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Macro

China RRR Cut, Trump Tariffs Monday Drivers


Morning Briefing June 25th 2018


Its a mixed data day across Europe and the US Monday, with mainly second tier data expected, although the German Ifo survey will be closely watched.

The European calendar kicks off at 0700GMT, with the publication of the Spanish May PP1 data.

At 0900GMT, the German Ifo business climate survey is published, giving an update on how corporate Germany sees the economy.

ECB Governing Council member Ewald Nowotny participates in a press conference "Art. IV Consultations of the IMF - peer review of Austria", in Vienna, starting at 0830GMT.

Across the Atlantic, the US calendar gets underway at 1400GMT, with the release of the May new home sales and the May Building permits revisions.

New home sales are expected to rise very slightly to a 665,000 annual rate in May following a small pullback in April. Unadjusted sales were up 14.3% from a year earlier in April. Meanwhile, home supply was up 0.7% month/month and 12.4% year/year, so the supply is there if demand increases.

The Dallas Fed manufacturing survey is set for publication at 1430GMT.

San Francisco Federal Reserve Bank Acting President Mark Gould will give the opening remarks at the Symposium on Asian baking and Finance in San Francisco, starting at 1600GMT.

Global Economic Trading Calendar


Markets


CHINA RATES: The 7-day deposit reverse repo average in China's interbank market was 2.6592% on Monday, lower than 2.7260% on Friday, according to Wind Information. Overnight deposit reverse repo average was last at 2.5286%, lower than 2.5455% on Friday.

CHINA YUAN: The yuan opened at 6.5200 against the U.S. dollar Monday, weaker than Friday's official close of 6.4964, and also weaker than today's central parity rate of 6.4893 set by the PBOC. The yuan is clearly trending weaker which is likely exactly what the PBOC wants amid the increasing threat of a trade war. The next level of support for the pair comes in at the congestions zone around 6.60, and it looks as though this level could be hit in the near term.

US TSYS: US T-Note futures pushed higher in the morning following reports that the US is planning to restrict Chinese investments in Us companies. The 10 year is up 0.18% and a break of the June 19 high of 120-06 would confirm a bullish trend and set the bulls sights on the May 30 high. - The 2-year note has also pushed higher but this has not stopped the 2s-10s curve from flattening to a new multi-year low of around 40bps. - Breakevens have not followed yields lower, causing real yields to edge lower. 10-year inflation-linked bond yields are now 20bps off of last months high and are pointing towards reduced expectations of an economic boom. - T-Notes last at 120-01, US Tsy ylds: 2Y 2.529%, 3Y 2.625%, 5Y 2.746%, 7Y 2.832%, 10Y 2.875%, 30Y 3.023%.

AUSSIE BONDS: Aussie bonds have drifted higher in line with US futures on the back of a renewed flare up in tensions between the US and China. The 10-year future sits at 97.365, slightly off of its daily highs but still above Friday's high. - the 3-year has also edged ever so slightly higher, sending the 3s-10s curve below its June 20 lows at just 53.8bps.  - Inflation-linked bond yields have also edged lower in a continuation of the recent trend, spurred on by the drop in US real yields. - The AU-US 10-year spread is pretty much flat at -24.8bps, close to its lowest level since the early 1980s.

US TSY FUTURES: Extending session highs again as US$/Yen slips to 109.74, -.23. Underscoring risk-off support, trade tiff update from recent headlines: WSJ "Trump Plans New Curbs on Chinese Investment, Tech Exports to China" followed by Financial Times article saying "Trump administration has decided to restrict Chinese investment in US companies and start-ups in sectors from aerospace to robotics."

FOREX: The major theme in FX markets today is the outperformance of the yen, something we have been flagging up over the past week. The unit the only Asian currency up on the day, gaining 0.39% amid a sea of red, with the KRW underperforming with a 0.7% loss. - USDJPY is pushing below support at the combination of its 50DMA and the uptrend from the March low. The next meaningful level of support comes in at 108.05, corresponding to the May low and the current 100DMA. - AUDUSD has edged lower following Friday's solid gains, with the negative 10-year real yield differential with the US continuing to weigh on the currency. The trend remains for further weakness and the June 21 low looks set to be tested again in the coming days. - It's a similar story for the Kiwi with the bounce off of support around 0.68 lacking any conviction and suggesting a retest could be on the cards. - The won's bear market appears to be just beginning given the deterioration in the country's real yield advantage over the US in recent months. The pair is heading to the next level of resistance which comes in at 1,150).

