Markets Update

U.S. job growth surged more than expected in June and employers increased hours for workers, with signs of a labor market strengthening that is likely to keep the Federal Reserve on course for a 3rd interest rate increase this year, despite lackluster inflation. Non-farm payrolls increased by 222,000 jobs in June beating expectations for a 179,000 gain. Data for April and May was revised to show 47,000 more jobs were created than previously reported. US unemployment rose to 4.4%, from a 16-year low of 4.3%, because more people were looking for work; a sign of confidence in the labor market. The jobless rate has dropped 0.4% this year and is close to the most recent Fed median forecast for 2017.

UK data released on Friday showed output by British factories unexpectedly fell in May, indicating that the UK economy has struggled to gain any momentum after a slow start to 2017 and further raising questions about the likelihood of the Bank of England raising interest rates this year. Markets were expecting an increase of 0.5% in Manufacturing Production (MoM) but were surprised with a very poor reading of -0.2%. GBPUSD reacted immediately dropping from 1.2955 to 1.28664 (-0.7%) whilst EURGBP climbed from 0.87964 to 0.88602 (+0.55%). GBPUSD is currently trading around 1.2905 and EURGBP around 0.8840.

The G20 meeting in Hamburg over the weekend had little to no impact on the markets. The highlights were the first-time meetings of Trump, Putin & Xi Jinping. The general undertone was that this was the G19 plus 1 meeting as the US was not a particularly welcome attendee.
USDJPY initially dropped by 0.6% on Friday, to trade as low as 113.148, before rebounding higher following the NFP to reach a high of 114.176 – a 0.8% increase on the day. In early trading USDJPY is around 114.15.

EURUSD had a similar story reaching a high of 1.14393 after the data release before retracing down to a low of 1.13791 a relatively small loss of 0.2% on the day. Currently EURUSD is trading around 1.1410.

Gold had heavy selling pressure, dropping 1% on Friday to trade as low as $1,207.17 – close to a 4-month low. Gold is down over 1.6% on the week resulting in its worst performance since May. Currently Gold is trading around $1,212.

WTI closed down 4% on the week as the decline in US inventories did not convince traders that global production was anywhere near rebalancing. On Friday WTI traded down 1.8% to hit a low of $43.88pb. Currently WTI is trading around $44.65pb.

Today & Tomorrow is light on impactful economic data releases – traders are focusing on Wednesday July 12 when, at 09:30 BST, the UK will release its Average Earnings Index followed, at 15:00 BST, by the Bank of Canada interest rate decision and Fed Chair Yellen’s Testimony.

Cheerio,

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

 

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Oil Bull Is Bearish

One of oil’s most prominent bulls is starting to sound like a skeptic.

The global crude market has “materially worsened” and prices may be stuck around $50 a barrel or below, storied hedge fund manager Andy Hall said in an investor letter this week, reversing the optimistic tone he’d taken for months.

Crude prices are down 16 percent for the year, amid signs that rising U.S. output will undercut production cuts ordered by the Organization of Petroleum Exporting Countries and its allies. After a rally last week, futures for West Texas Intermediate oil slipped 4.1 percent on Wednesday after Russian officials said they were opposed to deeper reductions.

“When the facts change … ” Hall wrote to investors in his Stamford, Connecticut, hedge fund, Astenbeck Capital Management LLC, in a July 3 letter obtained by Bloomberg News. “Not only did sentiment plumb new depths but fundamentals appear to have materially worsened.”

U.S. shale drilling is expanding “at a surprisingly fast rate, thus raising the odds for significant oversupply in 2018, even if OPEC maintains its production cuts.”

Hall’s career stretches back to the 1970s, including stints at BP Plc and legendary trading house Phibro Energy Inc., where he was chief executive officer. This year, he’s consistently pushed against the bearish tide, arguing in investor letters that data showing rising oil supplies was incompleteand that a sustained rally was on its way.

‘Rangebound’

U.S. producers have ramped up output and lowered their own costs faster than expected and growth in demand seems set to be lower than anticipated going forward, Hall wrote in the latest letter. While oil prices may recover somewhat in 2017, they look to be “rangebound for some time to come.”

“At the start of the year, the anchor was thought to be about $60″ for Brent crude “and rising over time,” Hall wrote. “Today, it appears to be closer to $50 (and possibly still falling.)”

A message seeking comment from Hall wasn’t immediately returned. Astenbeck managed $2.4 billion as of the end of 2016, according to a previous investor letter reviewed by Bloomberg. The most-recent letter doesn’t mention the size of the Astenbeck fund or its latest performance.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

 

Global Round Up

Here are some of the key events coming up:

  • More Fed officials will be speaking as the FOMC’s June 13-14 meeting approaches. Robert Kaplan will be in New York on Wednesday.
  • The U.S. jobs report Friday may bolster the case for a rate hike, with a gain of 180,000 positions expected.
  • Brazil’s central-bank decision Wednesday will probably see a cut of 75 to 100 basis points from the current 11.25 percent, according to economists.
  • The EIA is due to release its monthly supply reports Wednesday.

Here are the main movers in markets:

Stocks

  • The MSCI Asia Pacific Index dropped less than 0.1 percent, paring its advance for May to 2.6 percent. The Stoxx Europe 600 Index fell 0.1 percent, trimming a monthly gain to 0.8 percent.
  • The Shanghai Composite rose 0.2 percent, after nearly wiping out an earlier gain of 1.1 percent. The manufacturing purchasing managers index remained at 51.2 for a second straight month in May, compared with a median estimate of 51 in a Bloomberg survey of economists.
  • Hong Kong’s Hang Seng was flat, heading for a fifth straight monthly gain, the longest winning streak since 2013, as improving earnings outweighed concerns about China’s campaign to cut leverage.
  • Japan’s Topix fell 0.3 percent, following two days of gains.
  • Futures on the S&P 500 rose 0.1 percent. The benchmark index slipped 0.1 percent Tuesday, retreating for the first time in eight days. The Nasdaq 100 Index advanced for an eighth day to an all-time high.

Currencies

  • The pound dropped 0.3 percent to $1.2817. The euro was little changed, heading for a monthly gain of 2.7 percent, its best performance in more than a year.
  • The yen weakened 0.1 percent to 110.93 per dollar after rising 0.4 percent Tuesday. The South African rand strengthened 0.4 percent, after tumbling for two days.
  • The onshore yuan climbed 0.4 percent, poised for its highest closing level since November.
  • The Bloomberg Dollar Spot Index was little changed for a third straight day. The gauge is down 1.3 percent for the month.

Commodities

  • Iron-ore futures in Dalian fell 5.4 percent to 429.5 yuan a ton, the lowest since Nov. 7.
  • Gold was little changed at $1,262.69 an ounce, extending a 0.4 percent loss Tuesday.
  • Oil dropped 0.6 percent to $49.35 a barrel after retreating 0.3 percent in the previous session. OPEC and Russia’s deal last week to extend output limits through March was met with a selloff as it didn’t include deeper cuts, a plan for the rest of 2018 or a new ally.

Bonds

  • The yield on 10-year Treasuries rose two basis point to 2.23 percent, after declining four basis points in the previous session.
  • Benchmark yields in the U.K. rose one basis point, after a drop of two basis points Tuesday.
  • Australia 10-year yields fell less than one basis point to 2.39 percent.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd