Archives of “financial markets” tag

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Japan preliminary PMIs (May): Manufacturing 38.4 (prior 41.9) & Services 25.3 (prior 21.5)

  
Analysis, Economy
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Jibun Bank / Markit preliminary PMIs for May

Manufacturing 38.4
  • prior 41.9
Services 25.3
  • prior 21.5
Composite 27.4
  • prior 25.8
Joe Hayes, Economist at IHS Markit:
  • “Latest PMI data provide yet another shocking insight into the devastating impact of the COVID-19 outbreak. While the rate of decline in services activity has eased very slightly, plummeting demand for goods is finally catching up with the manufacturing sector, which posted an accelerated decline in production during May. 
  • “Taking the April and May PMI surveys together, we see that both are indicative of GDP falling at an annual rate in excess of 10%. It is clear that the economy is going to contract for a third successive quarter, with the hit to Q2 likely to be potentially as large as 20% on the previous year. 
  • “Nevertheless, the dynamics in the economy are clearly evolving. As Japan eases the state of emergency measures, the services economy can begin its gradual recovery. However, the damage to the manufacturing sector could continue to worsen as global trade conditions deteriorate and the global economic recovery is slow.” 

Today’s 20-year Treasury auction will be the first since 1986

  
  Analysis
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Interesting day in the bond market

The Treasury will jump into 20-year sales today for the first time in 34 years.
The initial auction of $20 billion is a relatively large one and is a reminder of how much debt the US is piling on. The notes are trading at 1.230%-1.220% on the bid/ask in the when-issued market. That puts them much closer to 30-year bonds (1.44%) than 10-years (0.71%).
“An auction concession of some sort is warranted; although we anticipate the new issue will be well absorbed even if it comes at a modest discount,” writes Ian Lyngen, head of US rates strategy at BMO.
The broader bond market is reluctant to send and clear signals at the moment. 10s have been in a tight range for six weeks now and it’s tough to envision a clear break on either side because you have inflation keeping yields up and the Fed keeping them down.
Interesting day in the bond market

Reuters Tankan (May) – Business sentiment hits decade lows

  
Analysis, Economy
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Reuters report on their monthly Tanakn survey for May 2020:

  • slump in Japan business mood deepens, hits decade lows again on coronavirus woes

Manufacturers index -44 in May vs -30 in April,  falls to lowest level since June 2009

  • non-manufacturers index -36 vs -23 …  lowest level since Dec 2009

Manufacturers august index seen at -51

  • non-manufacturers -48
The BOJ easy money policy is firmly entrenched, such a dire outlook in Japan. The extent you use central bank policy to assist your currency view, bearish yen.

Put Trading First, Be There Day In and Day Out

  
Analysis, Education
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  • Consistency is your willingness to put trading first in your life so you’re online day in and day out, trading your system to maximize the odds that it will work for you when the market is moving.
  • When traders take a break for whatever reason — because they want to play, because they have experienced a series of losses, because of complications in their personal lives, or because the market is dead — they end up missing moves that could have resulted in hefty profits.
  • That doesn’t mean you always have to trade, but you should always be there to follow the markets.
  • It’s very easy once you’re self-employed and trading to excuse yourself for all kinds of reasons. This can prove to be a devastating mistake. You will find over time that those days you take off to play golf or go fishing or whatever will inevitably be the days when the two or three trades you’ve been waiting for are triggered. These trades would have made your month very profitable. Then you have to scramble for the rest of the month. When you trade this way, you tend to lose money. Inconsistency does not pay off.

ICYMI – US Senate moves to punish China on coronavirus

  
  Analysis
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From the US afternoon, when equities and risk currencies dropped away …. or more accurately, continued to drop away …

US Senator Lindsey Graham, (persistent brown nose to Trump), weighing in yet again to try to cover up from the disastrous US fumbling of the crisis:
  • accused China’s Communist Party of deception over the virus
  • “I’m convinced China will never cooperate with a serious investigation unless they are made to do so.”
Graham proposed a “COVID-19 Accountability Act”
  • requiring China provide “a full and complete accounting to any COVID-19 investigation led by the United States, its allies or UN affiliate such as the World Health Organization
  • require certification that China had closed all wet markets
  • bill would authorize the president to impose a range of sanctions
all within 60 days.
It weighed on markets and there is a little more follow through in early Asia.

Stocks slide and tumble into the close. Major indices close near session lows.

