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Macro

BoE's Carney Plays Down May Hike Expectations, USD Edges Higher


Morning Briefing April 20th 2018


For those expecting Friday to pick up the pace, think again, as data remains fairly scarce.

Germany gets the calendar underway at 0600GMT with its March producer price figures. February saw prices contract on a m/m basis by 0.1% with y/y growth of 1.8%.

BOE Monetary Policy Committee member Michael Saunders will speak in Glasgow at 0930GMT.

The only other calendar event of note this morning is at 1130GMT when the ECB Governing Council member Jens Weidmann participates in the spring meeting of the IWF and World Bank in Washington D.C.

Moving swiftly to 1230GMT in Canada, we will get release of Building Permits, CPI and Retail Trade data. Building Permits declined by 2.6% m/m in February. Headline CPI on a y/y basis is expected to rise by 0.3pp in March to 2.5%. This is after the Bank of Canada left interest rates unchanged at 1.25% due to uncertainty regarding US trade tariffs. Retail Sales are expected to rise on a m/m basis from 0.3% previously to 0.5% in March. The excluding autos metric is anticipated to moderate to 0.4% m/m from 0.9%.

Next up at 1340GMT is the Chicago Federal Reserve Bank President Evans, who will speak at the Graaskamp Centre Spring Board Conference in Chicago.

This is followed up at 1400GMT with the release of the BLS State Employment metric. Previous state payrolls came in at 351.8.

The Eurozone flash Consumer Confidence Index is also at 1400GMT and is expected to fall a touch from an index figure of 0.1 in March to 0 in April.

Moving back to the US at 1500GMT is the St Louis Fed Real GDP Nowcast which previously estimated real GDP at 3.36%.

BOC Senior Deputy Governor Carolyn Wilkins participates in a panel discussion at the IMF regarding cyber security at 1515GMT.

At the same time the US NY Fed GDP Nowcast (prev. 2.8%) hits, as well as a speech from San Francisco Federal Reserve Bank President John Williams in California.

Global Economic Trading Calendar


Markets


SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session: - Nikkei 225 down 24.45 points at 22165.99 - ASX 200 down 10.5 points at 5870.4 - Shanghai Comp. down 37.367 points at 3080.009 - JGB 10-Yr future down 7 ticks at 150.78, yield up 0.4bp at 0.047% - Aussie 3-Yr future down 0.5 ticks at 97.725, yield down 0bp at 2.236% - Aussie 10-Yr future down 3 ticks at 97.175, yield up 2.7bp at 2.81% - US 10-Yr future unch. at 119.26+, yield up 0.37bp at 2.9135%

US TSYS: The space has edged lower in Asia-Pacific hours with the curve ever so slightly steeper. The move has come alongside an uptick in USDJPY, and as Fed voter Mester stuck to her hawkish script. - The Eurodollar strip is virtually unchanged at the time of writing with all of the white and red contracts printing unchanged to half a tick better than settle.

JGBS: JGB futures went into the lunch break at 150.76 (-9 ticks). The longer end of the curve has undergone a bout of underperformance in lieu of yesterday's soft 20-Year JGB supply, with the curve ever so slightly steeper again today. - The BoJ left the size of its 5-25+ Year Rinban operations unchanged today. Looking at the breakdown of the operations, the offer to cover ratio moderated in the 5-10 Year bucket, although the spread moved further into positive territory. Looking at the 10-25 Year bucket, the offer to cover ratio plummeted from 3.9 to 2.3, although the spread once again moved into positive territory. The offer to cover ratio also eased in the 25+ Year bucket, although once again, the spread moved further into positive territory.

