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Macro

European Market Outlook: Risk Off Continues in Asia; Markets Mull Hawkish CB Talk


Morning Briefing June 29th 2017


Thursday throws up another very busy day, with plenty of data on both sides of the Atlantic. At 0600GMT, the GFK German Consumer Climate will be released.

At 0700GMT, Spain's HICP number will be published, along with the first of the German state inflation releases. At 0800GMT, the German VDMA machine orders will cross the wire.

Bundesbank Board member Andreas Dombret speaks at Bavarian Sparkasse day, in Erlangen, Germany, also at 0800GMT.

In the UK, the Bank of England will publish the latest M4 money supply data and the latest consumer credit data.

At 0900GMT, the European Commission will publish the Economic Sentiment Indicator, the Business Climate Indicator and Consumer Confidence.

ECB Gov. Council member Jens Weidmann speaks at the greeting of the headquarters of German Bundesbank in Baden-Wuerttemberg, in Stuttgart, Germany, starting at 0930GMT.

German federal June preliminary inflation data will be published at 1200GMT.

Across the Atlantic, the US data calendar kicks off at 1230GMT, with the release of the latest Jobless Claims data and the revised GDP data.

First quarter GDP is expected to be unrevised at a 1.2% growth rate, while the chain price index is forecast to be revised at a 2.2% pace.

Canadian payroll data will be published at the same time.

At 1430GMT, the US Natural Gas Stocks data will cross the wires.

Richmond Fed Executive Vice President and Director of Research Kartik Athreya will discuss the "Economic Outlook: The Short and Long of It" during the Charlotte Economics Club's luncheon in Charlotte, NC, with audience Q&A,
starting at 1630GMT.

At 1700GMT, St. Louis Federal Reserve Bank president James Bullard to deliver a presentation on the U.S. economy and monetary policy at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture in London, with an audience and media Q&A.

In the UK House of Commons, MPs will vote on the Queen's Speech at around 1700GMT, although it could be slightly later. With the Conservatives deal with the DUP now signed, there seems little chance the speech won't pass.

Late US data will see this week's Fed Weekly M2 Money Supply Data published at 2030GMT.

 

Global Economic Trading Calendar


 

Markets


SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session:  Nikkei 225 up 109.14 points at 20239.84 ASX 200 up 55.302 points at 5811.1 Shanghai Comp. up 6.453 points at 3179.984 - JGB 10-Yr future down 5 ticks at 150.47, JGB 10-Yr yield down 0.2bp at 0.062%  Aussie 3-Yr future down 4 ticks at 98.08, Aussie 3-Yr yield up 3.5bp at 1.857%  Aussie 10-Yr future down 4 ticks at 97.455, Aussie 10-Yr yield up 4bp at 2.497% US 10-Yr future down 1 tick at 126.05+, US 10-Yr yield down 0.35bp at 2.2244%

US TSY/RECAP: Treasuries ended rollercoaster Wed mixed (2-5Y higher, 7Y-30Y lower) as market began NY weak then rose after BBG story cited sources saying ECB Draghi Tues comment misperceived by market as hawkish and he was trying to be balanced. EGBs jumped on that, dragging Tsys up. T-Notes open Asia at 126.05+, 10-Year yield last 2.228%.

JAPAN DATA: Capital flows for the week to June 24, according to data from the Ministry of Finance: Japan investors:  - Bought net Y366.1 bln in foreign equities - Bought net Y321.8 bln in foreign bonds - Sold net Y9.2 bln in foreign money-market instruments - Resulting in a net purchase of Y678.6 bln Foreign investors: - Sold net Y26.3 bln in Japan equities - Sold net Y1.4639 tln in Japan bonds - Bought net Y683.0 bln in Japan money-market instruments - Resulting in a net sale of Y807.2 bln

AUSSIE BONDS: Aussie bonds move lower, some 2k given at 98.09 pushing the 3-Year future down to 98.07. 10-Year drops to 97.45. - Yields rise across the curve; 3-Year yield now up 3bp, 10-Year yield now up 3.6bp - Australia HIA New Home Sales due in 10 mins.

US EURODLR FUTURES: Front end flat, longer dated contracts fall slightly coming off highs from yesterday, downside protection theme continues in options.

