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Risk on in Major Markets
05/16/2019 10:09 am EST
Risk-assets are moving favorably across the board this morning, says Bill Baruch, President of BlueLineFutures.com.
E-mini S&P (ESM)
Yesterday’s close: Settled at 2855, up 15.75
Fundamentals: Risk-assets are moving favorably across the board this morning. Although U.S benchmarks are extending yesterday’s gains and should foreseeably go unchanged on the week, their work is certainly cut out for them as they face strong resistance overheard technically and fundamentally. The rally started when President Trump said he plans to delay auto tariffs for at least another six months. Sentiment was very soft ahead of the open and the S&P 500 slipped to a low of 2815 and down nearly 1% before turning sharply higher just after 9:00 am CT on the news. Ultimately, as we described in yesterday’s Midday Market Minute, this was not new news, but it provided the hungry bull camp a reason to step in.
Furthermore, as we have been describing since Monday, the U.S-China trade landscape is solidified, the tariffs are announced and the meeting between the two leaders is scheduled. The worst, for now, is arguably in. Not so fast, the White House announced sanctions yesterday on Chinese telecom giant Huawei and at face value banned U.S companies from buying or selling components to them. This measure was arguably expected and one that does not deteriorate the larger picture on trade unless Chinese state officials take it there.
This morning, we look to Philly Fed Manufacturing, Building Permits, Housing Starts and weekly Jobless Claims at 7:30 am CT. This afternoon, Minneapolis Fed President Kashkari speaks at 11:05 am CT and Fed Governor Brainard at 11:15 am CT. Yesterday, Retail Sales and Industrial Production were very poor, but the market was able to move sharply higher trade tensions taking a breather. At the same time, the CME FedWatch Tool gives a 73.8% probability the Fed cuts rates this year, and this is certainly supportive.
Crude Oil (CLM)
Yesterday’s close: Settled at $62.02, up 0.24
Fundamentals: Crude oil is higher by more than 1% this morning on rising tensions in the Middle East, a healthy risk-environment and a less bearish than priced-in inventory report yesterday. Saudi Arabia has officially accused Iran-backed Houthi rebels for multiple attacks on their facilities. Ultimately, these tensions are coming to roost and now that the U.S-China trade war landscape is solidified, the energy sector is beginning to focus more and more on geopolitical risks in the region. Investors turned broadly to risk-assets yesterday after President Trump was said to delay auto tariffs and gains have been extended into this morning. Lastly, although crude inventories came in much higher than expected, it was not as large as a build estimated by the API survey and Gasoline was inventories fell.
On other fronts, today is options expiration for the June contract. Also, Russia is having contamination issues in its largest pipeline serving Europe. Furthermore, OPEC brass is scheduled to meet this weekend to discuss a framework for their highly anticipated June meeting.
Yesterday’s close: Settled at $1,297.8, up 1.5
Fundamentals: Gold is taking a swift kick to the gut after Philly Fed, Building Permits, Housing Starts and weekly Jobless Claims all beat expectations this morning. The metal struggled to capitalize yesterday on what should have been a favorable landscape when Retail Sales and Industrial Production contracted and largely missed expectations. However, investors turned up their risk appetite after President Trump said he would delay auto tariffs and despite a quiet Dollar, this brought a ceiling to the metal at the psychological $1300 mark. This afternoon, Minneapolis Fed President Kashkari speaks at 11:05 am CT and Fed Governor Brainard at 11:15 am CT.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com
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