Macro Morning – Growth worries


The outlook for growth is taking what is becoming the usual middle 3rd swoon at the moment with data from the US overnight reinforcing the weaker than expected non-farm payrolls from last month. The Philly Fed survey fell to 1.3 from 2 and against the 3 the market expected but was was troubling was that the employment sub component fairly tanked dropping from 2.7 to -6.8 in April. Clearly the outlook has darkened and clearly the the small 4000 rise in jobless claims saw an outsized response in the market but equally clearly the recent run of data and the IMF downgrade to growth prospects suggests that the economy is not as strong as many thought just a few short weeks ago.

This puts the S&P in danger given the proximity of what is looking like a key level and if the S&P is in strife then risk assets like the Aussie is in strife. Now you will not I have called the Aussie a risk asset. I am still in the camp that says that is what it is. Sure I will agree that it has been a safe harbour in a storm but safe haven it is not.

s&p 500, spx, s&p 500 charts&p 500, spx, s&p 500 chart

Looking at the S&P chart above you can see  the 1520 level we identified is actually below the fairly obvious neckline some are calling it. We are saying 1520 because we want to see it trade below the lows of the last 6 or 7 weeks and make a clear break of this line. Having said that though a close below this line on the week tonight will definitively turn the outlook back toward a move under 1500 and then we’ll see.

At the close The Dow fell 82 points or 0.56% to 14537, the Nasdaq dropped 1.21% and the S&P 500 fell 10 points to 1542. In Europe the German parliamentary approval of the Cypriot bailout was initially positive but in the end the weaker US data hit stocks and they closed off their highs. FTSE was flat, the DAX fell 0.39% and the CAC was roughly flat as well. Milanese stocks rose 0.63% and Spanish stocks were up 0.13%.

On FX markets the performance of the Aussie and the Euro would have disappointed the bulls as their rallies were aborted and the focus turned back south. The Aussie traded up to 1.0338 bid at one stage in mid morning European trade but it could not hang onto the gains and turned south once again. We bought at 15 looking for 39 and ended up selling in the high 20’s after the Aussie missed our target. It was a short term opportunistic set-up which didn’t change our view on the dailies articulated yesterday that the Aussie was biased toward 1.0250. The low was 66 overnight and the AUD still seems like it wants to test a little lower. A break of 1.0250 opens the way to 1.0180 – if the break occurs.

eur, eurusd, euro, euro (eur) price quoteeur, eurusd, euro, euro (eur) price quote

The Euro is up at 1.3050 but it too looks a bit dodgy on the charts from where we sit – it simply looks like it is going to rollover in the next few days and head back down toward the lows of last week. A breach of the 1.3000/20 zone will signal that this move is under way.

On commodity markets Crude rallied 1.21%, gold was up 0.71%, Silver was down a little and looks sick at $23.50 oz. Copper regained 0.52% overnight and in the Ags Corn crashed 2.42%, Wheat rose 0.11% and Soybeans were up 0.54%.


The G20 meeting is the highlight for the next few days and we look forward to the communique they will release. We are sure that the conversations between the Japanese and American representatives might be very interesting at the moment.

Twitter: Greg McKenna

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  1. “This puts the S&P in danger given the proximity of what is looking like a key level”
    What tripe!
    Chartism or whatever this is fairs no better than projection of past data via necromancy and the like.

    If the future looks grim it does so because the previous global insolvencies have never been resolved and the objective facts have inevitably worsened. Not because some imaginary ‘level’ has been breached or otherwise.

    I’m with Hanrahan ‘we’ll all be ruined’, Mauldin & many others. Keep your horde safe – come the day!!