OVERNIGHT OUTLOOK REPORT / APRIL 7TH

OVERNIGHT OUTLOOK REPORT

OPENING 1AM LEVELS:

DEBT:  30 Year:  165.12 10 Year: 130.23  5 Year: 121.09(2)

Bund: 164.00  Bobl: 131.27  Schatz: 111.80

METALS:   Gold: 1,230.00 Copper: 2.1465 Nickel: 8570  Steel: 244

                      Rebar:  411   Iron Ore:  53.00 Aluminum: 1517

OIL:  Wti:  38.12  Brent: 40.14

CURRENCIES:  Euro: 114.37 Yen: 92.03 CAD: 76.68 AUSSIE$: 75.97

INDEXES:  MINIS: 2059.00 DAX: 9,684 STOXX: 2841

 

1AM OPENING THOUGHTS:

YELLEN YELLEN YELLEN!

Well she did it again!  More dovish comments and more dollar weakness!

The first thing I noticed coming in and looking at was the currency levels, especially the Euro and the Yen.  At some point and time, you have to feel somewhat bad for them there.  They just keep trying to fight deflation by cutting rates and doing QE and it feels like Yellen is just killing everything they are trying to accomplish.  I just wonder when she talks about concerns internationally who she is concerned about?  I think it is China… Only thing that makes sense.

The Asian session again was mixed with the Nikkei +.22% to 15,749.84 and the Shanghai -1.35% to 3,009.51.  The YUAN was fixed -47 pips lower and the PBOC only injected CNY10 BLN via 7 day reverse repos.

Yesterday I talked how we were going to possibly see an oil dominated market.  It looks like we saw that yesterday, and I would think this would continue.  We kind of got that double barrel yesterday with bullish inventories and then Yellen.  I would think we would be sensitive again tonight to Oil & US $ moves.

Nothing has really changed in the chart for the minis.  Still just locked in the 2028.50 – 2067 range.  Short term I think holding below 2058 we can test 2048.  Again… Not much there.  I heard yesterday that we have some of the biggest short positions since 2008 again.  Not sure what to take of that information!

So far it looks to be a slow night… Curves and Currencies are in line.

OVERNIGHT HIGHLIGHTS:

*SHANGHAI CLOSES -1.35% to 3,009.51

*NIKKEI CLOSES +.22% to 15,749.84

*PBOC SET YUAN RATE AT 6.4707 Thursday vs. 6.4754

*BALTIC DRY INDEX AT 500 (52 week Range 290 – 1,222)

*CHINA INJECTS CNY10 BLN VIA 7 DAY REVERSE REPOS

*TELEGRAPH:  North Sea oil profitability plunges to near 20 year lows

*REUTERS: JP Morgan’s Dimon warns of economic trouble from Brexit

*REUTERS: US needs long-term growth plan, not more stimulus: FED’s Bullard

*BLOOMBERG: FED’s cautious approach on April rate hike raises stakes for June

*REUTERS: FED’s Kaplan says caution on rates does not mean standing still

*REUTERS: FED’s Kaplan sees sustained, gradual US rate hikes

*REUTERS: Investors bet again on the return of inflation – Demand for US

*REUTERS: China exporters expect improved trade performance in 2016

*TELEGRAPH: China’s debt explosion threatens financial stability, warns Fitch.

*BLOOMBERG: Yen gains to 17-month high as Japan jawbones, Fed seen dovish

*REUTERS:  Japan MOF warns on YEN rises, says ready to intervene.

*BLOOMBERG: Japan is fast approaching the quantitative limits of quantitative easing

*FITCHRATINGS: Conduct risk a growing threat for Australian banks

*WSJ: FED sends signal that April rate hike is unlikely

*FED MESTER:

-Waiting too long has risks and appropriate to gradually reduce accommodation this year.  FED is not behind the curve

-Underlying US economic fundamentals remain sound

-FED policy to remain accommodative for some time, but doesn’t forsee need for further accommodation.

