Sunday, 13 January 2019

Week to Jan 13th


Mon Jan 07
After a dip before the open, the Friday rally continued after Fed Chair Powell’s dovish comments last week, and positive comments from TradeSec Ross on China, and despite the miss in ISM PMI at 1500. Once again, there was a timing issue. As DAX and FTSE closed at 1630 before the rally reached its top, they posted red days unlike SPX and NKY (futures). The dovish Fed remarks fed (if you’ll pardon the pun) through to the dollar. DXY was down 0.52% on the day, with all major currencies (and Gold) rising, except for JPY which posted a flat day. Yields also dipped but ended the day up in line with the risk-on mood. Oil was up in line with equities.

Tuesday January 08
The bullish mood continued on news that the China talks, currently in progress in Beijing would be extended to a third day. All indices were up, with the three US majors (SPX, DJIA and NDX) adding 1%. Non-US indices and Oil posted similar gains, and yields were up again in line with risk-on. USD had a Turnaround Tuesday, and DXY added 0.22%, with most currencies (and Gold) down. Once again we saw the continuing recovery of commodity currencies, with AUD remaining flat, and CAD adding 0.37%.

Wednesday January 09
FOMC members Bostic and Rosenberg continued the dovish theme today, with the former indicating only one rate hike in 2019. The published minutes confirmed the stance. The more specific information is, the stronger the effect on the market, and USD fell sharply, with DXY giving up 0.7% on the day, its worst day since Nov 1st.  All currencies and Gold were up. US equities of course responded positively, however NKY and DAX were down, following the sharp spike up in JPY and EUR. FTSE managed a slight gain, as the GBP rally was less intense. Oil had another good day despite the EIA miss at 1530. Bond yields fell in line with the dollar, and after the auction of new 10-year paper at 1800 which yielded 2.728%. The BoC held rates as expected, and other than a brief (5 minute) 50 pip spike up, CAD ran in line with the other currencies.

Thursday January 10
After coming off slightly in the Asian and European sessions, stocks continued their rally at the US Open, as the dovish Fed mood continued from Wednesday’s minutes. This was despite lack of detail in the China talks, and the continuing government shutdown. You normally see a fast fades in sentiment in stocks, and more slowly in currency, but today was the other way round. But remarks from Chair Powell that the Fed would continue to shrink its balance sheet to a more normal level saw a reversal in DXY, up 0.42% day, with Gold and the major currencies pulling back. Only AUD posted a modest gain. Oil posted its eight green candle in a row, although at 0.29% up, it was practically flat. Yields followed the dollar back up.

Friday January 11
The end of the week saw a flat SPX, as the positives (slower tightening, China talks) and the negatives (shutdown, lack of China progress) balanced. The indecision was clear with JPY slightly down but Gold slightly up. US Core CPI provided no assistance, as it printed at 1330 at 2.2% as expected. Elsewhere fared worse, with DAX, FTSE and NKY clearly down on the day, although retaining some of Thursday’s gains. The relatively small move in DXY, up 0.22% to follow through from Thursday masked a notable move in GBP, which was up sharply, adding 0.77%. The MoM GDP beat (0.2% vs 0.1%) at 0930 added 0.4%, and then a fast three minute spike from 1051 added 0.71%, as speculation mounted that the UK would seek to delay its withdrawal from the EU. There is more on this in the outlook for next Tuesday below. The GBP spike was accompanied bye a small tick up in EUR, although the single currency was sold off in the US session, giving EURGBP its first 1% down day since Nov 1st. Oil pulled back slightly, perhaps for profit taking. The CLG19 (Feb) contract expires on Jan 22nd.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day. Currency moves are stated in relation to the US dollar. Dollar moves are referenced from the DXY basket.

WEEKLY PRICE MOVEMENT

Like last week, USD was down half a percent , and AUD and CAD, joined this week by NZD, were strong, whereas JPY hardly moved. Risk barometer AUDJPY was the strong pair at 1.42%, although AUDUSD was similar. The best index was NDX, inline with risk, and the best stock in our group was NFLX which outperformed for the second week running. The movie giant is up an amazing 44.5% since Christmas. The ETHBTC rally collapsed again this week. We are seeing more and more divergence between the two leading cryptocurrencies.

