Strong NFP after weak ADP, Dollar slides slows down, Gold over $2,000
MY CALL THIS WEEK : SELL NZDUSD
In a quiet vacation season week which saw Microsoft agree to buy TikTok, some progress on the next COVID-19 stimulus package and a strong NFP beat despite a poor ADP print, equities rose gently, with a new NDX high, the dollar decline slowed down, bonds consolidated, and the only notable move was to a new all-time for Gold.
Next week does not suggest any big moves either. Earnings season is still paused until the retail phase next week. We have inflation reports from China, Germany and the US, and jobs reports from the UK and Australia, but there is nothing on the calendar to suggest anything other than consolidation. SPX is only 1.26% from its all-time high (whereas DJIA is 7.78% away),and it may well get there. Of more interest is USD which is no longer oversold. Will it resume its journey down—the 10-year yield may give us the answer.
Mon Aug 3
Friday’s late rally continued into the new month after the important ISM Manuf PMI beat. The mood had been set earlier in Europe where the German PMI also beat and DAX outperformed the US indices. Microsoft’s TikTok deal helped NDX advance 1.47% to a new ATH. Oil moved up in line The dollar and Gold were both almost flat today, despite an early rally in the latter producing a new ATH of $1984.66.
Tuesday August 4
The House of Representatives reported “productive discussions” on the latest coronavirus stimulation package and market continued to rise. Yesterday NDX led, but today it was DJIA, although gains were more modest overall. Oil was up in line. Gold broke through the $2,000 barrier for the first time, and yields fell to a new low as the dollar fell again across the board. Bonds and Gold are reacting to the dollar much more than to the equity risk mood.
Wednesday August 5
A third day up for stocks, again led by DJIA which rose 1.4%, over double the move of SPX and NDX, helps by DIS, up 8.8% on earnings, and made a ‘Golden Cross’ as the 50-day moving average moved ahead of the 200-day. Oil rose in line. The dollar fell for a third day after, after the big miss on ADP jobs, pushing Gold up to a new high of $2,040. Yields were back up 4bp today, possibly reacting to equities, but more likely just part of a normal zigzag pattern down. The VIX was down to 23, its lowest level since the COVID crisis began
Thursday August 6
A fourth day of gains, this time the focus moving back to tech stocks, with NDX outperforming and breaking 11,000 for the first time. The rally was late, leaving European indices in the red, in particular FTSE reacting to the previous day’s GBP move up. Oil pulled back slightly after three days of gains. Gold continued its amazing run hitting a new high of $2,070. Yields pulled back despite a generally flat dollar.
Friday August 7
A strong beat on the NFP print (1.76M vs 1.36M) had surprisingly little effect, although SPX and DJIA managed small gains whereas NDX pulled back slightly as did Oil. The effect of the NFP was seen more in USD, which added 0.7% to DXY, reducing the week’s slide to under 1%. DXY is, notably, no longer oversold on a daily basis. Yields followed the stronger dollar up. Gold took a breather, only its second red day in the last 16, and pulled back $27, to close just under 3% up for the week.
WEEKLY PRICE MOVEMENT
Smaller moves than we have seen recently, with DJIA at +3.8% the top index mover. A much flatter forex market than usual, with AUDNZD up 0.57% as the top mover. Bitcoin went back to sleep, whereas Ethereum keeps on climbing. FANGs were quite variable with only AMZN and FB outperforming.
My own call to sell NZDUSD wasn’t too bad. NZD was the weakest currency, and we made 0.32% making my running total 6.86% (27wks 12wins). I still think the dollar is going to reverse back up next week (It tried towards the end of the week) so I will repeat my position and sell NZDUSD again.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
- US, China, Germany inflation
- UK & Australia Unemployment
- Earnings pause continues
- Low volatility expected
Monday August 10
Another quiet Monday with no US or European significant releases. Markets are closed in Japan, Singapore and South Africa.
01:30 China CPI (YoY e2.6% p2.5%)
21:00 NZ House Price Index
23:01 UK BRC Like-For-Like Retail Sales
Tuesday August 11
The UK Unemployment and Claimant Count change is the only key news today. The UK furlough scheme, where people did not lose their jobs means the figure is much less severe than other countries.
08:30 UK Unemployment Rate (3M)(Jun) (e4.2% p3.9%)
09:00 Eurozone ZEW Survey – Economic Sentiment(Aug)
09:00 Germany ZEW Survey – Current Situation/Economic Sentiment(Aug)
12:30 US PPI
Wednesday August 12
The main news today in this quiet week is the US inflation print. Markets are closed in Thailand.
02:00 RBNZ Rate Decision/Statement
03:00 RBNZ Press Conference
06:00 UK Manufacturing/Industrial Production
06:00 UK Prelim Q2 GDP (QoQ e-20.2% p-2.2%)
09:00 Eurozone Industrial Production
10:00 Germany 10Y Bond Auction
10:00 UK NIESR GDP Estimate (3M)(time approx.)
12:30 US Core CPI (YoY e1.2% p1.2%, MoM e0.2% p0.2%)
18:00 US Monthly Budget Statement (Jul)
Thursday August 13
Save any shocks in the US Jobless Claims, another quiet day for news. There are rate decisions in Mexico and Egypt.
01:30 Aus NFP/Unemp (NFP e40k p211k, Unemp e7.8% p7.4%)
06:00 Germany CPI (e0.0% p0.0%)
12:30 US Jobless Claims
22:30 Business NZ PMI(Jul)
Friday August 14
The quiet week closes with US and China Retail Sales. The Michigan Consumer Sentiment Index is still well down. Markets are closed in Pakistan.
02:00 China Retail Sales (YoY e0.3% p-1.8%)
09:00 Eurozone Prelim Q2 GDP (QoQ e-12.1% p-12.1%)
12:30 US Retail Sales (MoM e1.7% p7.5%)
13:15 US Industrial Production (MoM)(Jul)
14:00 US Prelim Michigan CSI (e71.5 p72.5)