AUSSIE BONDS: The space has operated around the closing SYCOM closing levels in the early part of the SFE session, with 3-Year Bond futures last trading at 97.725 (-0.5 tick), with 10-Year Bond futures at 97.175 (-3.0 ticks). - 3-Month BBSW fixed 0.5bp lower today as repo rates eased, with the Bill strip off of session lows, with the white and red contracts unchanged to a tick higher on the session. - The domestic 3-10 Year yield differential is last 3.1bp steeper at 57.0bp - The auction of the shortest 10-Year Bond future basket constituent passed smoothly, with the line registering yet another extremely strong bid-to-cover ratio at the auction, which is unusual for the shortest 10-Year basket bond, pointing to persistent demand for the line.

STOCKS: Asia-Pacific indices moved lower on Friday as the outlook for tech names dimmed. - The Nikkei 225 lost 0.2% as the materials space led the way lower, although gains for financials & consumer staples limited the move lower. - The Hang Seng shed 0.4% as IT & energy names led the decline, while China's CSI 300 shed 0.8% as the PBoC refrained from injecting liquidity via OMOs. - Australia's ASX 200 lost 0.21%, with telecoms once again leading the way lower, while consumer staples was the biggest gainer on a sectoral basis. - US index futures conformed with the trend, as the e-mini S&P traded flat & the mini Dow lost 6 points.

OIL: Oil futures sit virtually unchanged, with WTI last at $68.25 & Brent at $73.75. - Participants look to the OPEC JMMC meeting on Friday. - Traders also eye the latest weekly Baker Hughes rig count release.

GOLD: The yellow metal edged lower, shedding $2 to trade at $1343/oz.

FOREX: JPY crosses moved to highs on importer demand for USDJPY which ate through touted exporter selling orders ~107.50. JPY crosses are off highs after the Nikkei moved into -ve territory. - AUDUSD was lower, last trading at 0.7715, off of lows of 0.7706. Ex-Asia funds were rumoured to be the driving force behind the sell off, with option related bids in front of 0.7700, with some A$1.02bln worth of 0.7700 FX options set to roll off at today's 10AM NY cut. There is also talk of macro sell orders between 0.7730-40. NZDUSD underperformed, losing 30 or so pips after working it's way through options related bids at .7250 to deal at 0.7245 last. - GBPUSD last trades at 1.4080, with stories suggesting that the EU is set to reject UK PM May's solution to the Irish border issue and reports pointing to infighting within the Tory party. Of course, the bigger story was the cautious stance that BoE Carney took in his address made during late London hours. - USDCAD stuck to a tight range in front of today's Canadian CPI & retail sales data.

Technical Analysis


 BUND: (M18) Above 158.74 To Gain Breathing Room

*RES 4: 159.55 High Apr 18
*RES 3: 158.95 Low Apr 17 now resistance
*RES 2: 158.74 Low Apr 16 now resistance
*RES 1: 158.45 Hourly support Apr 19 now resistance

*PREVIOUS CLOSE: 158.30

*SUP 1: 158.06 Low Apr 19
*SUP 2: 157.67 Low Mar 19
*SUP 3: 157.44 55-DMA
*SUP 4: 157.34 Low Mar 14    

*COMMENTARY: Continued hesitation ahead of Mar monthly highs took its toll with sell-off and dip below the 100-DMA & Bolli base. Bears now focus on a break of 157.34 needed to confirm traction below the 55-DMA and initially target 156.22. The Bolli base (158.15) is the key concern for bears. Layers of resistance have been left in the wake. Bulls now need a close above 158.74 to gain breathing room and above 158.95 to return focus to 159.55-69 where Mar highs are noted.

EUROSTOXX50: Topside Hesitation A Concern

*RES 4: 3523.28 Low Feb 2 now resistance
*RES 3: 3516.33 55-WMA
*RES 2: 3511.07 200-DMA
*RES 1: 3495.39 High Apr 19

*PREVIOUS CLOSE: 3486.60

*SUP 1: 3476.59 Low Apr 18
*SUP 2: 3455.22 Hourly support Apr 17
*SUP 3: 3435.58 Low Apr 16
*SUP 4: 3411.63 Low Apr 11

*COMMENTARY: O/B daily studies appear to be impacting with the index struggling to gain traction above the 100-DMA (3490.66) and remaining capped ahead of the 200-WMA, 55-DMA and Bollinger top (3518.82). Bulls need a close above 3523.28 to confirm breaks of key resistance levels and to target 2018 highs. Bears look for a close below 3476.59 to gain breathing room and below 3383.17 to focus on 2018 lows.