JAPAN STOCKS: Japanese stocks go in to the lunch break higher, the Nikkei 225 up 108.44 points at 20,238.85. After opening at session highs of 20,266.59 the index fluctuated within a range, session low at 20,199.38. The move higher comes on the back of gains in US equities. - Materials and financials lead the way higher on the Nikkei 225, with 9/11 sectors in the green. Commodities are enjoying a strong session on Thursday, Dalian iron ore futures are up 5%, while coking coal is up 7% supporting the materials sector. Financials are boosted by a raft of hawkish central bank talk over the past

OIL: Oil has ground out some gains in Asia-Pac trade, WTI last up $0.20 at 44.94. WTI briefly made it above $45/bbl but couldn't sustain the move higher & dropped back slightly. WTI has now gained for 5 straight days, despite a plunge to around $43.60 on Tues after API data but managed decent gains on Weds. The move higher was supported by a report from the EIA that showed US crude production fell by 100k BPD last week, the biggest decline in a year. Analysts posit that the fall was due to tropical storm Cindy impacting production, as well as wide scale maintenance on Alaskan rigs.

GOLD: Gold is up around $2.50 in Asia, the yellow metal last trades at $1,251.77. Gold managed to squeak out some minor gains on Tuesday & Wednesday after the suspected "fat finger" on Monday saw gold drop from around $1,255 to $1,236. Gold is down 1.35% in June so far, with only 2 trading days left in June that puts it on track for its first monthly drop of 2017. – The DXY decline has deepened so far in Asia, last at 95.873.

FOREX: The fallout from the recent hawkish rhetoric from the European Central Bank, Bank of Canada and Bank of England, has led to broad-based US dollar weakness and that theme continued today in the Asia-Pacific region. Euro-dollar trekked higher from $1.1375 to print a fresh top of $1.1419, last at $1.1405. Aussie-dollar climbed from $0.7635 to $0.7665, the move helped along by higher commodities, in particular, coking coal +7.4% and Dalian ore +4.8%. Aussie was last at $0.7657. Kiwi-dollar rose from $0.7302 to $0.7335, ANZ Business Confidence data showed a surge to 24.8 from 14.9 prior, helping to underpin the kiwi. Cable advanced from $1.2924 to $1.2975, last at $1.2955. Meanwhile, Dollar-yen held a Y112.16 to Y112.43 range, dollar weakness was negated by cross demand. Dollar-yen was last at112.30, essentially, unchanged from this morning's open.

 

Technical Analysis


BUND: (U17) Rejected Above 55-DMA

*RES 4: 164.51 Hourly support June 27 now resistance
*RES 3: 164.04 High June 28
*RES 2: 163.96 55-DMA
*RES 1: 163.62 Hourly resistance June 28

*PREVIOUS CLOSE: 163.37

*SUP 1: 163.12 Hourly support June 28
*SUP 2: 162.78 Low June 28
*SUP 3: 162.56 21-WMA
*SUP 4: 162.39 Low May 23    

*COMMENTARY: Bears have so far failed to capitalise on the break of the daily bull channel base (162.96) but take comfort in the lack of follow through above the 55-DMA. Initial resistance is noted at 163.62 with bulls needing a close above to gain breathing room and above 164.13 to shift focus back to 164.69-79. Bears are currently focused on 161.68-162.39 where May lows are located. Daily studies remain well placed for further downside.

 


EUROSTOXX50: Broad Sideways Trading Continues


*RES 4: 3598.06 High June 20
*RES 3: 3581.43 High June 26
*RES 2: 3562.59 55-DMA
*RES 1: 3546.44 Hourly resistance June 27

*PREVIOUS CLOSE: 3535.70

*SUP 1: 3518.09 Hourly support June 28
*SUP 2: 3497.92 High Apr 12 now support
*SUP 3: 3484.97 100-DMA
*SUP 4: 3463.50 High Apr 13 now support

*COMMENTARY: Follow through has been lacking the past 8 weeks with broad sideways trading 3497.72-3615.06 defining. The 3615.06 resistance remains key with bulls needing a close above to shift focus to tests of 2017 highs. Bears need a close below 3497.72 to confirm focus on tests off 3463.50-3484.97 where the 100-DMA is situated. Bulls need a close above the 55-DMA to shift focus back to 3581.43-3615.06.