Technical Analysis


BUND: (U18) 21-DMA Support Key This Week

*RES 4: 164.19 2018 High May 29
*RES 3: 163.03 High May 30
*RES 2: 162.84 Bollinger band top
*RES 1: 162.35 High June 21

*PREVIOUS CLOSE: 162.13

*SUP 1: 161.80 Low June 22
*SUP 2: 161.26 Low June 21
*SUP 3: 161.11 21-DMA
*SUP 4: 160.85 Hourly resistance June 15 now support    

*COMMENTARY: Support emerging on dips back towards the 21-DMA provided the impetus for a rally Thursday that sees immediate focus on 162.84-163.03 and overall focus on 2018 highs and the weekly bear channel top (164.48). The 21-DMA is key support this week. Bears need a close below the 21-DMA to ease bullish pressure and shift initial focus back to 159.37-160.22 where the 55-DMA (159.55) is situated. Bulls look for a close above 162.35 to add support to their case.
 

EUROSTOXX50: Supported Ahead Of 100-WMA For Now

*RES 4: 3560.56 High May 24
*RES 3: 3540.64 High June 15
*RES 2: 3505.02 Low June 15 now resistance
*RES 1: 3469.94 Hourly resistance June 18

*PREVIOUS CLOSE: 3441.60

*SUP 1: 3398.65 Bollinger band base
*SUP 2: 3389.59 100-WMA
*SUP 3: 3383.17 Alternating daily support/resistance
*SUP 4: 3300.50 Low Apr 4

*COMMENTARY: The 3383.17-3389.59 support region where the 100-WMA is located confirmed significance last week with bears needing a close below 3383.17 to confirm a break of the channel base and 100-WMA and target 2018 lows. The Bollinger base is the key concern for bears and limits follow through. Bulls still need a close above 3469.94 to gain breathing room and above 3505.02 to shift focus back to 3540.03-3600.36.

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This article is from Eurex Exchange and is being posted with Eurex Exchange’s permission. The views expressed in this article are solely those of the author and/or Eurex Exchange and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Technical Analysis

Raw Sugar (SB) Bounces Off 2 Month Uptrend Support


Raw Sugar (SB) continued bouncing higher Friday off a 2 month uptrend support (on the 4hr and daily chart), and is nearing the end of a symmetrical triangle (on the 4hr chart).  A successful break above the same triangle's resistance will likely pave the way for a test of the downtrending resistance line (on the daily chart) this week.  The weekly, daily and 4hr RSI, Stochastics and MACD are bottomish, rallying or consolidating recent gains.  I am long as of last Thursday and Friday at an average price of .1247, targeting the red zone for mid week.  The amber/yellow zone is where I might place a stop if I was a swing trader (although in my personal account with which I seldom hold overnight I set my stops tighter).
 
Raw Sugar (ICE SB Oct18) Weekly/Daily/4hr
 
 
Click here for today's technical analysis on VIX, Nasdaq100
 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures and spot FX markets can be analyzed to enhance trading performance. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE/Eurex futures (commodities, equity indices, and interest rates), spot FX and cryptocurrency markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

 

 


18680




Futures

Tradable Events this Week


1. Trade Tensions

This coming week is much busier than last, but we cannot pretend the most important developments don’t rely on U.S and China trade relations. In fact, next Friday’s deadline (July 6th) to impose tariffs looms so heavily that it could affect the second quarter’s home stretch. Last week, it seemed that for the few hours trade was not in the picture, stocks made a valiant effort to bounce. With the July 4th holiday falling on a Wednesday, this places extra pressure on portfolio managers who are not only eyeing the Hamptons but the end of a quarter that the S&P is 8% from its low and the NQ and Russell 2000 are 14% from theirs. The question here becomes, if the week begins to unfold and there is no light at the end of the quarter, will there be selling? On or by Saturday June 30th, the White House is expected to announce a plan to restrict Chinese investment into the U.S and limit tech exports. Without this or the $34 billion in tariffs expected to be imposed on July 6th being addressed many investors are likely to get uncomfortable in their seats. We maintain our belief that a full-blown trade war is not priced into equity markets.

