Daily Market Color 9/17/2012

Daily Market Color

9/17/2012

Economic Reports & Headlines

The Empire Manufacturing Survey came in lower than expected; Actual (-10.41) Vs. Consensus (-2.00). New York business executes are expecting business conditions to worsen. This report is conducted by the New York FED on the first of each month. Roughly 175 New York business executives, across various industries, participate in the survey.

Overseas, European Union Merchandise Trade for July was narrower than expected, but still registered a surplus, Actual 7.9bn Vs. Consensus 9.8bn

Future Reports

US Housing Market Index will be released at 10:00am. The street is calling for a fifth straight month of improvement in the housing sector. The index is currently at levels not seen since mid 2007.

Tonight at 9:30pm in Australia, the Reserve Bank Board (RBB) will issue minutes, with a two week lag, of its most recent monthly meeting. Although the RBB normally issues a statement immediately after their meetings, the minutes are usually more detailed

Tomorrow we will get the Bank of Japan’s (BOJ) monetary policy announcement. This event should move the Nikkie or the Yen, depending on what's announced

In Britain we will get August CPI numbers. Economists are calling for a month over month increase of 50bps and a year over year increase of 260bps

Trades

The FED actions last week is supportive of risk assets, in particular precious metals. Treasuries should continue their decline since treasuries are no longer an outlet for QE. So, I plan on either going long equities or precious metals while simultaneously shorting treasuries.

Daily Market Color 9/4/2012

Daily Market Color

9/4/2012

Today’s Economic Reports & Headlines

Motor Vehicle Sales for August will be released today; total vehicle sales consensus is 14.3 million   

PMI manufacturing for August came out slightly higher than last month’s reading, registering a mild expansion at 51.5

At 10:00am today we ISM Manufacturing data for August, the street is estimating that the index will give a reading of 50

Also at 10:00am we have construction spending, economists are calling for a month over month increase of 40 basis points

Overseas, we have Australia’s second quarter GDP coming out at 9:30pm, economists are calling for quarter over quarter increase of 80 basis points

Tomorrow’s Reports

Nonfarm business productivity will be released at 8:30am, economists are calling for 1.9% Q/Q increase

The Bank of Canada will have their policy announcement at 9:00am

EMU, Germany and Britain will release PMI services data

Australia Labor Force Survey reading will come out at 9:30pm

Trades

This Friday we have Nonfarm payrolls (NFP) in the US, economists are expecting 125k gain in employment.  In the event of a large upset to the down side, I anticipate a sharp increase in Treasuries that will continue into next week’s FED policy announcement. However, if there is no downside or upside surprise, I don’t expect much of a move in either direction for the US 10yr

On September 6^th, the ECB will announce their policy decision which will be followed by a press conference, I expect to hear no details regarding Mario’s bond buying plans. At this juncture any commentary on unlimited easing from the ECB will be conditional on Germany’s court ruling on the ESM next Wednesday.  

The Australian dollar has been in a downward trend for several days now because of declining commodity prices. The Reserve Ban k of Australia believes the weak dollar will trigger a rebound. I will pay attention to Australia’s GDP numbers tonight; a large surprise to the downside should push the Aussie dollar lower and I will look to go short as a result.

Daily Market Color 8/29/2012

Daily Market Color

8/29/2012

Today’s Economic Reports & Headlines

Second quarter preliminary GDP data for the US was in line with analyst’ estimates, revised up to 1.7% from 1.5%, US equities opened flat on the news

Pending Home Sales will be released at 10:00am today; the street is expecting a 1% increase

Overseas, Germany will be releasing their consumer price index numbers and Italy will issue their retail sales numbers

According to the ECB, deposits at private banks in Spain decline by a record 74 billion Euros in July, this is the biggest decrease since 1997

Trades

Treasuries remain strong heading into Jackson Hole on Friday; I’m speculating that treasuries may have a strong rally within minutes of the J-hole conference, similar to the Euro before and during the ECB policy announcement and subsequent press conference. So, I intend to stay in my treasury position during J-Hole and trade accordingly with the intraday sentiment  

Daily Market Color 8/30/2012

Daily Market Color

8/30/2012

Today’s Economic Reports & Headlines

FED Reserve Bank President Dennis Lockhart said further easing will be a close call, via WSJ

So far for today we had economics reports that supported our treasury position, Jobless claims missed consensus coming in at 374k versus estimates of 370k

Personal Income and Outlays was in line with consensus, coming in at 30 and 40 basis points (bps) respectively

