollinger band base
*SUP 2: 3411.06 Low Aug 21
*SUP 3: 3395.25 200-DMA
*SUP 4: 3390.04 Low Mar 14
*COMMENTARY: Attempts to break higher last week were stifled by layers of resistance 3497.29-3539.48 where key DMAs and the bear channel top are situated. Layers of resistance are building and weighing with bulls needing a close above 3456.15 to return focus to key resistance layers. While 3456.15 caps bears focus on the 3355.40-3395.25 support region where the 200-DMA is situated. The Bollinger base remains the key concern for bears.
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From its 2011 highs to 2016 lows, the MSCI World Metals & Mining Index declined a dramatic 79%. In 2016 the mining index rallied back 54% while breaking a streak of five consecutive years in the red. This year it is seeing upside follow through with a respectable YTD gain of 13.4%, however this year’s highs were made back in early February at 244.31 and the index has since been consolidating with support down at 202. The importance of the ~244 resistance was first established back in 2013 when it then acted as a major pivot low (support), before it then flipped to resistance on two occasions in 2015 marking that year’s high. Three weeks ago the mining index stalled again near the 244 resistance while forming a bearish gravestone doji pattern which was followed the following week by a bearish engulfing candlestick. The question now is whether or not the metals and mining index is ready to breakout above the 244 resistance in what could be viewed as the neckline of a cup and handle pattern carrying a measured move +17% to 278, or if the index is in the early stages of reversing 15% lower towards the 202 support.
As of 11:45AM
The past two weeks, US stocks experienced their largest swings since early November, as the markets appear to be driven by political concerns. Markets are slightly weaker this morning as investor focus now shifts towards the central banks leaders, who will be meeting in Jackson Hole this week. After touching its November 2016 highs on Friday, the Gold trade faded throughout the session, giving up ~1.2% intraday. The price has rebounded this morning (+0.5%), helping the Bloomberg Commodity Index hang around flat territory.
The market’s reaction to Bannon’s firing was equally as unpredictable as the market’s response to any other host of headlines – domestic or geopolitical – over recent months. Trading the news is an easy way to lose money in this business and instead we do our best to focus on our knitting… prices. Seasonality remains a headwind for stocks in the near-term, and with nearly all of our momentum indicators in no man’s land, we’ll probably need to get an oversold condition before a more actionable low can take shape. In uptrends we cue off 20-day lows, with readings above 50% often a useful washout signal – we’re not there yet, with Friday’s reading coming in at 36%. Put volumes haven’t spiked either, also a common occurrence in or around market lows. The latest positioning data suggests the street is long S&P and short Russell 2000… it’s been the right trade, but now both sides are at statistical extremes. We’d be on guard for reversion.
While the tactical picture is mixed, it’s worth noting that credit conditions have not deteriorated to any meaningful extent (unlike August of 2015, more like August of 2013) and our longer-term trend work remains positive. We’re also impressed with the resiliency from E.M., which closed Friday at multi-year relative highs vs. the S&P. Brazil, in particular, continues to act well despite a frustrating Oil chart and a messy political situation. On a similar note, iron ore is breaking out and the Baltic Dry Index has turned up… the global backdrop remains firm.
Momentum Is Not Washed Out Yet
Russell 2000 Is Getting Closer…
Not Much Of A Response From Put/Calls Yet
Nasdaq 100 Put/Call Ratio Is Far More Extreme
The Russell 2000 briefly turned negative on the year last Friday before closing positive. It is up 0.05% year-to-date.
Make no mistake, fundamental investors are watching small caps closely.
As a reminder, they are the only liquid and somewhat correlated hedge for high yield, emerging market and private equity investors in the case of war.
The iShares Russell 2000 ETF (IWM) closed below the 200-DMAVG last week for the first time since June 2016.
The iShares Russell 2000 ETF (IWM) relative to the SPDR S&P 500 ETF Trust (IWM/SPY ratio) is close to breaking below the November 2016 level when small caps began their outperformance following the surprise election of Donald Trump.
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