As we approach the open - 3/26/15

 

 3/26/21

As we approach the open, US equity futures trade mixed after a relatively tight overnight session continuing yesterday's action with small caps leading, RUT futures up 0.84%, SPX also green at up a quarter of a percent, but NDX indicated down that much. Those green sectors are getting a nice lift from financials after the Fed indicated that it will be ending the temporary restrictions on dividends and buybacks imposed after the pandemic.  JPM for example is up 1.5%.  They're also being helped (and growth probably hurt) by a steepening of the yield curve with 10-yr yields moving up 6 basis points.  Looks like this extreme correlation is still in play.

Asia

This follows a strong session in Asia with most major indexes up 1%+ led by China's 1.6% gain. In data, S Korean consumer confidence improved and beat exp's and IMF increased growth forecasts for the country.  

In other news, stories out of China overnight highlight their desire to keep a lid on stimulus.

CNBC - BEIJING — Data for the year so far show signs that China is starting to crack down on debt.

A first-quarter survey by the China Beige Book released Thursday found that borrowing by state-owned enterprises dropped to the lowest in the study’s roughly 10-year history. Overall borrowing fell to its lowest in three years, while that of large firms hit a five-year low, the report said.

Given ties to the state, the government-linked companies are the “best signal” on authorities’ policy intent, China Beige Book Managing Director Shehzad Qazi said in a note. The company conducts quarterly surveys of businesses in China.

Europe

Europe also trading higher with gains in the 0.5-0.8% range  on the back of a big turnaround in Feb European retail sales with core sales (ex autos, fuel) +2.4% m/m vs +1.7% forecast and following a big -8.7% (revised) last month. They are now down just 1.1% y/y. UK retail sales also improved to positive territory as expected with core beating exp's. German business and Italian consumer confidence also beat exp's and in the case of the former improved solidly from last month, Meanwhile the roe over vaccines continues with France accusing UK of "blackmail" as do the headlines about the coming Covid "third wave" which is dampening sentiment a bit.

Data/Misc

Major early release this morning was personal income and spending which came in a little weaker than expectations but less so than other data for February this week.  I'll have details out on that in a bit.  PCE was also released which came in low (headline) but in-line core and inventories which fell wholesale but increased (core) retail.   

And as you know that tanker is still stuck.  Estimates range from very soon to weeks and weeks to get it free so basically nobody knows for sure. Until then expect weird shortages in things like instant coffee.

Outside of equities, the increase in bond yields could mean whatever "rebalance" was occurring is over, but for a while it was very strong right up until yields popped 3 bp's just after the 7-year auction at 1pm y'day which came in with a pretty fat "tail" (difference between when issued rate and the auction rate) even though the demand was pretty good.  Since then yields have creeped higher. But into yesterday, the flow was strong as evidenced by $IEF having its largest one-day increase on Wednesday... 

...and the clear imbalance to the buy side in fixed income we saw that day.
 

In fact, with those inflows you'd think yields might have moved further south.  The fact they didn't might mean as they subside the march towards 2% (where I think we're headed this year) will commence shortly.

In other commodities, crude cont's recent volatility with WTI bouncing back over $60 (but remains capped by declining 20-DMA). While Wed's spike was on the Ever Given (tanker in the Suez) today might be about the increasing activity in the Middle East.  Yesterday an Israeli ship was hit by a missile apparently, and last night we saw another drone attack on Saudi Arabia.  Something to keep an eye on.  

Reports Saudi Arabia Has Intercepted 5 Houthi Explosive Drones - State TV
Yemen's Houthis: Launched Attacks Against Aramco Facilities In Ras Al-Tanura, Rabigh, Yanbu And Jizan

Copper also is bouncing back pushing back over $4k but remaining capped by its downward declining 20-DMA and nat gas is also mildly green. Gold, dollar, and VIX trade right near flat levels with gold and VIX with a downward bias (tilting red).








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