June 2, 2017 - Market Update

Short recap

Asia up on risk on, Nikkei 225 attacking 2015 highs

Europe opening in green

Risk on can continue but need good NFPs

The last nail to the US international supremacy (seen as the Fall of the Roman empire sort of) is Trump pulling out of Paris Climate Accord  link

Trade sanctions on US polluters may follow

On the other hand I like this one from FR president "Make Our Planet Great Again"

Oil on defensive on Trump pulling out of Paris accord and still rising US production

As US drillers likely to increase production/supply

Fed’s Powell – US economy healthy, on track to make 3 hikes this year in total

Equities

Trump pulling out of Paris accord could cost US jobs, innovation and production in green industries

And cause the lagging in development against the world

Linde-Praxair merging (USD 73 bln) and creating a global leader in the field

Audi facing emission scandal

Baidu to entering the field of self-driving cars with Bosch and Continental

Google to be fined by EU

Deere buying Wirtgen Group (USD 4.9 bln) t diversify business

Bonds

10-yr Trys yield at 2.22%% - in case of bad surprise in NFPs, the 2.16% critical

10-yr Bund yield at 0.30%

BoJ reached the same size balance sheet as Fed (USD 4.5 trln)

Thus tripled it since 2013

DXY

Strong ADP had no effect on USD or yields

As there is an erratic correlation between ADPs and NFPs

And US inflation is a question mark for many

EURUSD

Tight range around 55 HMA (1.1217) that is steadily moving higher

Resistance at 1.1267, 1.1300 and 1.1500

Support at 1.1200 and 1.1166 (23.6% Fibo)

USDJPY

Seems to be getting ahead of US yields

Bad surprise in NFPs having much bigger impact

Resistance at 111.80 (Ichimoku), 112.00 (38.2% Fibo) and descending trendline

Support at 111.24 (50.0% Fibo), 110.50 (61.8% Fibo) and 200 DMA at 110.30

Gold

Resistance at 1286 (76.4% Fibo) and descending trendline

Market not ready to break it as may see strong profit taking funds substantially increased exposure (COT May 23)

Support at 1255 (61.8% Fibo)

Oil – very interesting piece on the future of oil  link

Oil companies now tilting toward renewable energy, such as Norway’s Statoil ASA, are best placed to survive peak demand, said Deutsche Bank AG. Exxon Mobil Corp.—due to its size and “reluctance to change”—is the most vulnerable.

State-run giants of the type that dominate the Organization of Petroleum Exporting Countries are even more at risk and could one day be left with billions of barrels of unwanted crude.

Data

US NFPs 185k exp vs 211k prior

Unempl. rate 4.4% exp vs 4.4% prior

Average earnings +0.2% exp vs +0.3% prior

Market expecting strong jobs growth after stellar ADP

Earnings on moderate side but market focusing on

ECB’s Nowotny (1200 GMT)

Fed’s Harker (1645 GMT)

Fed’s Kaplan (1700 GMT)

EU-China Business summit (Juncker/Li)

June 8 – ECB meeting – Draghi being alone but inflation data from US and JP suggesting ECB to carry on with ultra-loose stimulus

ECB likely to adjust the risk to economy wording but no change to asset purchases

June 8 – UK elections including Scotland, if SNP/Sturgeon wins the independence referendum likely to follow

June 8 - Former FBI director James Comey to testify before Senate

June 11/18 – French Legislative (Parliamentary) elections (a big question mark for Macron to gain majority)

June 13/14 – FOMC meeting – hike probability was at 89% after yesterday’s data. If data supportive, we may see one hike in June, then in Sept followed by balance sheet reduction announcement in Dec

June 15/16 – EcoFin meeting to discuss Greece

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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