 

2. U.S Data

There are three crucial data reads we are eyeing this week. The first, CB Consumer Confidence, is delivered on Tuesday at 9:00 am CT. Most importantly, this is a June number and will give us the latest insight into the consumer with fresh trade and political tensions in the air. Most importantly, a miss here could start to ring a tone that Fed Chair Powell spoke of last week; economic data has yet to price in trade. Next up is Durable Goods on Wednesday. The Core read, excluding transportation items, handily beat expectations last month. However, both the headline and Core reads have waffled over the last few months, mostly poorly. Philly Fed and Manufacturing PMI both missed last week with poor orders. Durable Goods will help signal how much the manufacturing sector is falling out with tariffs in the picture. PCE is the Federal Reserve’s preferred inflation indicator and this data point is due on Friday. The Core number excludes food and energy, two volatile sectors over the last 30 days. Regardless, the headline and Core will be very important given that the Fed just projected two more hikes this year totaling four. Also, New Home Sales are due Monday, Case Shiller House Price Index Tuesday and Pending Home Sales Wednesday.

 

3. Eurozone Data

Kicking off the week is German Ifo Business Climate on Monday at 3:00 am CT. In April, 102.1 was the worst read since November 2012. European confidence and sentiment data has struggled mightily in recent months given the Syrian conflict, regional politics (Brexit, Spain, Italy, etc) and trade uncertainty with the U.S. The May read missed expectations and came in at 102.2. Monday’s report is expected at 101.9. The Euro finished Friday 1.3% from the lowest level in a year and German Ifo will surely set a tone to begin this week. Looking out to Friday, this will be a crucial day for inflation. A fresh June Eurozone CPI number is due at 4:00 am CT. Expectations point to 2.0%, a number that if beaten will surely spike the Euro ahead of the U.S PCE read.

 

Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

Visit our website at www.bluelinefutures.com to open an account and stay up to date with our research.

Bill Baruch is President and founder of Blue Line Futures. Bill has more than a decade of trading experience. Working with clients he focuses on developing trading strategies that present a clear objective for both long and short-term trading approaches. He believes that in order to properly execute a trading strategy, there must be a well-balanced approach to risk and reward.

Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER which followed running a trade desk at Lind Waldock and MF Global.

Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications. 

Blue Line Futures is a leading futures and commodities brokerage firm located at the Chicago Board of Trade. We work with clients that range from institutional to professional to novice and from self-directed to broker-assisted. No matter what type of trader you are, our mission is simple; to put the client first. This means bringing YOU strong customer service, consistent and reliable research and state of the art technology. 

This article is from Blue Line Futures and is being posted with iBlue Line Futures’ permission. The views expressed in this article are solely those of the author and/or Blue Line Futures and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


18679




Options

Barron's - Picking Winners and Losers in Trade Wars - By Gunjan Banerji


Betting on—or against—trade wars is tougher than it seems.

Talk of escalating conflicts between the world’s biggest economies has jolted investors, sending major stock indexes into tailspins. On Tuesday, U.S. stocks saw steep declines before rebounding the next day.

The mixed reactions indicate just how challenging it is to pick eventual winners and losers of multinational political struggles over tariffs. “Markets are very good at pricing risk, not so good at pricing uncertainty,” says Steve Sosnick, the chief options strategist at Interactive Brokers.

Investors are more skilled at dealing with probabilities—for instance, calculating whether or not portfolios are hedged if a stock loses almost half of its value—than tackling more nebulous signals like saber-rattling, Sosnick says. The winners and losers of trade policies can be random and specific, with the future path of negotiations difficult to quantify.

This could explain why market volatility ebbed lower recently and some stocks and sectors have darted in different directions. For example, this month shares of Canadian companies have rallied, while Chinese stocks have plummeted—but both countries could be hit by U.S. tariffs. And shares of small companies and the tech-heavy Nasdaq Composite have swept to new highs while larger companies haven’t kept up.

Trade proposals can be hyperspecific, which makes it difficult to make a generalized bet covering different groups, Sosnick says. For example, even though not all industrial companies may be hurt by tariffs, an exchange-traded fund tracking industrials has lost 3% of its value this month.

