Weekly Market Update: Turkey Tensions Strain Otherwise Quiet Market

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Futures Trading Action Subsided 12.01.2015

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5. Futures Economic Reports for Tuesday December 1, 2015

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For 2015 I would like to wish all of you discipline and patience in your trading!

TradeTheNews.com Weekly Market Update: Turkey Tensions Strain Otherwise Quiet Market

Trading action was subdued this week as the US Thanksgiving holiday made markets sleepy. New growth and inflation data did nothing to deter the expectation of Fed rate liftoff in December. Global tensions briefly ratcheted up after Turkey shot down a Russian warplane that strayed into its airspace, further complicating the fight against ISIS in Syria. The euro continued to weaken in anticipation of the ECB monetary policy meeting next week where the central bank could expand its QE program and further cut key rates. Chinese stocks fell hard on Friday on a new round of crackdowns on brokerage houses, but stocks outside of China did not react significantly to the news. For the week, the DJIA lost 0.1%, the S&P500 was up less than 0.1%, and the Nasdaq edged up 0.4%.

Two more key pieces of the US monetary policy puzzle dropped this week: GDP and PCE inflation. There were no big surprises in the second reading of Q3 GDP. The main components met expectations, with the q/q annualized rate revised up to 2.1% from 1.5% in the advance reading, although this rate remains well below the final second quarter annualized GDP rate of +3.9%. Analysts chalked up the revision higher to an expansion of the inventory components of the data, offset by lower revisions to domestic spending components. Growth in the November Core PCE reading would have more or less clinched a December rate hike, but Wednesday’s flat/lower core reading is a more ambiguous outcome. The y/y reading didn’t budge from 1.3%, while the m/m figure was 0.046%, barely missing the rounding bar that would have left it flat. Inflation remains suppressed by lower energy costs, but the Fed has repeated ad nauseam that it will look past lower inflation from lower energy prices.

In other US data, the November Markit Manufacturing PMI index slipped to 52.6 from 54.1 in the prior month, putting the index at its lowest level in two years. According to Markit, domestic demand appears to be holding up well, but the sluggish global economy and strong dollar continue to act as dampeners on firms’ order book growth. Echoing the slight declines in other US homebuilding data numbers, October existing home sales declined to 5.36M units from 5.55M units in September. The October durables were better than expected and the September figures were revised much higher.

Early on Tuesday, Turkey shot down a Russian SU-24 fighter-bomber on the Turkey/Syria border. The Turkish side claimed the aircraft entered Turkish airspace over the town of Yaylidag and said the plane was warned 10 times in the space of five minutes before it was taken down. Russian President Putin reacted with very harsh words, calling the move a “stab in the back” by “terrorist accomplices,” with “serious consequences” for the Russia-Turkey relationship. The incident momentarily sent European equities lower and helped lift crude prices to two-week highs. Russia has followed up by moving a cruiser with anti-aircraft capabilities into the theater and announcing measures to discourage Russian tourism to Turkey. The Kremlin has also signaled it may take additional economic measures against Turkey.

The minutes from the late-Oct Bank of Japan policy meeting indicated the BoJ felt comfortable holding off on additional QE. All members agreed wage growth is somewhat slow, but most also noted the underlying inflation trend is improving. Members remain on edge about risks of slower growth due to FY17 sales tales tax hike. While the BoJ is not interested in more stimulus, the government is not holding back. There were press reports that the Abe cabinet has prepared a new draft plan to deal with low inflation. Tokyo intends to raise minimum wage by 3% next fiscal year and support capex by rewarding companies that invest in plants and equipment that improve energy use.

On Friday, the Shanghai Composite plummeted 5.5%, in its biggest decline since the August stock market tumult. Traders cited the report that Chinese officials are expanding their crackdown on brokerages including CITIC and Guosen Securities. US markets were unfazed by the drop in the Shanghai index, ending holiday shortened session around flat. Brazil shares took a hit this week when police investigating the ever growing Petrobras kickback scandal announced they had arrested the head of the ruling party in the Senate, Senator Amaral, as well as Andre Esteves, the CEO and controlling shareholder of BTG Pactual SA, Latin America’s biggest investment bank.

