We are back from the long holiday weekend and over the long weekend German chancellor Angela Merkel said Saturday that the fighting was a “conflict between Ukraine and Russia”. It is a no longer a EU vs. Russian issue. Putin has played the EU and Obama well and can now extract as he wishes in energy pricing to the EU. The tension between Russia and Ukraine continues to build. Elsewhere, EU bank sector lobbyists have warned the Basel Committee on Banking Supervision that its proposed Net Stable Funding Ratio requirement could make it more expensive for banks to facilitate equity market transactions. EU banking is hobbled and new taxes on trading only hinders its future.
The Japanese Yen sold off last night to 7 month lows as the failure of Abe-nomics is becoming a media spread event.
US $ continues to climb higher over all majors. The US$ sharp technical move higher in US$/Japan¥ attributed to larger than usual buying in Tokyo, as the FX pair tripped touted option barriers at 104.50, to print its highest level since January. The UK’s concerns of the growing momentum for the ‘Yes’ vote in the Scottish referendum which has seen 1-month £/US$ volatility reach its highest level since April as the £ is reaching 1 month price lows.
Last Friday Goldman Sachs formally announced the € to drop to 120 (last at 13 ) within a year.
Global Equities are higher everywhere in the overnight trade as Japan led the indexes higher as led by exporters due to a ever slipping ¥ to 7 month lows. The S&P traded up to 2006.25 as hopes of a ECB easing action on Thursday. Financials are the outperformers, with that sector providing support following a statement from JP Morgan who said that EU banks have around 10% upside as they anticipate a positive outcome to the upcoming ECB stress tests.
I remain bullish with a near term upside of 2020 and support at 1992.
US Treasuries are lower in the long weekend trade as equities moved higher. Profit taking has skewed the yield curve spreads to steepen as markets awaiting ECB meeting and Draghi press conference Thursday, the U.S. nonfarm payrolls Friday with next weeks Fed meeting set for Sept. 16-17. Rumor has it; Morgan Stanley closed their long Bund position as they say that ECB bets look overblown ahead of the ECB’s policy meeting. The 30 yr. yield reached 15 month lows at 3.05% last week as cautious fund traders took some profits. I’ll need a larger pull back before I step up again
Energies are working lower in the overnight trade. the stronger US$ and slacking news allows for focus on the globally poor manufacturing data; henceforth= lower demand. OPEC countries have been surprisingly quiet following the $10-per-barrel drop in oil prices over the last 2 months. Ideas OPEC will contemplate output cuts in the coming months as Saudi Arabia’s demand for direct-burning of crude slides and Asian refineries seek less oil from the mid east and more from China & Russia. $96 is still the current ceiling and the floor is $91.
Metals are lower once again with gold & silver back at the mid June price levels and platinum at April price levels. The Eurozone PMI data yesterday precludes any sort of ECB stimulative action and therefore making a weaker €.
The US$ has a few issues in its favor; it’s strength outweighed any gold/silver safe-haven demand concerning tensions in Ukraine. Further drops in gold’s price is likely over the course of the week as /traders investors continue to buy US$ ahead of Thursday’s ECB meeting and the possibility of bullion traders remaining sidelined ahead of Friday’s Non Farm Payroll report.
Grains are higher in the overnight trade are continuing to experience the short covering to lift prices as the realization the gist of the downside is over and its wise to scale down the size of the short positions. Soybeans have more funds net short, at nearly 22,000 contracts; it is the most since 2006. Also in the bigger picture and ‘down the road’ the overnight news has shown the results of China’s weekly soybean auction, which showed a large pick up in demand, with 132,135 tons (39.2%) of the soybeans on offer sold at today’s event. I suspect we can resell at higher prices.
Softs are coming higher following yesterdays trade with coffee up 2% and sugar up 1% since the end of August.
Like the grains the short covering continues and the longs liquidate as in cotton down 2% and cocoa down 1%. I like selling the Sept coffee above $201 and the Dec above $207.20
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