  
Analysis, US Market
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NASDAQ and S&P index fall over -2%

The major stock indices tumbled lower into the close, with the NASDAQ and S&P index both closing over -2% on the day. The final numbers for the major indices are showing:
  • S&P index -60.2 points or -2.05% at 2870.12
  • NASDAQ index -189.79 points or -2.06% at 9002.55
  • Dow -457.21 points or -1.89% at 23764.75
At the highs the:
  • S&P index is up 0.53%
  • NASDAQ index is up 0.64%
  • Dow industrial average is up 0.66%

The small-cap Russell 2000 index fell by -2.85% after being up as high as +0.43%.

The Canadian TSX/S&P index fell -1.23%
European shares ended mixed with Germany, France, and Portugal moving lower while UK, Spain, and Italy rose.

Mixed results from the major indices

  
Analysis, US Market
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Dow down. S&P modestly higher. Nasdaq higher

The major indices are ending the day with mixed results
The Dow is ending lower. The S&P is near unchanged and the Nasdaq is up about 0.8% on the day
The final numbers are showing:
  • The Dow fell -109.33 points or -0.45% at 24221.94
  • The S&P rose 0.39 points or 0.01% at 2930.19
  • The Nasdaq rose 71.02 points or 0.78% at 9192.34
The European markets were mostly lower exception of the UK FTSE which eked out a is small 0.06% gain.
Dow down. S&P modestly higher. Nasdaq higher

CFTC commitments of traders: EUR longs trimmed for the 2nd week in a row.

  
Analysis, Forex
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Forex futures positioning data for the week ending May 5, 2020.

  • EUR long 76K vs 80K long last week. Shorts trimmed by 4K
  • GBP short 12K vs 7K short last week. Shorts increased by 5K
  • JPY long 27K vs 32K long last week. Longs trimmed by 5K
  • CHF long 8K vs 6K long last week. Longs increased by 2K
  • AUD short 33k vs 38K short last week. Shorts trimmed by 5K
  • NZD short 15K  vs 14K short last week. Shorts increased by 1K
  • CAD short 32k vs 29K short last week. Shorts increased by 3K

Highlights:

  • the largest position change was 5K in the GBP, JPY and AUD. The GBP positions were increased by 5K, while the JPY and AUD positions were trimmed by 5K
  • The EUR long remains the largest position, but is lower for the 2nd week in a row. The net long over the last 2 weeks has seen the 87K to 76K this week
  • The AUD and CAD are the next largest positions at 33K and 32K respectively. However, traders are short AUD,and long CAD.
Below is a chart of the deposition in the EUR.  Although lower from the recent peak, it is still near high levels for the year, and high levels going back to June 2018.
Forex futures positioning data for the week ending May 5, 2020.

S&P and Dow close at session lows

  
Analysis, US Market
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NASDAQ are on the day but off the session highs

the S&P index and Dow industrial average are both closing at/near session lows. The NASDAQ index remained higher on the day but well off its high levels.
The final numbers are showing
  • S&P index -20.02 points or -0.70% at 2848.42. The high percentage was 0.79%
  • NASDAQ index +45.266 points or +0.51% at 8854.38. The high percentage was 1.41%.
  • Dow industrial average -218.45 points or -0.91% at 23664.64.  The high percentage was up 0.72%.

Eurozone April final services PMI 12.0 vs 11.7 prelim

  
Analysis, Economy
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Latest data released by Markit – 6 May 2020

  • Composite PMI 13.6 vs 13.5 prelim
The preliminary release can be found here. A tad better than initial estimates but again, it doesn’t take away the fact that the euro area economy saw a record contraction in business activity during the month of April. A summary to wrap your head around:
Markit notes that:

“The extent of the euro area economic downturn was laid bare by record downturns in every country surveyed in April, with output falling at unprecedented rates across the region’s manufacturing and services sectors.

“With a large part of the region’s economy shut down while COVID-19 infections spiked higher, the economic data for April were inevitably going to be bad, but the scale of the decline is still shocking. The survey data are indicative of GDP falling at a quarterly rate of around 7.5%, far surpassing the worst decline seen in the global financial crisis. Jobs are also being lost at a rate never previously seen.

“Hopefully, with coronavirus curves flattening and governments making moves to ease lockdown restrictions, many sectors should start to see output and demand pick up. The process will be only very gradual, however, as governments juggle between reviving economies and preventing a second wave of infections. Most companies will inevitably need to work at levels well below full capacity and sectors such as retail, travel, tourism and recreation – already the hardest hit – will continue to be badly affected by social distancing.

“While the rate of decline may ease in coming months, we do not expect to see any material signs of recovery until the second half of the year, and it is likely to be several years before the output lost due to the 

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