June 22, 2017 - Market Update (Harley Davidson buying Ducati, PIMCO on Chinese bonds, Frankurt to top London, Brexit laws blocked by Scots and Lords?, New US healhcare bill coming)

Short recap

Asia higher as oil found some ground

Europe mixed

German FinMin out with Frankfurt a good alternative to London

As ECB and banking oversight is there

Luring European Banking Authority there as well

Likely to cut taxes

PBOC not planning to shrink the balance sheet as Fed does

Macron – stronger integration of EZ to come (via common budget)

Brexit – getting tougher for May as Scottish parliament and House of Lords may unite with some MPs (Liberal and Labour) to block necessary Brexit bills

US pushing China to do more on North Korea

New healthcare bill is coming to life but watch the clash between Senate and the House

Equities

Ok to stay long equities on valuations but some macro worries appearing and volatility is extremely low

A time to buy protection going to lousy summer trading and position before wild Q3?

Harley Davidson eying to buy Ducati (belongs to Volkswagen/Audi portfolio) (EUR 1.5 bln)

Diageo buying tequila brand Casamigos (owned by George Clooney) for about USD 1 bln

Nike to sell directly on Amazon.com

RBC to cut jobs in order to push new technology

Cenovus having hard time to sell assets as oil prices are low

Wal-Mart and GM driving renewable energy sector as the largest buyers

Fed to release banks stress test results

Bonds

10-yr Trys yield at 2.15% - under pressure from falling oil and commodities

10-yr Bund yield at 0.26%

PIMCO on Chinese bonds:

Inverted yield curve pointing to stress (10 yr CGB yield dropped below 1 yr yield)

Result of tightening by PBOC and lower liquidity

Growth to decelerate into 2018

Stress in interbank market to be taken seriously

US high yield credit spreads widen on the back of stress in energy sector

That needs to cope with high debt (still growing) versus lower operating income from low oil prices

EZ bond yields diverge depending on the debt load (top EZ countries from lowest to highest)

Used to move in tandem

Germany, Finland, Netherlands, Austria

EURUSD

In the absence of data, the flows will be affected/limited by expiring options:

1.1000 (EUR 1.3 bln), 1.1090-1.1100 (EUR 1.87 bln), 1.1140 (EUR 423 mln), 1.1160 (EUR 800 mln) 1.1175 (EUR 2.2 bln), 1.1200-10 (EUR 1.7 bln), 1.1250 (EUR 2 bln), 1.1275 (EUR 660 mln) 1.1300 (EUR 74 5 mln)

Break of 1.1178 (10 DMA) to negate the trend lower

Next resistance at 1.1187 (23.6% Fibo)

Support at 1.1120/30, 1.1100 and then 1.1067 (50.0% Fibo)

USDJPY

Resistance at 111.24 (50.0% Fibo), 50 DMA at 111.15, 200 DMA at 110.85

Bidding interest on importers side on dips, while offers from exporters sit above 111.50

Stops below 111.00

Experiencing a strong correlation with real yields

Thus correction in US yields and oil higher to weaken the JPY

Expiring options will likely drive the market:

110.00-10 (USD 1.9 bln), 111.00-10 (USD 2.7 bln,) 111.50 (USD 690 mln) 111.80 (EUR 575 mln) 112.50 (EUR 1.7 bln)

Data/Events

EU Summit

ECB General Council meeting

ECB’s Hakkarainen (0820 GMT)

Fed’s Powell (1400 GMT)

Fri

Fed’s Bullard (1515 GMT), Mester (1640 GMT), Powell (1815 GMT)

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: landoftradingATgmailDOTcom

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June 21, 2017 - Market Update (China A-shares in MSCI, Oil dropping, Energy stocks on negative but getting closer to attractive, EUR down on risk off this time, Geopolitical risks ongoing, Queen's speech)

Short recap

Asia – risk off with miners, energy and banks in red

China shares slightly higher as MSCI decision was largely priced in

Europe opening lower

Oil dropping like a stone on rising Libya and US rig production, while OPEC not able to cut more

And rebalance the market, officially entering the bearish territory

Japan facing declining domestic demand and labour shortage, result of aging population

North Korea testing nukes again?

Be aware of still on going geopolitical risks: Qatar, Saudis, Syria, Russia, North Korea and Trump’s reaction

S&P likely to cut UK rating (Brexit – short time, high risks)

Equities

China A-shares included in MSCI Emerging Markets index (to add 222 stocks)

Full inclusion can take 9+ years due to size, access, capital flow restrictions…etc.

Initial weight of 0.73%, when fully completed, China would represent 20% of the index

Thus USD 340 bln of a flow in

Near future market to expect up to USD 18 bln (until May/Aug 2018)

Proving China is getting more internationally integrated

Energy stocks still negative view on falling oil prices but…

…may be getting closer to attractive levels

Huge risks are credit events as industry copes with high debt (still growing) versus lower operating income

Comment from last week as a reminder:

“Resources stocks to offer an interesting value

In particular energy but need some credit events and cleaning within the space

Canadian Natural Resources, AltaGas, Roxgold can be looked at”

Novartis having advantage over vision treatment from Regenerom Pharmaceuticals

Aviva dropping its exposure to tobacco companies

Apple fighting with Qualcomm over chip license, saying they are invalid

Ford to relocate part of Focus production to China (a bit of opposite to Trump wishes)

Boeing very positive on 737 and demand growth

Banks to pick a new alternative to LIBOR

Huge valuation gap between DM’s techs and their peers from EM space

Bonds

10-yr Trys yield at 2.16%

10-yr Bund yield at 0.26%

Fed hike priced at 21% (Sep) and 43% (Dec)

EZ credit spreads hitting lows seen back in 2014

On chasing yields in corps and lower rating issues, thus redirecting flows from developed markets

EURUSD

This time risk off should be negative on EUR

As the market may reduce positions/risk-on flows to EZ assets

And prefer USD and JPY

Saw profit taking and liquidation in EUR crosses

Only breaking 1.1179 (10 DMA) can negate the trend lower

Support at 1.1120/30, 1.1100 and then 1.1067 (50.0% Fibo)

Resistance 1.1187 (23.6% Fibo)

USDJPY

Resistance at 111.81 (Ichimoku), 100 DMA at 111.82

With large offers from 111.85

Support at 111.24 (50.0% Fibo), then 111.00 with stops below

50 DMA at 111.11, 200 DMA at 110.80

Large expiring options between 111.25-30

Importers likely looking to buy dips towards 110.00

While exporters to sell above 111.00

GBPUSD

Heavy with line in the sand at 1.2500

1.2629 (100 DMA) and 1.2552 (200 DMA)

Bids ahead of 1.2600, stops seen below

NZDUSD - 0.7100 in sight if no hawkish surprise from RBNZ

EURJPY – 122.50 attractive

Data/Events

Brexit - Queen’s speech 1030 GMT, later to be discussed what may usually take up to 5 days

GE’s Schauble speaking

ECB non-monetary meeting

BOJ’s Kuroda speaking

Thu

EU Summit

Fed’s Powell (1400 GMT)

Fri

Fed’s Bullard (1515 GMT), Mester (1640 GMT), Powell (1815 GMT)

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: landoftradingATgmailDOTcom

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