Brexit & Beyond: U.K. Retail Sales Slump, U.S. Data Case Scares EU, ECB Warns Nations to Prep for Next Crisis

Brexit & Beyond: U.K. Retail Sales Slump, U.S. Data Case Scares EU, ECB Warns Nations to Prep for Next Crisis

Brexit & Beyond: Europe in Flux is The Wall Street Journal’s round-up of news and analysis of how Brexit will affect global business, economies and finance. You can sign up here. MUST READS U.K. retail sales fell steeply on the month in December, new figures showed Friday.  Thierry Roge/Belga/Zuma Press U.K. Retail Sales Suffer Sharpest Drop […]

Next Week

Next Week

Next Week

January 19, 2018

World Economic Forum: Annual conference in Davos, Switzerland, bringing together leaders of business, politics and academia. This year’s theme is “Creating a Shared Future in a Fractured World.” The WEF begins Tuesday and runs through the end of the week.

Central Banks: Both the Bank of Japan and European Central Banks will be holding policy reviews. Governor Kuroda and President Draghi will hold press conferences afterward. The BOJ’s meeting coincides with publication of the quarterly Outlook for Economic Growth and Prices. Monetary policy meetings are also scheduled next week at the Bank of Norway, Bank Negara Malaysia, and Czech National Bank.

Holiday: Australia Day on Friday.

Scheduled U.S. Statistical Releases: Initial estimate of fourth-quarter GDP. Monthly new and existing home sales, durable goods orders, the Richmond and Kansas City Fed manufacturing indices, the advanced trade deficit estimate, the FHFA house price index, and the index of leading economic indicators. Weekly jobless insurance claims, chain store sales, consumer comfort, mortgage applications and energy inventories.

Euroland: Preliminary purchasing managers index, money and bank lending growth, consumer confidence and ECB survey of forecasters.

Members of the Euro Area: German and French preliminary PMI surveys. ZEW investor sentiment toward Germany and Euroland. German IFO business climate. French, Dutch, and German consumer confidence. Spanish and Finnish producer prices. French business sentiment and index of leading economic indicators. Spanish and Greek current accounts. Austrian and Cypriot industrial production. Spanish unemployment, Irish PPI and Italian industrial orders.

U.K. and Switzerland: Britsih GDP, unemployment, wage growth, public sector net borrowing, mortgage approvals, Rightmove house price index, and the CBI monthly surveys of industrial trends and distributive trades. Swiss money growth.

Nordic Europe: Swedish and Danish retail sales and consumer confidence. Norwegian business sentiment and unemployment. Swedish retail sales and trade balance. Icelandic wage costs.

Eastern Europe: Czech business and consumer sentiment.

Japan and China: Japanese consumer prices, corporate service prices, customs trade, department and supermarket sales, all industry index, machine tool orders, index of leading economic indicators, and preliminary manufacturing purchasing managers index. Chinese corporate profits and index of leading economic indicators.

Selected Other Asian Data: South Korean retail sales, industrial production, GDP, consumer confidence, and PPI. Singapore CPI, industrial production and unemployment. Hong Kong trade and CPI. Indian index of leading economic orders.

Australia and New Zealand: Australia’s index of leading economic indicators. New Zealand service sector purchasing managers index, ANX activity outlook index, and 4Q consumer prices.

South Africa and Turkey: South African CPI, PPI, and index of leading economic indicators. Turkish consumer sentiment.

Canada, Brazil and Mexico: Canadian retail sales, consumer prices and wholesale turnover. Brazilian current account and consumer sentiment. Mexican trade balance.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Economic Data Calendar




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Trend Following versus Regression to the Mean

Trend Following versus Regression to the Mean

Our current market climate for Trend Followers of commodities is characterized by reversion to the mean instead of trending behavior. This presents us with meager opportunities. In such an environment ones trading system tries to minimize whipsaw losses while still taking its trading signals because you never know which trade may become the next big grand slam. This is trend following.

Trend following takes discipline…persistence…and GRIT!

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When All Else Fails, Raise Hemlines

When All Else Fails, Raise Hemlines

Saudi Arabia

The arrival of cinema (after a 35-year ban), comedy shows, woman driving. What the hell is happening? At this rate, within a few months Saudi woman will be tottering around in lululemon and enraging the clerics via Instagram in their yoga pants. I could think of worse things.

Why all these changes?

Good question! Let’s first take a look at what Mohammed Bin Salman (MBS) has done.

I already wrote about MBS back in November when he gave all the royals a nice holiday in the Ritz.

Clearly he’s charting a new course, and amongst the Saudi population he’s very popular. And why not? He’s basically Robin Hood without the green tights, who just donned a white sheet.

Remember the Arab Spring?

