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Stock indices end lower. All S&P sectors close lower on the day

  
Analysis, US Market
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Late day selling hurts major indices

Some late day selling has pushed the major indices into the red.  All the S&P sectors are closing lower on the day.
The final numbers are showing:
  • S&P index -9.13 points or -0.28% to 3237.15. The high reached 3244.91.The low extended to 3232.43
  • NASDAQ index fell -2.883 points or -0.03% to 9068.58. The high reached 9091.93. The low extended to 9042.55
  • Dow fell -119.97 points or -0.42% to 28583.43. The high reached 28685.50. The low extended to 28565.28.

Eurozone December final manufacturing PMI 46.3 vs 45.9 prelim

  
  Analysis
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Latest data released by Markit – 2 January 2020

The preliminary release can be found here. The mildly higher revision was predicated by the French and German readings earlier but it is still weaker than the November print.

All this does is just reaffirm more sluggish factory conditions in the euro area economy towards the end of last year and that any signs of a recovery still needs more consistency despite a better outlook to US-China trade and Brexit developments.

Markit notes that:

“Eurozone manufacturers reported a dire end to 2019, with output falling at a rate not exceeded since 2012. The survey is indicative of production falling by 1.5% in the fourth quarter, acting as a severe drag on the wider economy.

Although firms grew somewhat more optimistic about the year ahead, a return to growth remains a long way off given that new order inflows continued to fall at one of the fastest rates seen over the past seven years. Firms sought to reduce inventory levels and cut headcounts as a result, focusing on slashing capacity and lowering costs. Such cost cutting was again also evident in further steep falls in demand for machinery, equipment and production-line inputs.”

It’s PMI day in Europe to kick start the new year

  
  Analysis
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But markets are still plagued by poor liquidity conditions for the most part

2020

Happy New Year, everyone! Hope that all of you had a great celebration or time off and that you’re refreshed for another new trading year ahead.
Markets are still largely affected by thin conditions with liquidity still rather lacking and I would expect things to stay that way until tomorrow or next week at least.
In the major currencies space, things are a little mixed with the pound finding itself on the back foot while the aussie and franc are also mildly weaker on the day so far.
Looking ahead, we’ll have manufacturing PMI releases in the European morning but these will be final readings for December, so they won’t really matter all too much.
0815 GMT – Spain December manufacturing PMI
0845 GMT – Italy December manufacturing PMI
0850 GMT – France December final manufacturing PMI
0855 GMT – Germany December final manufacturing PMI
0900 GMT – Eurozone December final manufacturing PMI

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European shares end the day lower

  
Analysis, Global Indices
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German DAX, -0.66%. UK’s FTSE, -0.68%

the major European stock indices are ending the day with declines. The provisional closes are showing:
  • German DAX, -0.66%
  • France’s CAC, -0.79%
  • UK’s FTSE, -0.68%
  • Spain’s Ibex, -0.74%
  • Italy’s FTSE MIB, -1.06%
  • Portugal’s PSI 20, -0.62%
In the European debt market, yields moved sharply higher with the UK 10 year benchmark note leading the way with a rise of 11 basis points.
German DAX, -0.66%. UK's FTSE, -0.68%_In other markets as European traders exit:
  • Spot gold is higher by $5.60 or 0.37% at $1516.18. It is trading at the highs for the day with the low down at $1510.86
  • WTI crude oil futures are down $0.17 at $61.54, after failing to hold above the $62 level. The high price for the day reach $62.34
The US stocks are trading lower on the day led by declines in the NASDAQ index
  • S&P index -14 points or -0.44% at 3226
  • NASDAQ -51.18 points or -0.57% at 8955.82
  • Dow -129 points or -0.45% at 28514

US yields are also higher with the yield curve steepening. The 2 – 10 year spread has widened out to 34.28 basis points from 29.4 basis points on Friday.

US yields are higher

Asian markets return today, but holiday mode will persist – here is what’s on the calendar

  
  Analysis
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Coming up today on what will be a lower than usual liquidity session:

2330 GMT Tokyo inflation data for December – Tokyo area CPI (national level CPI for the month follows in three weeks). The y/y rate has received a wee boost from the October 1 sales tax hike. But not much.

