Week In Review – March 8

Summary

• Big rally in DM bond markets as ECB throws in the towel and sees gloom ahead and the very weak nonfarm payroll number on Friday
• U.S. credit gave some back last week
• Dixie ready to breakout
• EM FX hit again, led by Latin majors
• Most equity markets down moderately with the NIKKEI leading, down 2.67 percent
• Russell down 4.26 percent.  Watch this schpace
• Grains, led by Wheat continue to get crushed.  Market seems to be anticipating big trade conflict coming

Commentary:   Once again, Mr. Market sets a huge bull trap after last week’s close above the key level of 2800 and rejected the rally at 2816.88 just 6 bps below the high of the recent bear market.   The S&P closed the week below its 200-day moving average with the key level to the downside is now 2713.88.  The 200-day at 2750 needs to be reclaimed quickly.

Trade will be front and center as the rumors that a deal is now not so near even as POTUS tweets a big spike in the stock market coming with a good deal.  Reports now are that Xi canceling plans for his visit to Mar-a-Lago at the end of March as he is worried Trump may walk just as in Vietnam with Kim Jung-un.   Our “Mad King” risk asserting itself.   There is no plan, no strategy,  no Art of the Deal.  This whole exercise is turning into a giant farce.

What we are watching this week. The UK Brexit vote set for Tuesday, if it fails, follow-up votes on Wednesday and Thursday.   Looking to buy cable weakness unless the no deal vote passes on Wednesday, which is highly unlikely.  The Thursday vote will be to delay the March 29 Brexit, increasing the probability of a second reffie.

The first tranche of the US budget will be released Monday.  Expect deep cuts programmed for non-defense spending, which will face yuuge oppo from the Dems.  The budget is going nowhere.

Top energy executives meet in Houston for CERAWeek for their annual five-day conference, which could provide some insight for the sector in the coming year.

Bank of Japan to maintain its short-term interest rate target at minus 0.1 per cent and 10-year bond yield around zero percent at the end of its two-day monetary meeting on Friday.

Economic data:  German industrial production and trade balance figures for January on Monday, looking for the latest sign of a slowdown in Europe’s biggest economy.  US  producer price indices for February on Tuesday and industrial production on Friday.   China’s industrial production on Thursday.

Happy hunting, folks.

Inflation Is Bad For All Assets