That was waaaay back in 2012. MBS was just still in his 20’s but being a sharp guy I’m pretty sure he was watching.

It wasn’t therefore lost on him how mad a population can get when they see lavish extravagance around them… and they’re not party to it. And so stripping untold wealth from the royals and redistributing a percentage of this to the people isn’t the dumbest idea ever. And for that he’s a modern-day hero.

As to all those powerful and wealthy angry royals… Well, they’re no doubt pretty shocked.

I mean, what he’s done is even less appropriate than farting at a Royal Ascot charity dinner. It was certainly more unexpected. I’m sure if they could, they’d fill his trousers with some of that oil that’s made them all so stinking rich and set him alight. But that’s unlikely to happen, at least for now. Why?

And Trump can champion all these freedoms MBS is allowing and take credit for them. Now, being such a bashful, humble guy I’m sure he won’t, but you know he could if he wanted to.

As for MBS, he’s no dolt. I mean, for starters a thuggish dolt of a dictator would simply have chopped off the heads of all the royals and stolen all their money. Not MBS. He’s cunningly served much the same dish by coating it in a delicious looking mayonnaise called “cracking down on corruption” and the world’s eating it up.

He realises that OPEC is finished and no matter what they all agree to do it’s just smoke and mirrors at this point as they’re all cheating more than a group of married investment bankers in Vegas for the weekend. So what’s he to do?

Develop the petrochemical complex, build out refining capacity like they’re doing at the Jazan refinery and terminal project, which on completion will sport a processing capacity of more than 400,000 barrels of the black stuff per day, providing fuels for domestic and international customers. And diversify Saudi’s economy from oil.

Alternative energy? Sure!

Tourism? Yes, sir!

Now, you might look at me with cross eyes and say, “Chris, put down the drugs! Who on earth would go on holiday to Saudi frickin’ Arabia?” And you’d be right, which is why MBS is building, amongst other things, NEOM, a $500 billion mega city.

In his own words:

We’re building a new generation of cities. NEOM will be powered by clean energy, and will have no room for anything traditional.

Take a look.

Ha! And you thought I was kidding about lululemon!

Here’s what I said in that article back in November:

It looks to me like MBS sees this for the expiring option contract that it is. My best guess is that he realises that if they wait too long, by the time the welfare money has run out, they’ll all be overthrown. The old guard probably don’t want to hear that, but it is the truth. And because they don’t want to hear it, you need to get rid of them.

Now only 3 months on that certainly looks like it was a pretty good guess. Lucky me!

IPO?

All talk now seems to be around this Saudi Aramco IPO.

You know what I think?

I don’t think it’s going to happen. At least not as many think.

Here’s a question that’s been bugging me and we should all ask ourselves. We’re ostensibly leading up to an IPO of what is the worlds largest company. And yet, nobody knows the numbers. Seriously!

This is not even like Tesla whose numbers are just financial spaghetti. These guys have not opened their books so we just don’t really know. Hands up who wants to invest in a company where we don’t know what the hell we’re buying… in a country renowned for chopping off people’s heads?

Yeah, and while you’re thinking about that, think about this. Everything MBS has done has been pretty methodical and clearly calculated. This is a sharp guy. You may not like him but he’s clearly not an idiot. Would he risk a failed IPO at a time when he’s been making some of the most polarising decisions in the history of the Kingdom?

Yeah, I didn’t think so either. I may be proven wrong but what I think is more likely is a listing of certain “assets” — maybe some port facilities, a refinery or two. JVs such as the Aramco-Sinopec Yanbu refinery JV. We’ll see that sort of stuff but not a wholesale listing of Aramco because let’s face it: That’d be like lifting you kilt and what the whole world will be looking to see is how big is it really? I don’t see any signs MBS is willing to reveal this.

Implications

Markets are funny creatures. Everything everywhere feeds in and out of the animal revealing which way it may be headed. So in that light I present to you high yield energy:

Back to 2014 highs. Remember 2014? Probably not. Well, let me remind you. Here it is:

That’s quite some divergence. Certainly the high yield market shows us that speculators are betting aggressively right now. That’s a worry in itself because the thing with speculators is they’re like husbands arguing with their wives — let’s face it, we’re very rarely right.

Long or short?

Well, I can’t give away how we’re positioned as that’d be pretty unfair to subscribers, but there’s just no asymmetry in oil itself and as for the high yield energy market. Put a gun to my head and I’d be short and since there’s no gun at my head, I’ll just not play in that sandpit.

What do you think?

What’s the best way to invest in oil (long or short) for the next 5 years?

Let me know in the comments section.