  • Tokyo CPI y/y, expected 0.9%, prior was 0.8%
  • Tokyo CPI y/y excluding Fresh Food, expected 0.6%, prior was 0.6%
  • Tokyo CPI excluding Food, Energy y/y, expected 0.7%, prior was 0.7%

Also at 2330 GMT Japan Jobless (Unemployment) rate for November

  • expected 2.4 %, prior 2.4%

and Job to applicant ratio for November

  • expected 1.57, prior 1.57

2350 GMT Bank of Japan monetary policy meeting ‘Summary of Opinions’ of the December meeting

  • this precedes the minutes of that meeting by many, many weeks.

2350 GMT Japan Retail sales for November

expected 5.0% m/m, prior -14.2% (the huge drop was helped along by that sales tax hike I mentioned above)

  • expected -1.7% y/y, prior -7.0%

2350 GMT Japan Industrial Production for November (preliminary)

  • expected -1.0% m/m, prior -4.5%
  • expected -8.1% y/y, prior -7.7% (trade wars have weighed on exports which in turn have impacted IP)

0130 GMT China Industrial Profits for November % y/y

  • prior -9.9% (trade war and negative PPI big factors in this)

Moody’s says global manufacturing outlook for 2020 is negative

  
Analysis, Economy
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Moody’s on the manufacturing outlook

  • Most manufacturign sectors will likely experience only modest profit growth or even slight declines in 2020
  • Agricultural, transportation and utilities end markets exhibit weak growth prospects
  • Aerospace and defense segment has strong growth prospects
  • Key drivers for global manufacturing include weak earnings growth expectations and deteriorating sentiment

If Moody’s track record is any indication, then now is the time to buy the stocks of manufacturers relating to agricultural, transportation and utilities industries.

CFTC Commitments of Traders report: GBP shorts trimmed but not as much as you might think

  
Analysis, Forex
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Forex futures positioning data for the week ended Tuesday, December 10:

Forex futures positioning data for the week ended Tuesday, December 10:

  • EUR short 68K vs 69K short last week. Shorts trimmed by 1K
  • GBP short 23K vs 30K short last week. Shorts trimmed by 7K
  • JPY short 44K vs 48K short last week. Shorts trimmed by 4k
  • CHF short 21K vs 22K short last week. Shorts trimmed by 1K
  • AUD short 37k vs 36K short last week. Shorts increased by 1K
  • NZD short 25K vs 27K short last week. Shorts trimmed by 2K
  • CAD long 21k vs 21K long last week.  No change
The big shifts recently have been paring GBP and NZD shorts. Those trends both continued this week but at a slower pace than you might have expected given the rallies in both. Next week’s data will capture the UK election and that should be instructive.

US auctions off $38 billion of 3 year notes at 1.632%

  
  Analysis
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That is below the WI level of 1.634%

  • high yield of 1.632%. That is below the WI of 1.634%
  • bid to cover 2.56x vs six-month average of 2.48x
  • Directs 23.8% vs six-month average of 16.8%
  • Indirects 49.1% vs six-month average of 49.5%
  • Dealers take 27.1% versus six-month average of 33.7%
Overall, decent demand. The yield stopped through the WI level by a touch. The bid to cover was higher than the six-month average. Dealers took down a relatively small amount suggesting decent demand.

Its a big week coming up (FOMC, UK election & more) – Asian events to take note of also

  
  Analysis
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Its a huge market week with loads of central bank decisions and more:

  • FOMC (Wednesday 11 December)
  • ECB, SNB and UK election (Thursday 12 December )
Also, take note of events in Asia that could well be significant also:
  • China inflation data for November on Tuesday 10 December
  • Philip Lowe, Governor of the Reserve Bank of Australia. speaks. Also on Tuesday
  • Bank of Japan’s quarterly Tankan survey is on Friday December 13
And, while not during market hours, Sunday December 15 will bring US President Trump’s latest mood swing decision on tariffs on China. Which should set up a volatile Monday morning (the 16th)
Its a huge market week with loads of central bank decisions and more:

Ray Dalio debunks WSJ story about his bearish position

  
  Analysis
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Ray Dalio from Bridgewater Associates responsed to WSJ article

It was reported by the Wall Street Journal earlier today that Ray Dalio from Bridgewater Associates had a 1.5 billion bearish option position on the S&P and Eurostoxx 600 index.
Dalio is out with a tweet debunking the story. He tweets:
 Ray Dalio from Bridgewater Associates responsed to WSJ article
Even if he did, or does,  have a 1.5 billion option position (it is not clear), it would dwarf the money under management (and likely long position).
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