 

Eurex Futures Market Close


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This article is from Eurex Exchange and is being posted with Eurex Exchange’s permission. The views expressed in this article are solely those of the author and/or Eurex Exchange and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Technical Analysis

GBPUSD Breaking Weekly Chart Triangle Resistance


The GBPUSD surged over 100 pips yesterday bringing its post-UK general election recovery to roughly 300 pips.  The GBPUSD is now near its 2017 high, and may consolidate a few days at this level before drawing more buyers to continue its ascent towards upchannel resistance (on the daily chart).  Intraday volatility can be expected today when the US' Final GDP and Unemployment figures release at 830am EST.  The weekly, daily and 4hr RSI, Stochastics and MACD are rallying, consolidating recent gains.  Ideally I'd go long in the green zone (of the daily chart), targeting the red zone for late week.  The amber/yellow zone is where I might place a stop if I was a swing trader (although in my personal account which I seldom hold overnight I set my stops tighter).

 

GBPUSD Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Wheat, Cocoa

 

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This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Securities Lending

SLB Update: Highest Borrow Fees


These were the 15 securities with highest borrow fees on 6/26/17.

 

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Securities Lending

Borrow Fee Spikes with Price


Cara Therapeutics (NASDAQ: CARA) develops drugs for treatment of pain and inflammation.  It is based in Stamford, CT and has a market cap of $900M.  In June the company announced news regarding certain drugs in its pipeline.  Shares have rallied, up 66% month-to-date.  The aggregate street short balance increased 15%, with utilization (demand) at 96% today.  Implied volatility increased from 88 on June 1 to 126 today.  The borrow fee followed, moving from 10% to 100% during that time.  Short Interest is very high at 60%.  Shares are tough to find.  Everyone is looking for a locate – large banks, retail and prime brokers.  The only supply we have seen are scraps form agent lenders which are immediately taken down by someone.

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Options

Time to Charge Into Visa


The card company’s stock is rallying after its first investor day meeting in four years, and shares can go higher still. Here’s one way to play it.
 
 

Buy Visa.

The stock is up about 22% this year, which is normally a sound reason for caution. But Visa (ticker: V) has been trading like a champ following its first investor day meeting in four years on June 22. Shares are dancing around a fresh 52-week high, and some investors are prepping for the stock to hit $105 by January.

Earlier this week, when the stock was around $95, one major investor sold 5,400 January $95 call options and bought 10,800 January $105 calls for $1.90. The trade suggests the investor bullishly adjusted a profitable position in the $95 calls and is preparing for Visa to trade to a new annual high. During the past 52 weeks, Visa’s stock has traded between $73.80 and $96.60.

The big trade is a sign that major investors liked what they heard at Visa’s analyst day.

The company is focused on trying to capitalize on the shift away from cash to credit cards and other electronic payments. Using a term that Apple (AAPL) popularized with investors, Visa wants to grow market share in the payment’s “ecosystem.”

While such talk is the stuff of prepared remarks delivered at conferences, Visa actually walks it like it talks it. The company is growing revenue at a fast rate—an accomplishment that eludes many others.

In anticipation that Visa will keep executing on all cylinders, we want to establish a bullish position inspired by the big call trade executed earlier this week.

With its stock trading around $95.50, investors can buy Visa’s January $95 call that traded at $6 and sell the January $105 call at $2. The trade costs $4. If the stock is at, or above, $105 at expiration, the maximum profit is $6.

The January expiration should cover at least two earnings reports, and countless meetings with investors. Our trade anticipates that investors will increasingly like what they see, and hear, from Visa’s management.

https://si.wsj.net/public/resources/images/ON-CE477_V0628_G_20170628140615.png

Steven M. Sears is a Senior Editor and Columnist with Barron's. He is the author of "The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails." Mr. Sears previously reported for Dow Jones Newswires and The Wall Street Journal. He has reported upon most major modern financial events, including the Asian Contagion, the bursting of the Internet Bubble, the Credit Crisis, and Europe's sovereign debt crisis. He also was part of exchange executive teams that modernized the U.S. options market, and introduced electronic trading. Interact with him on Twitter @sm_sears.

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This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


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