Overseas, Germany released employment figures that were in line with consensus; the jobless rate came in at 6.8%, 9,000 were laid off in August bringing the total number of the unemployed in Germany at 2.901 million. This is the second consecutive month that joblessness increased in Germany

The EC Economic Sentiment report, which are three indices that measures economic, industrial and consumer sentiment in the European Union, is at a 3 year low. Economic and industrial sentiment slightly missed expectations while consumer sentiment was in line with economists forecast    

Tomorrow’s Reports

The Jackson Hole conference will begin at 10:00am tomorrow; this symposium should prove to be eventful with market players anticipating dovish comments from Ben Bernanke

In addition to J-Hole in the US, numbers for Chicago PMI and Factory Orders will be released as well  

Italy and the European Monetary Union will release consumer pricing reports that measures inflation at 5:00am

Germany will be releasing retail sales numbers at 2:00am

China will be coming out with their manufacturing Purchasing Managers Index (PMI) report for August at 9:00pm; economists are expecting the index to come in just above 50.1, indicating a modest expansion for manufacturing in China (PMI readings above 50 represents an expansion while readings below 50 represents a contraction)

Trades

JACKSON HOLE, this is the event all market participants will be focusing on, I personally expect Ben Bernanke to state he is still monitoring economic conditions to assess the need for further stimulus, the only economic report that will be relevant to the FED’s monetary decisions before their policy announcement on September 13^th will be the Non-Farm Payrolls report.

Furthermore, the numbers that came out for the past week weren’t horrific, but they also weren’t optimistic as well. So, I will remain long treasuries heading into the conference and trade accordingly with the sentiment of those speculating in treasuries

Daily Market Color 8/28/2012

Daily Market Color

8/28/2012

Yesterday’s Economic Reports & Headlines:

We had the Dallas FED manufacturing survey beating consensus with its business activity index coming in at (-1.6) Vs. consensus of (-6.0)

Over in Germany, we had the Ifo survey numbers which came in slightly lower than economists estimates, the Ifo survey is a West German business sentiment index

According to Bloomberg, Bundesbank bank head, Jens Wiedmann, is clearly against ECB buying PIIGS government debt and he is against giving any time extension to Greece to meet bailout terms, the Euro is drifting lower as result of the commentary

Today’s Economic Reports & Headlines

June’s S&P Case and Schiller Home Price Index beat consensus, registering a month over month 90bps gain and a year over year gain of 2.3%

We had the US Consumer Confidence report missing consensus coming in at 60.6 Vs. Est 65.8

Japan’s government cut its economic forecast for the first time in a year because of decelerating economic growth in the US and China coupled with European debt issues, the Yen is up 25bps as a result of the report, via Reuters  

Catalonia, the most indebted Spanish region, is expected to apply for $6.3bn in aid from Spain’s liquidity program, via Wall Street Journal

ECB President, Mario Draghi is expected to skip the Jackson Hole Symposium, via Wall Street Journal  

Trades

I will continue to remain long the 10yr Treasury note until the end of this week, but lately I have been questioning whether I should stay in the position during the Jackson Hole conference since commentary from 

Germany, France and Greece are very indicative of another debacle over bailout terms.

Angela Merkel and Jens Wiedmann are opposed to providing Greece a time extension, if Greece is asking for extra time to meet bailout terms then there’s a good chance that the Troika assessment report of Greece finances in early September should be all but pleasant, so, this could lead to renewed speculation of a Greek default

According to The Gartman Letter, France posted its largest month over month increase in unemployment since the depths of the recession and Spain’s highly indebted region of Catalonia is expected to request $6.3bn of aid soon, Europe could cause another period of flight to safety in September and that should be very supportive of treasury prices going forward

Daily Market Color 8/27/2012

Daily Market Color

8/27/2012

Today’s Economic Reports

Today we have the Dallas FED manufacturing survey coming out at 10:30am, economist are expecting a 6 point decline in business activity

At 12:15pm and 6:15pm we have two FOMC (Federal Open Market Committee) members speaking, market participants are anxiously awaiting their commentary on monetary easing

Headlines

Europe is turning into a waiting game. Markel and Hollande are waiting for the Troika’s assessment of Greece before deciding whether or not they should ease bailout terms; the report of that assessment is expected to be released in early September

If Greece is granted the extension then either two things would need to happen: 1. Greece will need more bailout funding or, 2. Greece’s bailout terms will have to be restructured, a restructuring of the terms should lead to another prolong period of uncertainty    