(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold). 

Monday January 14
Today the earnings season kicks off, with the first mega cap, Citibank reporting before the bell. The market in Japan is closed for ‘Coming of Age’ Day. The most interest release of the day is the China Trade Balance. This rose continually throughout 2018, and consensus is a massive increase again. A miss could indicate tariffs are starting to bite, and halt the recent CNY rally.

00:00 AUD Aus Consumer Inflation Expectation
02:00 CNY China Imports/Exports/Trade Balance (est 51.53B prev 44.71B)
02:15 CNY China FDI
10:00 EUR Eurozone Industrial Production
21:00 NZD NZIER Business Confidence (QoQ)

Tuesday January 15
A big day today for the UK, with the rescheduled parliamentary vote on the ‘with deal’ ie ‘soft’ Brexit. As recent tactics by Europhiles have blocked the government from preparing for ‘no deal’, a failure for the Government motion to be carried is actually bullish for GBP, as it implies Mrs May and her cabinet would now either delay the exit date and/or run a second referendum. Although anything that suggested a general election would create uncertainty, and push the pound down. The earnings season continues with JPM, UNH and WFC reporting before the bell. The first two are 9.76% of DJIA so a Dow/SPX divergence is possible. Conversely, no divergence shows the sentiment of the results is carried into the market as a whole. Fed ├╝ber-hawk Esther George speaks at 1800, it will be interesting to see if she contradicts the dovish statements from last week. George going dovish would be big news.

00:00 GBP UK Parliamentary vote on Brexit (time unspecified)
13:30 USD US Core PPI
14:00 NZD NZ GDT Milk Index
15:00 EUR ECB President Draghi's Speech
21:30 WTI API Stock

Wednesday January 16
Important inflation data from Germany and the UK starts the day, and may have an outsized effect on a volatile GBP from the day before. Today is the first day that the USTR can initiate new trade negotiations with Japan, so some statement may be forthcoming. After hawk George yesterday, we get the most dovish FOMC member Kashkari at 1630. He is no doubt with the ‘patient’ group, but is not a voter this year. The earnings season rolls on with two more banks BAC and GS reporting before the bell, and tariff-sensitive AA after the close. There is a rate decision on IDR.

07:00 EUR Germany CPI (est 1.7% pr 1.7%)
09:30 GBP UK CPI/RPI/PPI (Core CPI est 1.8% pre 1.8%)
13:30 USD US Retail Sales (MoM) (Core est 0.2% pr 0.2%) 
15:30 WTI API Stock
19:00 USD Fed's Beige Book
23:30 AUD Aus Westpac Consumer Confidence

Thursday January 17
The first FANG reports today. NFLX earnings are out after the bell, and historically this has meant big moves in the stock, NDX and even SPX. Also two more banks report before the bell, DJIA component AXP and merchant bank MS. Fed Quarles (centrist, 2019/2020 voter) speaks on the anniversary of his appointment. There is a rate decision on ZAR.

00:00 EUR G20 Meeting (all day)
00:30 AUD Aus Home Loans/Sales
10:00 EUR Eurozone CPI (Core est 1% pr 1%)
13:30 USD US Jobless Claims
13:30 USD Philadelphia Fed Manufacturing Survey
21:30 NZD Business NZ PMI
23:30 JPY Japan National CPI

Friday January 18
The main news today is Canadian inflation, although the day is generally expected to be quieter than the big days of Tuesday and Wednesday. No important stocks report today, although next week is packed, however today is Opex day for January. Fed Harker (dove, non-voter) will be speaking, as will Williams (hawkish, voter).

00:00 EUR G20 Meeting (all day)
09:30 GBP UK Retail Sales
13:30 CAD Canada CPI
14:15 USD US Industrial Production/Capacity Utilization
15:00 USD Michigan Consumer Sentiment Index
18:00 WTI Baker Hughes US Oil Rig Count

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