Growth Signals Ok

Growth Signals Ok

07/03/2018,Tuesday，Cloudy,Air Polluted

Summary：Global malaise over trade triggerred a risk-off tone again ,but both the fact of US data strongly beat and the divergence between officially declared resolved boosted the market.

Euro Session:

The trigger of the risk-off sentiment seemed originated from the Trump intervewed by Bartiromo from FX on July 1st. With that TV show, Trump declared he can impose tariffs even as much as 500bn. And he also mentioned EU bad behavior. So from the very beginning of Mondaym FTQ sentiment across east asia with Hong Kong on vacation pressed 10yr of USTdown 2bp. EURUSD gapped lower from the open as Merkel ‘''s coalition about to hold last-ditch talks.

When euro session stepped in ,stocks slump on trade risk, estoxx50 even -1.3%. As to rates, BTP was dumpped again , 10yr btp yield opened 6 bp higher while bund , oat and gilt offered at around 1 bp higher.

Around 4:00, the bavarian state premier Soeder said we don''t want to put the stability of German government at risk and Seehofer surprised us with his offer to regign as CSU leader and interior minister. This headline boosted EURUSD bounce back from below 1.1630 to above 1.1640.Do you know how Merkel comment on this? "Everyone has hysteria. We should be calm. We can continue to work with CSU . Cooler heads can prevail"

At 4:30, UK June manu PMI slightly rised to 54.4 , which showed a little more positive tone for sterling upside risk even after boosted by Merkel''s good news mentioned aboved. And Euro equities also bounced a little.

After that, the Europe equity auto-piloted around their intraday lows while EURUSD started its own choppy tour corresponding to any headlines about CSU, Seehofer and etc.

Economy data:

3:15,Swiss May retails fall real 0.1% vs 1.4% , pre 2.2% revised up to 2.9%.

3:30, Swiss June manufacturing PMI 61.6 vs 61,pre 62.4.

3;45, Italy June manufacturing PMI 53.3 vs 52.5 , pre 52.7.

3:50, French June manufacturing PMI final 52.5 vs 53.1, prior 53.1

3:55, German June manufacturing PMI final 55.9 vs 55.9 ,prior 55.9

4:00 Eurozone June manufacturing PMI final 54.9 vs 55, the lowest in recent 18 onths,prior 55,

4:30, UK June manufacturing PMI 54.4 vs 54, pre 54.3;

5:00, Eurozone May unemployment rate 8.4% vs 8.5% , pre 8.5% revised down to 8.4%.

Us Session:

As expected with July 4th this Wednesday, The matket saw a relatively low volume day trading 40% below 20dma. The rally of ust yield reversed as NY started trading while the curve continued its flattening move in the early session. Regarding economic data, Markit PMI beat, Construction Spending missed, and ISM Mfg. beat. It is worth noting that imports (59.0 vs. 54.1) are still at solid levels, which makes sense if firms are looking to stock up ahead of anticipated tariff measures.

The overall strong manufacturing data helped Treasuries grind lower as the market steadied after the midnight. The same pattern was also followed by the equity market. Indu , spx and nasdaq opened lower and reversed their early losses to step up led by techs.

Just before NY closed, The treasure market went out at the lows as the headline “German CSU leader says migration clash with Merkel resolved” easing some of the political volatility abroad. EURUSD pared back its early losses to finish the day less than 0.5% lower around 1.1640

Other news: after meeting with Dutch PM Mark Rutte, Trump says he’s “very close” to making some fair trade deals, as he had a meeting with EU fairly soon. Ross said premature to talk about withdrawing from WTO and WTO need some changes. By axios, Michael Cohen breaks his silence: Trump isn’t my "first loyalty". He is the only person on earth intertwined in Trump’s professional, political, personal, legal and family life

Economy data :

9:45, US June Markit manufacture PMI 55.4 vs 54.7, prior 54.6

10:00, US June ISM manufacture PMI 60.2 vs 58.5, pre 58.7:new orders 63.5, pre 63.7;employment 56, pre 56.3; price paid 76.8 vs 74.8, pre 79.5.US June construction spending 0.4% mom vs 0.4% mom, pre 1.8% revised up to 2%

Comments:

Asian PMI''s showed a stronger reading for the more trade driven economies of the region-Korea 49.8, Taiwam54.5, Malaysia 49.5, Vietnam 55.7. On the weaker side were Indonesia, Philippines and Thailand,.But in all three cases(composite, service and manufacture), Our readings were still above 50. China reported 51.0 (prior 51.1), and looking at the breakdown of data,new orders remain strong suggesting domestic demand is holding up well. Finally in Europe, the Eurozone present was in line, and the UK reading was even better than expected at 54.4(est 54).Over all, the growth signal is not too bad yet. So from the perspect of economy fundamentals , the market could overreact a little. Even when the trade tension finally turn into something bad , since both US and China has in-depth domestic market, the collateral damage could be a thing. Besides, if the thing could force the reform accelerating somehow, it would benefit the ordinary people in the final !

Revision: The Fed paper talked about yesterday on the topics of yield curve signaling recession should be described as the chart below:

个人微信zhangke8639，欢迎同业交换名片。

公众号更新速度快一点儿....排版也好一点点儿....

近期重要时间点：

6月14日-7月15日，俄罗斯世界杯

7月6日，中美互征关税开始生效

7月11日，北约峰会

7月16日，第二批160亿美元清单走完程序，Putin和Trump在芬兰会面

7月26日，GB Q2

8月1日，FOMC

8月2日，BOE开会，有可能加息，需要Q1 GDP上修+Q2不低于0.3

9月，日本LDP选举

9月19日，FOMC

11月11日，美国阅兵

12月20日，FOMC

Appendix：his t overnight

0702  1102  Congratulations to Andres Manuel Lopez Obrador on becoming the next President of Mexico. I look very much forward to working with him. There is much to be done that will benefit both the United States and Mexico!

0703  0032  RT @DHSgov: Today, DHS, @CBP, and @ICEgov will be sharing stories of the brave men and women who put their lives on the line every day with the sole objective of protecting our nation. Make sure to follow to see stories that have not been widely reported.

0703  0557  Today, it was my great honor to welcome Prime Minister Mark Rutte of the Netherlands, to the @WhiteHouse!

https://t.co/Zn6ZLM0tzy

Disclaimer：This material was prepared in private name and out of party time hobby,definately based upon facts and robust analysis with delicate consideration of highly professionality.But with no means to conduct any trade , and before using the contents of this note in any internal or external communication, please ensure you are comfortable and fully aware this could not be sufficient enough as any action base.

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