Diary of a Financier

Top Newsstuffs (December 4-10)

In Bookshelf on Sun 10 Dec 2017 at 05:48

Top reads from across the past week…

Macro (BULLISH)

Trade balance (October 2017)
by US Department of Commerce

The deficit misses again, falling back to postcrisis lows despite a really weak USD, and having lapped difficult yoy comps by now; overall, gross trade volumes are accelerating, a sign of strong global growth and US tailwinds from a cyclically weak USD, secularly declining petroleum imports, and slower trade with China…Trade balance 2017.10
Net exports: -13.1% yoy, -8.6% mom @ -$48.7B deficit (miss -$47.5e)
    Exports: +5.6% yoy, unch mom
    Imports: +7.0% yoy, +1.6% mom
The net balance of trade accounts for ~3 – 5% of US GDP (seasonally adjusted).
[Previously: GDP returns to bullish trend]
#Neutral $DXY $UUP #EX #IM #NX #Globalization

Purchasing Managers Index (November 2017)
by Markit Economics

Global growth remains a multiyear highs with both strong internals for coming months and broad-based participation; however, inflation needs to be watched, because it’s now manifest as a material problem (global prices @ 57.3)…
Global PMI (Composite): unch @ 54.0 (beats 53.9 LT avg); highest since 9/2012
Global PMI (Services): -0.4 @ 53.7 (miss 54.3 LT avg)
Global PMI (Manufacturing): +0.5 @ 54.0 (above 51.4 LT avg); highest since 3/2011
US ISM (Composite): -2.5 @ 57.5; still strong growth, but the tailwind has ended
– US ISM (Services): -2.7 @ 57.4 (miss 59.0e); velocity remains good despite the deceleration that missed expectations; however, internals are eroding, signaling an end to the tailwind for future months (not yet a headwind); corresponds to +3.3% real GDP (annualized)
    New orders: -4.1 @ 58.7
    Inventories: +2.0 @ 54.5 (sentiment -5.0 @ 56.0 “too high”)
    Backlog: -2.0 @ 51.5
    Prices: -2.0 @ 60.7
US ISM (Manufacturing): -0.5 @ 58.2 (miss 58.4e); velocity remains high with great internals; inflation remains troubling, with some respondents still citing transitory effects from the Hurricanes (plunging USD and insular trade policy too?); corresponds to +4.7% real GDP (annualized)
    New orders: +0.6 @ 64.0
    Backlog: unch @ 55.0
    Prices: -3.0 @ 65.5
    Inventories: -1.0 @ 47.0
    Customer inventories: +2.0 @ 45.5
Eurozone (Composite): +1.5 @ 57.5 (meet 57.5e); corresponds to +0.8% real GDP (annualized)
Eurozone (Services): +1.2 @ 56.2 (meet 56.2e)
Eurozone (Manufacturing): +1.6 @ 60.1 (beat 60.0e); highest since 4/2000, near a record high
China: official +0.2 @ 51.8 (beat 51.4e); unofficial -0.2 @ 50.8
Japan: +0.8 @ 53.6; highest since 3/2014
UK: +1.6 @ 58.2; inflation continues to accelerate, threatening production, as expected in the wake of Brexit
Canada: +0.1@ 54.4
India: -0.9 @ 50.3; citing uncertainty over newly-implemented GST taxes, although employment at almost 5-year highs
South Korea: +1.0 @ 51.2; fully recovered from a Presidential scandal and North Korean tensions
Taiwan: +2.7 @ 56.3
ASEAN: +0.4 @ 50.8
Brazil: +2.3 @ 53.5; an 81-month high

#Bullish! $ACWI $EFA $EEM $DXY $UUP

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

 

Sentiment (BULLISH)

Retail investor sentiment survey (2017.12.07)
by The American Association of Individual Investors (AAII)

Sentiment returns to norms after a procyclical plunge two weeks ago; more importantly, the neutral cohort continues to recede — a sign of both broader-based participation and the wall-of-worry’s dismantling…Retail investor sentiment- bulls 2017.11.16
Bull/Bear ratio: -10bps wow @ 1.14x (below 1.30 historical average, within 1.00 – 1.80 extremes)
Bullish: +0.5pp @ 35.9% (above 39 avg , within 30 – 45 extremes)
Bearish: +2.6pp @ 31.6% (above 30 avg, within 25 – 40 extremes)
Neutral: -3.1pp @ 32.4% (above 31 avg, within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2018).
[Previously: Retail allocations remain barely neutral, Institutional allocations remain barely neutral, Strategist sentiment remains neutral & Quantifying the “wall of worry”; See also: Household equity allocations at postcrisis lows sends a bullish signal]
#Neutral #Contrarian

 

Technicals (NEUTRAL)

NYSE margin debt & balances (October 2017)
by Doug Short (dshort’s Advisor Perspectives)

Margin debt levels continue acceleration to record highs, remaining in reasonable proportion to market performance, although the mounting releveraging trend requires monitoring due to recent decoupling; yoy comps are still misrepresentative due to a low base, but they’re now lapping that into year-end…
Nominal margin debt: +0.3% mom, +16.0% yoy @ $561.4B; a new alltime high
Net credit (“buying power”): -16.0% mom, -48.1% yoy @ -$269.7B debit; a new alltime low
[See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007]
#Neutral #Leverage #Lagging indicator

 

–Romeo

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