On the other hand, the European Central Bank is waiting for Germany’s court ruling on the legality of the ESM before providing details on their bond buying program

Germany court ruling is expected to be on 9/12/12, while the ECB policy announcement is on 9/6/12; since the ECB is going to wait for the ruling before elaborating on their bond buying plans, this indicates that the ball is in Germany’s court 

Trades

All of the uncertainty listed above coupled with the highly anticipated Jackson Hole Symposium, should be supportive of treasury prices in my opinion. We will continue to be long the 10yr Treasury note until the end of this week

Daily Market Color 8/24/2012

Daily Market Color

8/24/2012

Yesterday’s Economic Reports 

·         

      Jobless claims came in higher than expected @ 372k Vs. 365k Est

o   The downside surprise gave treasury prices a boost because the negative data is being perceived as one reason, among many, for the FED to provide stimulus on 9/12/12

·         New home sales were up 3.6% in July beating consensus coming in @ 372k Vs. 362k, with most of the gains concentrated in the Northeast and Midwest.

o   This is a two year high in new home sales

Today’s Economic Reports

·         Today at 8:30am, we had July’s Durable Goods Orders numbers coming in at 4.2% Vs. estimates of 1.9%, however, orders drop 40bps if you exclude transportation orders

o   Treasuries rallied on the report, because market players believe this will increase the probability of QE3

·         We also had second quarter GDP data that came out from the UK today, the report was in line with consensus; UK’s economy dropped 50bps, as a result the Pound is drifting lower

Headlines

·         The news was relatively light yesterday. Merkel and Hollande are in talks to find common ground in handling Greece debt woes along with the debt burdens of other peripheral Euro Zone members, according to Bloomberg

o   The request for additional time from Greek Prime Minister, Antonis Samaras, may go unanswered until the troika’s assessment of Greece’s finances

o   According to the IMF, Greece will need up to $14bn regardless of Greece receiving an extension to meet their bailout covenants

Trades

·         I’ll continue to be long treasuries going into next Friday; next week should prove to be eventful because of the following:

o   We have two FOMC members speaking on Monday

o   US GDP data will be released on Wednesday

o   And on Thursday we have Jobless Claims and Personal Income and Outlays

Daily Market Color 8/23/2012

Daily Market Color

8/23/2012

Economic Front Last Night

·         Existing Home Sales came in below estimates @ 4.47m Vs 4.50m

o   M/M rise of 2.3% & Y/Y rise of 10.4%

o   All regions showed gains except for the West

o   The report had a short lived effect on US equities yesterday

·       

      According to the FOMC Minutes released yesterday at 2:30pm, many members feel QE3 is necessary unless incoming information proved otherwise, via Bloomberg.

o   The dovish minutes pushed Treasuries higher, I went long one future contract on the 10yr treasury note and plan to close it before Jackson Hole

o   The FOMC policy decision on 9/12/12 will be conditional upon August non-farm payrolls report and GDP

o   Whether the FOMC decides to do QE3 or not, I expect volatility in treasuries on 9/12/12 and I plan to capitalize on it

·     

           Germany released flash manufacturing/services PMI data, they beat manufacturing consensus and missed services consensus, but both numbers were below 50 which signifies a contraction

·        

      Germany also released GDP data that was in line with consensus, growing 30bps  

·        

      EMU released flash manufacturing/services PMI data, they beat manufacturing consensus but missed services consensus, these numbers were also below 50  

^o     Despite the whimsical numbers, the Euro continued to climb higher against the dollar

^o     Market participants seem to be anticipating Mario Draghi’s commentary at the Jackson Hole symposium in addition to the ECB’s policy announcement on September 6^th 

^o     I will be looking to short the Euro on any surprise to the downside because the markets are rallying into expectations that I don’t expect to be met

Headlines

^·        According to the Congressional Budget Office (CBO) 2013 economic forecast released yesterday, US GDP will drop 50bps and the jobless rate will be above 9% if scheduled policy changes go through

^o     The 2012 deficit is expected to be 1.1trn, 100bn less than their forecast in March of this year

^·          Greek Prime Minister is asking the Troika for more time to implement reforms

^o     If Greece do not receive additional time that could push the Euro lower

^·          Japanese trade deficit came in larger than expected,  Actual (-517bn) Vs Estimates (-300bn)

^o     The Yen rallied nearly 100bps on the report, its coming into resistance at 1.280

^o     I am looking to short the Yen against the dollar because there is a low probability of future events within the next week to sustain the rally