June 21, 2017 – Market Update (China A-shares in MSCI, Oil dropping, Energy stocks on negative but getting closer to attractive, EUR down on risk off this time, Geopolitical risks ongoing, Queen’s speech)

Mr Price Action/ June 21, 2017/ Market Update, Market Update Posts/ 0 comments

 

Short recap

 

Asia – risk off with miners, energy and banks in red

China shares slightly higher as MSCI decision was largely priced in

Europe opening lower

Oil dropping like a stone on rising Libya and US rig production, while OPEC not able to cut more

And rebalance the market, officially entering the bearish territory

Japan facing declining domestic demand and labour shortage, result of aging population

North Korea testing nukes again?

Be aware of still on going geopolitical risks: Qatar, Saudis, Syria, Russia, North Korea and Trump’s reaction

S&P likely to cut UK rating (Brexit – short time, high risks)

 

Equities

 

China A-shares included in MSCI Emerging Markets index (to add 222 stocks)

Full inclusion can take 9+ years due to size, access, capital flow restrictions…etc.

Initial weight of 0.73%, when fully completed, China would represent 20% of the index

Thus USD 340 bln of a flow in

Near future market to expect up to USD 18 bln (until May/Aug 2018)

Proving China is getting more internationally integrated

 

Energy stocks still negative view on falling oil prices but…

…may be getting closer to attractive levels

Huge risks are credit events as industry copes with high debt (still growing) versus lower operating income

Comment from last week as a reminder:

Resources stocks to offer an interesting value

In particular energy but need some credit events and cleaning within the space

Canadian Natural Resources, AltaGas, Roxgold can be looked at”

 

Novartis having advantage over vision treatment from Regenerom Pharmaceuticals

Aviva dropping its exposure to tobacco companies

Apple fighting with Qualcomm over chip license, saying they are invalid

Ford to relocate part of Focus production to China (a bit of opposite to Trump wishes)

Boeing very positive on 737 and demand growth

Banks to pick a new alternative to LIBOR

Huge valuation gap between DM’s techs and their peers from EM space

 

Bonds

 

10-yr Trys yield at 2.16%

10-yr Bund yield at 0.26%

 

Fed hike priced at 21% (Sep) and 43% (Dec)

EZ credit spreads hitting lows seen back in 2014

On chasing yields in corps and lower rating issues, thus redirecting flows from developed markets

 

EURUSD

 

This time risk off should be negative on EUR

As the market may reduce positions/risk-on flows to EZ assets

And prefer USD and JPY

Saw profit taking and liquidation in EUR crosses

Only breaking 1.1179 (10 DMA) can negate the trend lower

Support at 1.1120/30, 1.1100 and then 1.1067 (50.0% Fibo)

Resistance 1.1187 (23.6% Fibo)

 

USDJPY

 

Resistance at 111.81 (Ichimoku), 100 DMA at 111.82

With large offers from 111.85

Support at 111.24 (50.0% Fibo), then 111.00 with stops below

50 DMA at 111.11, 200 DMA at 110.80

Large expiring options between 111.25-30

Importers likely looking to buy dips towards 110.00

While exporters to sell above 111.00

 

GBPUSD

 

Heavy with line in the sand at 1.2500

1.2629 (100 DMA) and 1.2552 (200 DMA)

Bids ahead of 1.2600, stops seen below

 

NZDUSD – 0.7100 in sight if no hawkish surprise from RBNZ

 

EURJPY – 122.50 attractive

 

Data/Events

 

Brexit – Queen’s speech 1030 GMT, later to be discussed what may usually take up to 5 days

GE’s Schauble speaking

ECB non-monetary meeting

BOJ’s Kuroda speaking

 

Thursday

EU Summit

Fed’s Powell (1400 GMT)

 

Fri

Fed’s Bullard (1515 GMT), Mester (1640 GMT), Powell (1815 GMT)

 

 

Should you have any questions feel free to contact me anytime.

 

Good luck Champs!

 

Mr Hawk

 

 

 

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

 

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