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.


17461




Futures

Blue Line Futures - 2 Minute Drill (Grains)


May option expiration could be keeping the grain markets in check for the week, but technicals and fundamentals support higher prices into planting season.

Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

                                              Visit our website at www.bluelinefutures.com to open an account and stay up to date with our research.

Oliver Sloup is Vice President of Blue Line Futures. Oliver has been a guest on CNBC and Bloomberg, among others. Oliver has over a decade of trading experience. Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.

Blue Line Futures is a leading futures and commodities brokerage firm located at the Chicago Board of Trade. We work with clients that range from institutional to professional to novice and from self-directed to broker-assisted. No matter what type of trader you are, our mission is simple; to put the client first. This means bringing YOU strong customer service, consistent and reliable research and state of the art technology.

This video is from Blue Line Futures and is being posted with Blue Line Futures' permission. The views expressed in this video are solely those of the author and/or Blue Line Futures and IB is not endorsing or recommending any investment or trading discussed in the video. 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.


17459




Futures

Blue Line Futures - 2 Minute Drill (Livestock)


Oliver Sloup shares what he is looking for in the cattle market ahead of tomorrow’s Cattle on Feed Report.

Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

                                 Visit our website at www.bluelinefutures.com to open an account and stay up to date with our research.

Oliver Sloup is Vice President of Blue Line Futures. Oliver has been a guest on CNBC and Bloomberg, among others. Oliver has over a decade of trading experience. Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.

Blue Line Futures is a leading futures and commodities brokerage firm located at the Chicago Board of Trade. We work with clients that range from institutional to professional to novice and from self-directed to broker-assisted. No matter what type of trader you are, our mission is simple; to put the client first. This means bringing YOU strong customer service, consistent and reliable research and state of the art technology.

This video is from Blue Line Futures and is being posted with Blue Line Futures' permission. The views expressed in this video are solely those of the author and/or Blue Line Futures and IB is not endorsing or recommending any investment or trading discussed in the video. 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.


17458




Macro

Interactive Brokers - Recent Earnings Impact the Markets


 

 

Interactive Brokers Chief Options Strategist Steve Sosnick discusses how recent earnings have impacted the markets.

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.

 


17456




Macro

Franklin Templeton - Why Tech-Sector Volatility Doesn't Worry Us


While a few companies in the US technology space have been in the hot seat lately, Jonathan Curtis, vice president and research analyst with Franklin Equity Group, is largely unfazed. He said temporary “blips” affecting certain stocks are par for the course as consumers get used to new technologies—and how they impact our lives. He sees the overall long-term fundamental backdrop for the sector as sound.

We’ve seen a recent selloff in the US technology sector as some companies in the space have faced near-term challenges and negative press. But as long-term investors, we are not deterred. The tech sector overall has been performing well over the past year, so it certainly doesn’t surprise us to see the market give back a bit of those gains.

In the first quarter of this year, concerns about consumer data privacy and potentially tighter regulatory controls exacerbated existing investor nervousness tied to speculation the US Federal Reserve would quicken the pace of interest-rate hikes in response to higher wage growth. Investor sentiment was further rattled by the possibility of an escalating trade skirmish, primarily with China.

Data Privacy Concerns: The Elephant in the (Digital) Room

While safety issues have bubbled up in the autonomous vehicle space recently, online platforms have faced increasing scrutiny over data privacy. Facebook was caught in the crosshairs amid revelations that a data analytics firm improperly kept a small portion of Facebook’s user data for years, igniting a major debate over user and data privacy.