– Chris

“Cycles of shortage and surplus characterize the entire history of oil.” — Daniel Yergin

 

Wednesday’s Biggest Winners and Losers in the S&P 500

Wednesday’s Biggest Winners and Losers in the S&P 500

Source: Thinkstock

January 17, 2018: The S&P 500 closed up 0.9% at 2,802.57. The DJIA closed up 1.3% at 26,114.51. Separately, the Nasdaq was up 1.0% at 7,298.28.

Wednesday was an incredible day for the U.S. markets. Once again all three of the major averages hit all-time highs. Although we are only about two weeks into the new year, this is easily the best trading day for the markets in 2018. Crude oil started made a small recovery on Wednesday. The S&P 500 sectors were all positive. The best performing sectors were technology, consumer staples, and health care up 1.4%, 1.0%, and 0.9%, respectively. The worst performing sectors were consumer staples and materials, up only 0.4% each.

Crude oil was up 0.2% at $63.86.

Gold was down 0.6% at $1,329.30.

The S&P 500 stock posting the largest daily percentage loss ahead of the close Wednesday was Fastenal Company (NASDAQ: FAST) which traded down roughly 6% at $52.16. The stock’s 52-week range is $39.79 to $56.15. Volume was over 8 million, compared with the daily average of 2.1 million shares.

The stock posting the largest daily percentage gain in the S&P 500 ahead of the close Wednesday was Lam Research Corp. (NASDAQ: LRCX) which rose over 7% to $204.79. The stock’s 52-week range is $109.33 to $219.70. Volume was over 6 million compared to its average volume of 2.7 million.

Fed Beige Book Review

Fed Beige Book Review

Fed Beige Book Review

January 17, 2018

The Federal Reserve today released findings from its latest survey of regional economic conditions, known as the Beige Book.  It does this about two weeks prior to each of the eight scheduled FOMC meetings of the year. The latest report covers the period from roughly Thanksgiving to endyear.

Economic growth was characterized a moderate in in six Federal Reserve districts, modest in five districts and robust in the Dallas district that covers all of Texas plus southern Louisiana and southern New Mexico. Regionally, the “modestly” growing areas encompass a broad south-easterly swatch of territory running from Wyoming to Florida, plus the Northeast minus the New York district but including the Boston and Philly districts. The Dallas Fed’s robust characterization was an upgrade. Besides New York, moderate growth was found in the Cleveland, Minneapolis, Richmond, and San Francisco Districts (the latter covering the West).

Price movement has been mixed lately. Retail prices remain subdued. Manufacturers and construction face rising input costs but in certain instances have been above to pass on the increases. Wage growth has accelerated but is still considered essentially modest and lower than what overall tight labor might conditions historically produced. A slowdown in jobs growth last month is not expected to endure.

The recently passed tax bill is expected to stimulate economic growth somewhat in 2018. So all in all, the report seems consistent with at least three increases this year of the federal funds rate and doesn’t preclude the possibility of more hikes.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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Mid-day look at gold, crude and Treasuries

Mid-day look at gold, crude and Treasuries

Gold Feb Contract (GC, ETF: (GLD))
Friday’s post-close rally to fresh highs and its extension Sunday night up to $1345.00 per ounce were retraced entirely overnight. Tuesday’s flat open eventually firmed into the close, barely jeopardizing the buy signal that had already triggered through Friday’s open.

Eurodollar Mar Contract (EC, ETF: (FXE, UUP))
The holiday weekend’s gap up was preserved into Tuesday. That required a lot of energy, which has now been fulfilled, so any new weakness would be credible for extending down. By implication, any new weakness could be a significant turning point for the USD.

Silver Mar Contract (SI, ETF: (SLV))
Friday’s post-close rally above $17.15 per ounce to fresh highs and its extension Sunday night to 17.45 were retraced entirely overnight to pierce under Thursday’s 16.85 low. Recovering to unchanged into Tuesday’s open later closed 5-10 cents higher to suggest another rally attempt will be underway.

30-year Treasury Mar Contract (US, ETF: (TLT))
Bounce potential to 150-16 had been tested and then extended Monday night to make the bounce potential to 151-26 also likely to be tested before resuming the decline. Tuesday’s test of 151-00 reacted down but held 150-16 to keep alive the potential for extending the temporary bounce.

Crude Oil Feb Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
The bounce from Friday’s dip to the $63.15 per barrel pullback limit persisted into Tuesday’s open, albeit still short of the rally’s 64.75 that had been tested already.

Natural Gas Feb Contract (NG, ETF: (UNG, UNL))
Gapping down from Friday’s test of the rally’s initial $3.17 per thousand cubic feet target had room down to “lower prior highs” at 3.05, which were tested overnight. Holding the pullback limit’s test through the morning was recovered to fill the gap back up to 3.17.

About the Author

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes “Trading Plan” and more each session at the blog http://IfThenSignals.com.