Activist investors are targeting AIG and Alcoa. Back in late October, Carl Icahn pushed AIG to break itself up into three companies. This week, he said he would commence a consent solicitation for shareholders and may seek a board seat. Icahn disclosed that he has been talking with AIG CEO Peter Hancock, although he also indicated AIG’s CEO was not taking his advice. AIG responded simply by noting the steps it has taken to streamline the businesses. At Alcoa, Elliott Management disclosed a 6.4% stake and said it was talking with management about steps to “maximize shareholder value,” which might include selling its hydropower business, expanding margins, and follow through on splitting up the business.

After a flurry of press talk last week, Pfizer and Allergan have agreed to merge in a tax-inversion deal worth up to about $155 billion that will result in the world’s biggest drug maker by sales. Allergan shareholders will be receiving $363.63 worth of Pfizer stock, or 11.3 shares per share. The new firm will retain the Pfizer name and Allergan’s domicile in Ireland. Pfizer expects the combined firm to have an adjusted tax rate of 17-18%, lower than its current 25% rate.

Source: http://www.tradethenews.com/?storyId=1863642 

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Futures Trading Levels

Contract Dec. 2015 SP500 Nasdaq100 Dow Jones Mini Russell Dollar Index
Resistance 3 2107.50 4742.33 17958 1218.33 100.75
Resistance 2 2101.25 4721.42 17903 1213.17 100.56
Resistance 1 2091.00 4695.33 17811 1205.33 100.41
Pivot 2084.75 4674.42 17756 1200.17 100.22
Support 1 2074.50 4648.33 17664 1192.33 100.07
Support 2 2068.25 4627.42 17609 1187.17 99.88
Support 3 2058.00 4601.33 17517 1179.33 99.73
Contract Feb. Gold Feb. Silver Jan. Crude Oil Mar. Bonds Dec.   Euro
Resistance 3 1088.4 14.38 43.43 154 30/32 1.0629
Resistance 2 1078.7 14.28 43.02 154 19/32 1.0613
Resistance 1 1071.5 14.18 42.32 154 13/32 1.0591
Pivot 1061.8 14.08 41.91 154 2/32 1.0575
Support 1 1054.6 13.97 41.21 153 28/32 1.0553
Support 2 1044.9 13.87 40.80 153 17/32 1.0537
Support 3 1037.7 13.77 40.10 153 11/32 1.0515
Contract Mar. Corn Mar. Wheat Jan Beans Jan. SoyMeal Jan. Nat Gas
Resistance 3 383.2 484.5 892.75 290.47 2.34
Resistance 2 378.6 482.5 888.00 288.23 2.29
Resistance 1 375.4 479.0 884.50 286.77 2.26
Pivot 370.8 477.0 879.75 284.53 2.22
Support 1 367.7 473.5 876.3 283.1 2.2
Support 2 363.1 471.5 871.50 280.83 2.14
Support 3 359.9 468.0 868.00 279.37 2.11
Economic Reports


All times are Eastern time Zone (EST)

Date 4:04pm Currency Impact Detail Actual Forecast Previous Graph
TueDec 1  3:15am EUR Spanish Manufacturing PMI 51.9 51.3
3:45am EUR Italian Manufacturing PMI 54.3 54.1
3:50am EUR French Final Manufacturing PMI 50.8 50.8
3:55am EUR German Unemployment Change -4K -5K
EUR German Final Manufacturing PMI 52.6 52.6
4:00am EUR Final Manufacturing PMI 52.8 52.8
EUR Italian Monthly Unemployment Rate 11.7% 11.8%
EUR Italian Quarterly Unemployment Rate 11.9% 12.4%
5:00am EUR Unemployment Rate 10.8% 10.8%
9:45am USD Final Manufacturing PMI 52.6 52.6
10:00am USD ISM Manufacturing PMI 50.6 50.1
USD Construction Spending m/m 0.5% 0.6%
USD ISM Manufacturing Prices 40.0 39.0
All Day USD Total Vehicle Sales 18.0M 18.2M
12:45pm USD FOMC Member Evans Speaks
8:00pm USD FOMC Member Brainard Speaks

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading.


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