OVERNIGHT OUTLOOK REPORT FOR FEBRUARY 29TH

OVERNIGHT OUTLOOK REPORT

OPENING 1AM LEVELS:

DEBT:  30 Year:  164.26 10 Year: 130.18  Bund: 166.10

               Bobl: 133.16  Aussie 10 Year:  97.60(5)

METALS:   Gold: 1,227.60  Copper: 2.1060 Nickel: 8440 Steel: 177

                      Rebar:  319.5        Iron Ore:  45.34  Aluminum: 1568.50                     OIL:  Wti:  32.69   Brent: 35.51

CURRENCIES:  Euro: 109.47 Yen: 88.56  CAD: 73.91 AUSSIE$: 71.25

INDEXES:  ASX: 4855  MINIS: 1931.50  DAX: 9434.5  STOXX: 2902

 

1AM OPENING THOUGHTS:

The Shanghai is down -3.94% to 2,658.05 and Nikkei -1.00% to 16,026.76.  The Minis have followed suit trading down -14.00 to 1928.75.  They traded to support to minis at 1928 area, and wondering if they will hold.  Through there we could break to 1909 and then 1902.  It sounds like China is selling off due to a disappointed G-20 meeting.  The PBOC injected another CNY230 BLN via 7 day reverse repos. 

After reassessing last week, it seems that the market has disconnected from some currency relationships and is switching around in the curves also.  I do not think we are going to see another serious leg down in equities until you see these curves move lower.  The currencies are pointing to us staying between 1900-1950 and not projecting anything.  Their seems to be a switch in markets lately from risk/on – off to straight dollar moves.  Very difficult to follow! 

The curves are in – line tonight and looking for FYT to break 101120 in the March. 

Currency spreads are weak to minis hear.  The Euro/Yen has retraced over half of it’s move from the end of last week, and puts the minis around 1925 area.

Going to take an easy approach this week and do some light trading before Unemployment.

OVERNIGHT HIGHLIGHTS:

*SHANGHAI CLOSES -2.87% to 2,687.83

*NIKKEI CLOSES -1.00%% to 16,026.76

*PBOC SET YUAN RATE AT 6.5452 MONDAY vs. 6.5338

*BALTIC DRY INDEX AT 327 (52 week Range 290 – 1,222)

*CHINA INJECTS CNY230 BLN VIA 1 WEEK REVERSE REPOS

*REUTERS:  French Central Bank Head cautions on oil price impact

*REUTERS: Global economic slowdown not be ignored- ECB’s Praet

*REUTERS: London mayor Boris Johnson urges UK cabinet to back BREXIT, defying PM Cameron.

*European oil majors tally $19 Billion in losses as oil prices bite

*World Economy stands on the cusp of another crash warns Lord Mervyn King

*Deutsche Bank has warned that the pound will fall to 1.28 by year end

*G-20 Hears China say there will be no YUAN devaluation

*G-20 says economic risks have risen globally

*Hedge Fund treasury bets at most since 2013 amid two month rally

*BLOOMBERG:  Kuroda Negative Rates Bazooka Fizzles on Overnight Lending Freeze

*Japan factory output rises fastest in a year-outlook uncertain.  3.7% m/m gain compared with a 3.3% estimate.

*FT: China halts overseas investment schemes.

*US Oil rig count touches 400.  Overall count at 502

*Washington Post:  Syria’s cease-fire frays as Russia resumes airstrikes

G-20:

-Global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth

-Monetary policies will continue to support economic activity and ensure price stability.

-G-20 agrees to use monetary, fiscal and structural tools flexibly to increase growth

-G-20 to calibrate and clearly communicate their policies

-Monetary policy alone cannot lead to balanced growth

-Downside risks have increased with various headwinds including concerns about growth in China and the US

-Volatile capital flows, continued weakness in commodity prices and potential shock from Brexit all points of concern

-Concerns also noted on escalating geopolitical tensions and the European refugee crisis.

-While recognizing these challenges, they judge that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy.

-G-20 agreed to consult closely on foreign exchange markets

-Excessive volatility can damage economic and financial stability

-G-20 reiterates previous promise to refrain from competitive devaluations and we will not target our exchange rates for competitive purposes.

-G-20 will resist all forms of protectionism

-G-20 strongly urged US to ratify 2010 IMF reforms

*UK Lloyds Business Barometer fell sharply to +28 in February from +45

*FEDS BRAINARD:

-Financial tightening as a result of financial shocks, may lead to rates staying lower for longer than expected

-Rates to stay low for some time

*ECB’s WEIDMANN:

-Does not expect large revisions to the ECB forecasts at the March meeting

-ECB must decide on inflation at March meeting but monetary policy cannot cure everything

-Low energy prices are still having a strong influence on inflation

*ECB’s VILLEROY:

-ECB could act as a result as low inflation

-Low prices are not by themselves justification for acting

-However if they start feeding into long term effects, which appears to be the case, ECB are ready to act, although remaining data dependent.

*ECB’s PRAET:

-Global economy is losing momentum

-Weakening Euro Zone indicators are a warning

-ECB balance sheet quite sizeable

*German retail sales +.7% m/m and -.8% y/y.  Expected +.3 and +1.8%

*PBOC GOVERNOR ZHOU:

-Chinese economic fundamentals remain healthy and room for future growth remains large

-Sees strong need for G-20 to strengthen policy coordination

*PBOC VICE GOVERNOR:

-Fluctuations in the YUAN partly driven by speculation

-Fall in Chinese FX reserves due to residents increasing holdings and cutting FX debt.

-Capital outflows will slow

*Japanese retail trade softer and fell -.1% m/m and -.1% y/y.  Expected +.1% and +.1%

*Japanese Industrial Production rose +3.7% m/m and -3.8% y/y.  Expected +3.2% and -3.8%

*Japanese vehicle production fell -5.8% y/y. 

*Japanese Construction Orders fell -13.8% y/y

*JAPANESE PM ABE:

-Excessively strong YEN has corrected as a result of Abenomics

-Japan not trying to influence FX markets

-Necessary that Japan end deflation to ensure fiscal health

-No plan to postpone sales tax hike

*EURO ZONE FLASH INFLATION -.2% vs Consensus at 0%

*PBOC CUTS RESERVE RATIO REQUIREMENT BY .5 TO TAKE EFFECT MARCH 1st.

 

OVERNIGHT THOUGHTS:

The overnight session starting at 1 am CST time was pretty slow until 4 am.  The Euro Zone CPI came out worse to -.2% and at the same time the PBOC cut the RRR  by .5.  We saw a quick YEN sell – off and an AUSSIE$ pop.  The minis traded 8-9 handles higher to 1940.  The Copper and Oil market rallied, and the US debt came off.

After about 30 minutes, we settled back in and went back to the same slow market… Except in Europe where the continuation of making new contract highs in the Bund and Bobl continues.  We have some month – end extension buying happening and the market just continues higher.  The 2- 10 spread continues to move lower, and makes me want to short the DAX… But I just cannot hedge in the debt.  I have no idea where this is going.  The Note / Bund continues to make contract lows, and you just have to observe this right now until you see a currency reversal. 

The US curves are staying in line and we have switched over to the June contract.  Currency spreads have been off and on all night.  Switching with the dollar importance at times.  We saw a big dollar reversal tonight with that Euro trading the 109.00 handle. 

I stuck to observing this market, and to be honest I did not see much opportunity as things stayed pretty much in line.  I do feel that Europe is strong to the US in the equity spread still.  Especially with this Eurex curve move and Euro / Yen sell off.

LONG TERM TRADES CURRENTLY:

NONE

*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

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