-See US growth at moderate 2.25% - 2.50% this year

-Inflation to remain low in 2016 and move to 2% target over a couple of years.

-FED has a growing recognition of the impact of global developments on the US

*FED GEORGE:

-Not at risk right now of tightening

-Moving at a gradual pace is allowing a lot of the accommodation to remain

-Slowly moving on a path to put rates close to where the economy is performing.

-Concerned about creating imbalances that are not visible at the moment

*FED BULLARD:

-Data since March has been mixed, but highlighted April jobs data as another series of good reports

-Tepid growth and weak outlook are a bigger concern than the US labor market

-Inflation expectations are recovering and that is comforting

-Bullard could support a hike if inflation expectations rise, and FED should continue to normalize policy

*FED KAPLAN:

-US economy is resilient and seeing some progress on inflation

-FED rate path remains gradual and cautious and appropriate to remove some accommodation this year

-Being cautious does not mean standing still

-A lot easier for the FED to tighten policy than to ease

-Global economy has more impact than ever on the US and FED must be aware of external vulnerabilities

-Policy makers should not speculate on future moves but approaching period when FED can take next hike

-Impact of low oil prices are transitory

*ECB PRAET:

-Policy since ECB’s package in 2015 have been effective

-Repeats that structural growth cannot depend solely on monetary policy

-Without ECB policy, Euro Zone CPI would have been negative last year

-Measures have supported output and inflation

-What we have not seen yet, however, is a significant recovery in the path of either headline or core inflation.

-Inflation remains weak due to new shocks

-Persistence of negative rates could be worrisome

-2 to 3 years of negative rates could damage some banks business models

*ECB’s CONSTANCIO:

-Europe facing a number of challenges simultaneously

-ECB doing its part and will continue to do so

-However monetary policy cannot do all the work and must be supported by other areas

-ECB will do whatever is needed to pursue price stability

-ECB trying to foster growth and close output gap

-Leaving monetary union unfinished leaves Europe fragile to shocks

-Beginning to see second round low inflation effects

OVERNIGHT THOUGHTS:

Tonight we saw some extreme Euro moves early in the night.  The old high in the Euro was 114.62(5).  The Euro opened at 114.37 at the 1am open.  It continued to gain strength, and then spiked above the 114.62(5) area and traded 114.76 to make for a new contract high.  At the time the YEN was keeping pace also and traded above the 92.00 area.  Then the Euro turned down really hard… Skipping prices and traded to 114.04(5) and later breaking through the 114 handle.  From what I can find it seemed to be off of some ECB comments and speculation of more QE.

What was impressive on this move down was the Aussie $, and CAD got smoked.  The YEN rallied strong… A straight look at risk off!  What is difficult through this was that they bought the Euro Stoxx at first and selling minis.  The market took into account only the Euro sell – off.  BUT it truly turned into a monster Euro / Yen move.  Which we have not seen in awhile.  Euro / Yen spread is down over 175 pips, and is a big move.  Later the equities all sold off with minis breaking through 2050. 

We also had some sweeps up in Gold and sweeps down in Copper.  We had one of the biggest sweeps I have seen in Copper overnight in awhile, and moved from 2.15 to 2.11.  We did not see much reaction in this to the equities at the time, but it did seem to turn the Aussie $ lower.  The Gold sweeps came in two $5 moves… This was right before the equity break, and seemed to start the moves.

Oil has just been on a slow drip lower throughout the night, and the MA’s on a short term are turning bearish again after yesterdays rally.

Risk Off moves are signaling everywhere, and I would not be surprised to be a little heavy in equities today and make a push to 2038 -2028.50 area.  The TUT is weak to the FYT also.

*PORT 22 and Brian Tehako are not liable or responsible for trade ideas or information provided in the Outlook Report.

Have a great day! 

OVERNIGHT OUTLOOK REPORT

209 North Morgan St.

Chicago IL. 60607

Cell: 312-371-7917

Work: 312568-5020