What A Day, What A Scam

What A Day, What A Scam

The markets over the weekend continued to rebound from Trump declarations, North Korean missiles and mull over Macron’s French Presidential victory. However, the real news is whether your computer opened or if all your files have gone missing. The ironic thing about this latest scam is that the code was developed by the NSA and that was never supposed to see the light of day and Governments ask us to trust them with our security.

Friday’s trading was one of interest. The U.S. retailers’ woes continued with poor marks from Nordstrom’s. On Friday Macey’s shares fell by some 11% and Kohl’s fell some 7%. It was an ugly day if you were in retail. The utility companies on the day had a solid rebound and this points that a seismic shift is starting to occur. The U.S. equity market appears to be losing patience with the Trump trade and bonds appear be becoming fashionable again.

So what is at stake? Simply put Trump must start acting and behaving like a President. His recent actions against Comey, is not going to get the bipartisan support that he so desperately needs to implement his ambitious plans. His recent actions further alienate him and the American people are the losers. His comments relating to press releases won’t help either. To get the U.S moving again, Trump should stop thinking Government is his private business but is the instrument of the people. He will find it difficult finding an FBI Director who pleads allegiance to Trump ahead of the American people and that is why supposedly Comey was fired.

Markets wise Friday saw some interesting results. The PPI rose 0.5% for April, which was good news in some way for the Fed as it indicates some movement in the economy. Retail sales rose 0.4% the strongest read in 13 years. The big winners were restaurants. The CPI rose 0.2% which goes against the stronger numbers of the PPI. This was the first time the annual gain had fallen below October 2015. Prices rose 1.9%. This number would be concerning the Fed.

On Friday equities were soft trading down 0.1% but the real mover was the Bonds. Treasuries fell some 10 bp to close around 2.32%. This is a major move at a time when equity analysts are pointing rosy projections. Something is wrong and I suspect those painting rosy pictures are probably too optimistic.

The curve was mixed with the 2/10 closing at 103.2, the 10/30 closing at 66.1 and the 2/30 closing at 169.4.

The Bloomberg Dollar Spot Index slipped 0.3%. The yen added 0.5% and the euro gained 0.6%. The rebound of oil ran out of steam and oil gained $0.01 to close at $47.84. Aluminium jumped 0.9% after China’s top smelter suspended production.

The U.S. growth story is somewhat correct but don’t expect 3% this year. A lot has to happen to get 3% growth rates. Meanwhile China is ramping up the ante on growth. The new Xi initiative to invest $500bln into his Silk Road Project will provide benefits for those willing to make the journey. The antitrade stance of Trump and his acolytes may find that in time the U.S. could lose, particularly as the first executive order Trump made was to repeal the TPP. At present the U.S. economy is on shaky ground and that is exactly what the treasury market is suggesting.

Aussie Market Today

The equities were soft and with commodities looking soft it is hard to see the $A advancing too far. Equities on the day should stall. The big winner will be Aussie bonds. I expect Aussie Bonds and credit to rally given the movement in the U.S.