Even small-cap stocks—which have remained insulated from trade fears—could quickly see their fortunes turn if geopolitical tensions intensify, analysts say. Small-company shares are thought to be under less of a threat from a trade war because they generate fewer of their revenues from abroad.

However, because many supply larger U.S. companies, which are exposed, they could be sucked into the trade drama, analysts say. Shares of small companies have run up 10% this year, racing past the S&P 500’s 3% gain. The small-cap Russell 2000 hit a record on Wednesday, though it edged lower along with other major stock indexes on Thursday.

Some believe investors are overestimating the degree to which small-caps will remain protected from trade tensions. “If this all goes bonkers, small-caps don’t provide you any protection,” says Sosnick.

Shares of small-cap companies can be volatile. They rallied after the 2016 election, then faded last year. Investors seeking protection from a selloff in this sector—banking that it may not be as immune to trade tensions as it appears—could tap so-called options put spreads on the iShares Russell 2000 exchange-traded fund (ticker: IWM), says broker Cantor Fitzgerald. The $49 billion ETF—which counts companies like GrubHub (GRUB) and Sarepta Therapeutics(SRPT) among its biggest holdings—is currently trading around $168.

The trade entails buying one put option contract below where the ETF is currently trading, and simultaneously selling one at an even lower price. Investors could do this for the ETF hitting $162 and $150, respectively, Cantor Fitzgerald says. Selling an option with a lower strike price, or the level at which the contracts can be executed, can help finance the entire trade. (A put option gives holders the right to sell a stock at a certain price and time. Each option contract allows investors to exercise 100 shares.)

For example, an investor could buy 100 put option contracts and sell 100 contracts with an expiration date of Aug. 17, betting that the ETF will trade at $162 or lower, roughly 4% below its current price, and sell 100 put option contracts tied to the $150 level. If the fund crosses $162, investors could sell the shares and protect themselves against further downside, until the fund reaches the $150 level. If the fund continues to rally, the entire investment of about $12,200 would be lost.


Gunjan Banerji covers options for The Wall Street Journal.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


18678




Stocks

Finimize - Don't Cry For Me, Argentina (And Saudi Arabia)


 

What's going on here?

Stocks of companies in Argentina and Saudi Arabia are set to be added to a major benchmark of emerging markets (EM) stocks by MSCI. The news sent stocks in these markets soaring by as much as 5%.

What does this mean?

Well, it’s a pretty big deal. Passive investments – often made by firms which look after your pension money, or robo advisors – in groups of companies compiled by MSCI and others amount to $14 trillion. This new inclusion, starting next summer, will make it much easier for foreign investment to go into Argentina and Saudi Arabia.

The new inclusions will also mean the EM group of companies (a.k.a. index) is less skewed to potentially volatile sectors like technology (which is big in Asia) – providing likely welcome diversification for those investing in high-growth economies.

Why should I care?

For markets: A potential boon for the biggest ever IPO.

Saudi Arabia has been increasing diversification of its economy in order to boost investment into the country, which offers access to substantial natural resources and potential for high economic growth. Inclusion in the MSCI opens the floodgates to a new wave of potential investors, who may potentially be interested in the biggest IPO ever in 2019.

The bigger picture: Argentina rises from the ashes.

The MSCI inclusion could help to bring Argentina’s recent economic troubles to a close – its stock index has sunk by 37% and the value of its currency has fallen 33% in 2018. The country recently got a $50 billion financing deal from the International Monetary Fund (IMF, the bank for countries) to help stabilize its economy. The MSCI inclusion will see more money coming into the country, helping it to balance the ship.

 

                                                              Thu June 21, 2018 • Image source: Ali Al-Awartany / Shutterstock.com

Finimize is the daily email that everyone in finance secretly reads. It's the perfect 3-minute cheat sheet on what happened in the financial news: it's free and without any jargon or as Forbes puts it “Super digestible and well-written. A+”. All content is created by the Finimize team, formerly @Goldman Sachs, Barclays, etc. Join more than 200,000 daily readers.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This article is from Finimize and is being posted with Finimize 's permission. The views expressed in this article are solely those of the author and/or Finimize and IBKR is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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