Short recap
Asia lower
Europe opening mixed
Strong EUR to weigh on EU stocks soon
10-yr Trys yield above 2.75%
putting pressure on stocks
As dividend yield is not as
attractive as before and cost of financing for companies is getting higher
With recent rise in US
yields, economic numbers and improving earnings season
Are we going to see one 50
bps hike among all three hikes expected in 2018?
Equities
Apple likely to return half of USD 285 bln of cash
to shareholders
Amazon.com enjoying a record USD 2 bln profit
Royal Dutch Shell attacking Exxon Mobil
position of biggest cash generator
Daimler on the spending spree for electric and
autonomous vehicles this year
eBay dumping a privilege partnership with PayPal
Adding a Dutch fintech Adyen to payment service
Insurers looking at protection against cryptos
thefts
Saudi Arabia in strategic talks with China, Japan and
SoKo before Aramco listing
Earnings
Chevron, Exxon Mobil
reporting in the light of higher oil prices. Any surprises?
Merck
A bit of reflection…
Seems like 2-yr Trys yield is
giving more than dividend yield of S&P 500 stocks on average or…
Is the excess money from
bond markets flowing to equities or does it mean something else?
Something like valuations are
extremely high?
Number of Americans thinking
about stock markets being higher in one year from now hitting multidecade
records:
Well, two many too bullish…
Bonds
10-yr Trys yield at
2.79% vs 2.73% yesterday (20 bps from 3.00% mark)
30-yr Trys yield above 3.00%
Yield curve keeps flattening
despite recent spike in short term yields
But 10-yrs touching 3% could
help USD
Credit spreads in speculative
bond space have been tightening over the past years
With lots of money flowing
there, higher Trys yields may reverse flows
If US yields keep rising what
in turn can send volatility waves across all markets
VIX is already trading above
10, the level that acted as a resistance for quite some time
10-yr Bund yield at
0.73% vs 0.70% yesterday
More and more EZ bond yields moving above zero level
Italy in or out?
Probability of Italy leaving EZ still elevated since
Constitutional vote
ECB and Bank of Italy have a problem – holding over EUR
100 bln of debt
Once ECB stops tapering, IT bonds will suffer on the back
of debt to GDP ratio being higher than pre crisis
Thus sending shock waves through periphery
Luckily, majority of the public supports more EU
integration
Despite
immigration and EU criticism
Parliament elections (Mar 4) to be a lose call
There's been a distinct
shift in currency markets that explains why the US dollar is getting hammered link
Something strange is underway in currency markets at
present…
EURUSD
Markets focussed on USD
weakness and potential ECB taper, now holding pretty firm
Bids sitting below 1.2490
Stops seen above 1.2540-50,
if broken we can visit highs of 1.2570 and 1.2602
To watch also 1.2597 (61.8%
Fibo of 1.3992/1.0340 move)
EUR 1.1 bln options with
strikes between 1.2495-1.2500 expiring today
Important 1.2516 (38.2% Fibo
of 1.6038/1.0340 move)
Support 1.2398 (10 DMA),
1.2305 (23.6% Fibo) and descending trendline (highs 2008, 2011, 2014)
USDJPY
BoJ special operations helped
the cross higher
Offers seen ahead of 109.75,
110.00 and stops above
Bids may be around option
expiries (USD 2.3 bln strikes 109.00-35)
Support 109.45 (10 DMA),
109.06 (76.4% Fibo) and 108.12 & 107.31 lows
Resistance 110.14 (61.8%
Fibo)
Crude Oil
Crude oil - US producing 10 mln barrels a day, putting enormous
pressure on OPEC
But strict adherence to
production cuts by OPEC and Russia support the prices
China overtaking US as a biggest crude importer
Latest correction seems not to do any harm to long
speculative positions held by funds
GS upgraded Brent forecast that should hit 82.50
level by summer
Bitcoin
Well, few accounts holding huge amounts link
Data/events
ECB’sCoeure (1000 MGT)
ECB’s Villeroy (1400 GMT)
US NFPs
Bar high for any surprise to
support USD
Payrolls 180k exp vs 148k
prior
Unemployment rate 4.1% exp vs
4.1% prior
Average earnings (m/m) +0.3%
exp vs +0.3% prior
Average earnings (y/y) +2.6%
exp vs +2.5% prior
Strong labour market
supporting consumptions
But earnings may disappoint
despite minimum wage and bonus increases
If not, market will start to
speculate about quicker rate hikes this year
Fed’s Kaplan (1830 GMT)
Fed’s Williams (2030 GMT)
Feb 3 – Powell taking office as
Fed Chair (he is a lawyer and not economist)
Feb 16 – Chinese New Year
Mar 4 – Elections in Italy
Should you have any questions
feel free to contact me anytime.
Good luck Champs!
Mr Hawk
DISCLAIMER: This material was
created for informational purposes only and represents the Land of Trading
team’s view of the past and current economic and capital market environment. It
is not an investment advice and should not be viewed that way at all, and the
creators of this material cannot be held liable for any potential losses
resulting from trading, where despite this disclaimer someone would consider
this material as an investment advice. All rights reserved ©2016. Contact:
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