The collision of global markets and social mood

Wednesday, April 5, 2017

Wednesday -- China Rally, Shipping Shock, Panera's Premium, GPIF Out Of JGBs?

S&P E-mini Futures:
Modestly green.

The Shanghai Composite Index rose 1.48% while Taiwan rallied 1.4%  as both markets reopened after a holiday.

"Little more than 2 1/2 years from now, the global fleet of merchant ships will have to reduce drastically how much sulfur their engines belch into the atmosphere. While that will do good things -- like diminishing the threat of acid rain and helping asthma sufferers -- there’s a $60 billion sting in the tail."

"Lower-emissions rule will strain fuel supply, retrofit expense -- Could halt ships from fleet handling 90% of global trade"

$60 billion is a pretty big potential headwind. With a VAT on the table suddenly, it could add up to a massive global tax on consumption.

Note the new "rule" is imposed by the International Maritime Organization, an unelected UN-agency.

Slippery slope here. Shipping emissions, due to low-grade bunker fuel, are indeed massive. But so are the implications of the UN eventually running our lives.

In this case, low-priced junk from China will cost more while air pollution will decrease globally. Hard to argue with it.

Largest ever restaurant deal, at hefty valuations, another sign of peaking social mood.

Privately-owned German company JAB (headquartered in Luxembourg) will purchase Panera Bread for $315 per share -- a 20% premium -- in a deal valued at about $7.5 billion, and an incredible 18x LTM EBITDA.

"If completed, the transaction would mark the largest M&A deal for a US restaurant company, and the second-largest in North America after the 2014 acquisition of Tim Horton's."

Dining out becomes a veritable sport at mood peaks.

JPY, SEK, and MXN weaker. GBP getting a lift.

Day Two of price weakness when follow through is needed.

Nikkei -- "Ultralow rate driving Japan's public pension fund out of JGBs"

This couldn't come at a worse time. The Japanese government could soon become the only buyer of JGBs. Dangerous.

Recipe for higher prices: "CME Cuts Margin Requirement for Front-Month WTI Oil by 6.9%."

WTI crude up over 1% while NG lower.

We'll see. Oil inventories at 10:30am.

Platinum, palladium, and copper are higher along with base metals which are ripping on news that China will develop an economic zone -- another Ghost City? -- in Xiongan, Hebei province.

Commodities such as coking coal, iron ore and steel rebar soared along with zinc, nickel, and iron ore.

Gold and silver down. Gold failed its 1264.90 swing point.

S&P Outlook:
A rally into the S&P 2376-2380 area is still an option, and the NDX 100 closed above a minor swing point. So both are in synch for the time being. NDX has more relative strength, but should be watched closely for any break of it.

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