Hawks Without Wings

Hawks Without Wings

08/03/2018， Fri， Sunny， Air Polluted

Summary：Trade overshadowed Asia and Eurozone market while US equities recovered. Weird feeling why yield stay low.

Euro Session:

UST and JGB were a tough stronger from the level closed in US session. Equities were hit hard through Asia while $Asia performed mixed. BOJ statement that he purchased 400bn yen worth of 5-to-10-year bonds in the afternoon pressed down the JGB yield which left USDJPY in bid tone. It looks like Mr. Kuroda get everything he want, steeper curve, weaker yen and relatively stable equity.

 

The risk-off sentiment was broadly based even after EU session stepped in . EUR and GBP went down sharply. EGBs stabilized somewhat while UST and JGB traded heavily again. But with EU equities slumped , the risk-off sentiment pushed the yield of BUND and UST to the intraday low of 0.446 and 2.975 respectively.

 

Coupled with the widening of German-Italy 10yr spread, Italy gradually came back into focus as the financial mister of Tria was said to hold a top-level meeting on fiscal budget due to be presented by 27 Sep. This meeting was suppose to consider populists' demands for tax cut and income support for the poor, which was bound to enlarge fiscal deficit. Only if Italy chose to comply with EU's rules on fiscal deficit as to GDP, EU could avoid a big challenge. But the market seems to expect some compromise between EU and Italy government.

 

 

 

7:00, BOE raised rates to 0.75% by 25bps in a surprise unanimous vote of 9-0, and said if the economy unfolds as they expect, ongoing tightening will be needed. despite apparently hawkish results from the Bank of England, GBP was hit down fairly forcibly after initially rallying. Especially after Carney said "Policy needs to walk , not run, to stand still", the Pound decreased even further. GBP has been boosted at least three times by BOE officials' review on this hike, but it finally turn out to be a hawk without wings. If there was a window to long sterling, it must be very short. UK's Construction PMI has beaten expectations, hitting a solid 55.8 in July (vs. 52.8). This is the fourth consecutive month of expansion, rising from 53.1 in June. Great numbers and an encouraging sign that things are still up. So could we expect sterling more resilient before 1.3000?

Economy data:

3:15,Swiss July retail sales 0.3% mom vs 0%, prior -0.1% revised up to 0.4%

3:30, Swill July manufacture PMI 61.9 vs 60.9, prior 61.6

4:30, UK Construction PMI 55.88 vs 52.8, prior 53.1.

5:00, EU June PPI 0.4% mom vs 0.5% mom , prior 0.8%

US Session:

It looks like US market was isolated from the rest of the world. Equities gapped lower and gradually rallied on till the end of the session. Every time UST endured a sell-off , the strong interests of "buy the dip" pressed down the yield again. Apple became the first US company with $1 trillion in market cap. Trump said he didn't need presidency ,said "had a very nice life" .

Economy data:

8:30, US Claims were +1k to 218k vs. 220k

10:00, US Jun. Factory Orders 0.7% mom vs 0.7%.

US June final Durables 0.8% mom, preliminary 1.0%.

Key Data And Events Ahead:

UK, IT, GE, FR Markit service and composite PMI

IT IP

EC retail

US trade balance

NFP, focus on wage inflation

US Markit service and composite PMI

Comments:

It kind of feels that the only thing holding yields down in the US right now is Trump and his Twitter account. With 10yr UST is still below 3%, I think It's time to have a good think what's going on after JGB curve goes higher and steeper. From the mid of 2017 Japan investors slowly retreated from US market and shifted to Euro bond market. This strategy went well in the year of 2017 but turned out to be bad since the EU economy momentum clearly fade from the beginning of this year. Then Japan investors redistributed their fund back to US market according to US treasure statistic. So when the yield of JGB increased high to attract Japan money back home, the possibility of fund flow reshaping could shake the market. On Tuesday , BUND , GILT and OAT followed the weakness of JGB tightly, while it was UST that made the similar pattern in the overnight session. Usually the core rates intend to move in the same way while the recent 2 days' abnormality could be well explained in this means. How could this take place? It's all about fighting for fund inflow which is a decisive factor in short-term. In the long run, market share should be the king definitely. That's what the trade issues are all about.