While we can’t predict what will ultimately happen with Facebook or any other individual company, we think tech companies in general will be able to regain consumer confidence and keep engagement high. We view the sector’s recent setback as likely a short-term blip and not a structural change in the trajectory of the industry or the business models of these companies.

That said, it’s clear consumers are just starting to understand how these types of digital businesses operate. We believe digital social networks in one form or another will survive, because people have a strong desire to connect with each other and the businesses and causes that matter to them. And, while advertisers on these platforms recognize the value proposition in targeting consumers, they likely will need to do so in a less-opaque manner. We feel confident these issues can be worked through.

Taking a Long-Term View of Tech Transformation

Investors are starting to understand that technology is playing an increasingly important role in the global economy, and we think the sector’s long-term fundamentals are positive. We have seen a big-picture trend of digital transformation—which encompasses areas including artificial intelligence (AI), cloud computing, software-as-a-service and robotics—growing across the economy.

The digital transformation appears to be gaining momentum, even as certain companies experience growing pains. Advancements over the past few years in AI and machine learning have created opportunities for technology vendors in the data-processing supply chain and for enterprises with unique and compounding datasets.

We believe that through the course of 2018 and 2019 investors will come to appreciate how technology companies with large and compounding datasets will be able to combine their data with machine learning algorithms to create new sources of revenue, reduce costs, build predictive models and create compounding competitive advantages. We expect the entire data chain (data storage, processing and analysis) to benefit from this seismic shift, especially for companies that have relatively unique datasets.

Market volatility aside, we believe 2018 is shaping up to be a good year for information technology (IT) sector fundamentals (including growing revenue, growing earnings per share and increased dividends), based on the digital transformation theme, lower taxes and the need for increased productivity in a tightening labor market. We believe some stock market-related setbacks are inevitable and may occasionally weigh on what we consider to be a solid IT-driven growth outlook, with significant technology-related changes set to take place in the next few years.

Corporate tax reform is helping to bring capital back to the United States, which is being applied to share repurchase activity and increased dividends for shareholders. We are also hearing that a number of companies outside the technology sector will be increasing their investment in technology as a result of tax reform, which lowered the corporate tax rate across the board for US companies.

Technology is helping companies across industries develop more service-oriented, data-centric relationships with their customers. Tech-platform businesses have done well in the advertising space, and they are taking the close business relationships they have with consumers—and the data they’ve collected—into expanded areas like financial services and transportation.

We feel companies that are not tech-centric at their core are likely going to be compelled to respond to the advancements that these big tech-platform companies are having in categories that are new to them. As a result, these non-tech-centric businesses will need to invest in innovation. So, we should see this double benefit of leadership from core tech-platform companies as well as efforts by legacy businesses or companies outside the technology space to leverage technology to play more defense.

Finding Value Amid Volatility

As some investors have been selling shares of tech-sector companies of late, we, as active managers, have been looking for stocks that appear to have the best long-term growth prospects and highest quality business models and teams amidst the inevitable reappearance of volatility that we have seen in early 2018.

Today’s progressively sophisticated technology and software also allow companies to provide products and services that seemed impossible even 10 years ago. In particular, we believe the transition to technology-on-demand will be integrated into day-to-day life in the years ahead. This transition is being enabled by a large base of always-connected consumers, high-speed internet access and an expanding global cloud infrastructure. As it grows, industries far afield from IT are feeling the impact of the emerging platform disruptors across a wide array of industries.

We continue to rely on our disciplined, bottom-up research to identify companies leveraging long-term trends that provide growth opportunities over time, regardless of shifting markets and any short-term “blips.”

---

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

This information is intended for US residents only.

What Are the Risks?

All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments.

To get insights from Franklin Templeton delivered to your inbox, subscribe to the Beyond Bulls & Bears blog.

This article is from Franklin Templeton and is being posted with Franklin Templeton’s permission. The views expressed in this article are solely those of the author and/or Franklin Templeton 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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