The futures market are mostly down today in the wake of a USD recovering a little bit after 2 days of sharp decline. Only bonds futures and energy futures are up at 2:15pm GMT while metals, stocks indices, soft commodities futures and foreign currency futures are mostly down.
Today at 1:30pm GMT the PPI and core PPI numbers were published respectively at 0.8% and 0.2%, with the PPI quite higher than the expectations. The large difference between the PPI and the core PPI reflects the recent surge in the price of oil. The Michigan sentiment index is still to be published at 2:55pm GMT and could reinforce the current trend seen.
Given the negative news starting to pile up from China, we believe that current levels of the stock markets are difficult to sustain, we believe that stocks and oil might be exposed to a severe downward shock in the short term, while stocks are probably in a new long term bull market and any pullback will probably be only temporary.
At 2:20pm GMT metal futures are mostly down, although not by much and with Palladium futures pretty much unchanged at $718.20. Gold futures are down 0.50% at $1,274, Silver futures are down 0.78% at $19.80, Platinum futures are down a small 0.19% at $1,404.90 and Copper futures are down 0.31% at $3.1675. Metals were down quite a bite more during the end of the Asian session this morning and have since then bounced off their intraday lows and seem to be starting some sort of a rally to the upside.
Bonds futures are up today, the US yield curve is down around 4bps across maturities. The T-bonds futures are up 0.42% at 134.78 while the 10Y T-note futures are up 0.25% at 126.63. The T-bonds futures have been on a huge decline since April and despite the small and apparently weak rally of the last few days, we remain strongly bearish on the bonds futures.
Crude light futures are slightly up today after a fairly flat morning although crude oil were trading below $105 for most of the morning and have managed a rally to pretty much $106 in the US morning. Yesterday’s session saw both a new high around $107.50 and then a sharp decline all the way down to just above $104. We believe that after the rally we have just observed back to $106, prices could decline sharply towards $102 at least and most probably $100. The prospects for oil after testing back $100 would be unclear and probably depend on the evolution of the situation in the Middle East.
Chart of the Day
The chart of the day is an hourly frequency chart of crude oil futures. We believe that the current set-up is a very good opportunity to get short on the futures and aim for a target of $100 within a couple of days.