 

 

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近期重要时间点：

8月9日，美日贸易谈判

8月17日，公众200bn清单提交书面请求截止日

8月20-23日，200bn听证会

8月25日，Jackson Hole 研讨会

8月30日，200bn听证会后申诉材料提交截止日

9月13日，ECB议息

9月26日，FOMC

9月，日本LDP选举

9月27r日，意大利提交财政预算案

10月25日,ECB议息

10月31日，BOJ议息

11月6日，美国中期选举开始

11月8日，FOMC

11月11日，美国阅兵

12月13日，ECB议息

12月20日，FOMC

12月22日，改革开放40周年

2019年3月29日，脱欧谈判截止

Appendix：his t overnight

0802 1132 Incredibly beautiful ceremony as U.S. Korean War remains are returned to American soil. Thank you to Honolulu and all of our great Military participants on a job well done. A special thanks to Vice President Mike Pence on delivering a truly magnificent tribute!

0802 1147 RT @realDonaldTrump: “Worker pay rate hits highest level since 2008” https://t.co/pMDxHQqcg9

0802 1247 Congratulations to @GreggJarrett on The TREMENDOUS success of his just out book, “The Russia Hoax, The Illicit Scheme To Clear Hillary Clinton & Frame Donald Trump.” Already number one on Amazon. Hard work from a brilliant guy. It’s the Real Story of the Rigged Witch Hunt!

0802 1337 Thank you to Chairman Kim Jong Un for keeping your word & starting the process of sending home the remains of our great and beloved missing fallen! I am not at all surprised that you took this kind action. Also, thank you for your nice letter - l look forward to seeing you soon!

0802 1842 Charles Koch of Koch Brothers, who claims to be giving away millions of dollars to politicians even though I know very few who have seen this (?), now makes the ridiculous statement that what President Trump is doing is unfair to “foreign workers.” He is correct, AMERICA FIRST!

0802 1907 Wow, @foxandfriends is blowing away the competition in the morning ratings. Morning Joe is a dead show with very few people watching and sadly, Fake News CNN is also doing poorly. Too much hate and inaccurately reported stories - too predictable!

0803 0107 Working hard, thank you! https://t.co/pNXbFNcf8z

0803 0247 Congressman Steve Stivers of Ohio has done a fantastic job as Chairman of the @NRCC. He is a great Congressman who is tough on crime & borders & an inspiration to our Military & Vets. Big on 2nd Amendment. Get out and vote for Steve on Aug 7th. He has my full & total endorsement!

0803 0257 Looking forward to being in the Great State of Pennsylvania where we had a tremendous victory in the Election. Will be campaigning hard for an original supporter, Lou Barletta, to replace a weak an ineffective Senator, Bob Casey. Lou is tough and smart, loves PA and our Country!

0803 0257 Pennsylvania has to love Trump because unlike all of the others before me, I am bringing STEEL BACK in a VERY BIG way. Plants opening up in Pennsylvania, and all over the Country, and Congressman Lou Barletta, who is running for the Senate in Pennsylvania, is really helping!

0803 0302 When the House and Senate meet on the very important Farm Bill – we love our farmers - hopefully they will be able to leave the WORK REQUIREMENTS FOR FOOD STAMPS PROVISION that the House approved. Senate should go to 51 votes!

0803 0312 Looking forward to being in the Great State of Ohio on Saturday night where I will be campaigning hard for a truly talented **re Congressman, @Troy_Balderson. See you all then! Tickets: https://t.co/8UOykaI8uf https://t.co/jHdtAy5fgj

0803 0427 They asked my daughter Ivanka whether or not the media is the enemy of the people. She correctly said no. It is the FAKE NEWS, which is a large percentage of the media, that is the enemy of the people!

0803 0832 Thank you Pennsylvania. I love you! https://t.co/qoswnBZb3f

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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