Sunday, 26 August 2018

Week to Aug 24th

Monday August 20
Friday’s rally continued into Monday, as the Turkish lira stabilised, and markets were hopeful about the continuing China trade talks. All equity indices were up, with export-heavy DAX up 1%. Only NKY bucked the trend, fading slightly in the Asian cash session and failing to recover during the (futures) day, partly because of a stronger yen. The dollar continued downwards, with DXY giving up 0.42% on the day, and losing ground against all currencies, Gold and Oil, and US 10-year bond yields were down to in line, to their lowest level (2.82%) for a month, as the market looked forward to Wednesdays FOMC minutes and Jackson Hole, and bearing in mind President Trump saying he was “not thrilled” about interest rate rises.

Tuesday August 21
Lots of volatility today as SPX first shot up to touch an intraday all-time high of 2873.23, beating the January record. However, it then sharply reversed after news broke of Trump lawyer Michael Cohen implicating the president in  the hush money payoffs in the run up to the election. The key point is not the payments, it is the fact they may be regarded as undeclared and therefore illegal election expenses.

NKY, DAX and FTSE finished up in their cash sessions, but futures were then dragged back down by the late US selloff, and a strong showing from the European currencies. A clear case of technical resistance to the high. Subsidiary indices RUT and DJT also hit record intraday and closing highs. 

The dollar retreated further, with DXY giving up 0.55%, its worst day for a month, as speculation on whether the FOMC minutes or Jackson Hole will reveal any reaction from the Fed to the Trump statements. The gains were in EUR and GBP. The picture was not even though, JPY was up, and CAD managed to keep pace with USD (ie USDCAD was flat). Gold was up in line with the weaker dollar, although Oil fell, despite an early rally. NZD was up against the ailing dollar despite the GDT miss at 14:24. It was however down against AUD. Yields recovered 2bp from their sharp fall on Monday, despite the dollar fade, but in line with early SPX rally.

Wednesday August 22
Few people remember the Jul 16-Oct 11 1990 20% ‘crash’ because, unlike Oct 19, 1987, it wasn’t instantaneous. At only 62 business days it was however quite fast, but from then on the market never lost 20% for 3,453 days, until its all-time high on Mar 24, 2000 (at which point it started a two and a half year decline losing half its value.) 20% is the benchmark for bear territory, and conversely a market which never dips this much is defined as a continuous bull market.

This means today was an important day statistically, as the record 3,453 period from the low of Mar 9, 2009 was equalled. SPX was up, although it didn’t touch the previous day’s intraday ATH. So were other indices.

The dollar fell for the sixth day in a row, and was little affected by the Fed minutes. Even CAD outperformed despite the Retail Sales miss at 12:30. However, the movement was not great (DXY -0.13%), and Gold and GBP were virtually flat. Oil was comfortably up after the EIA Stock beat at 14:30, and yields were down a further 2bp.

Thursday August 23
Today the US/China two-way tariffs came in to force. AUD fell sharply during the Asian session due to political uncertainty over the political leadership. But in any event, there was a sharp turnaround in USD, with DXY up 0.51%, probably as traders searched for evidence of Trump pressure in the Fed minutes and failed to find it. Notably JPY fell more than the other currencies, although all were down, as was Gold. Yields were flat on the day as was Oil.

Indices drifted slightly down on concerns about Cohen, and of course the lack of dovishness in the Fed minutes. The misses on forward looking housing and PMI data didn’t help. BABA beat estimates, but the stock still faded after an early rally. The earnings were foreshadowed by AABA reporting earlier. (AABA is Yahoo Japan plus Yahoo’s holdings in BABA. The other Yahoo business was sold to Verizon in 2006).

Friday August 24
Jay Powells speech on Friday at Jackson Hole was just what the markets wanted and just what the dollar didn’t. He defended the gradual interest rate rises, but did not see any risk of inflation overheating the economy. Crucially, it’s what he didn’t mention (the trade wars and presidential pressure) that marked the speech as dovish.

SPX and IXIC (the Nasdaq Composite, not NDX) made new closing highs, and all markets were up. DXY fell 0.49% in short order, and all currencies rose. Gold was up $20, its best day since May 2017, although this is also because it was so severely oversold last week. The yellow metal is still down 1.55% month to date. Oil and yields were flat on the day, although yields had risen before Powell spoke.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.


USD had its worst week since February, after Trump’s remarks about interest rates. However, the risk-on markets meant JPY fell further, and the biggest forex mover for the week was EURJPY. The risk barometer pair was up 2.52% as equities hit all-time highs again. Reversals came as DAX was the best performing index and Oil the best performing commodity after both being the worst last week. The crypto separation between Bitcoin and Ethereum continued, as ETHBTC fell by over 10% for the second week running.

From this week we have added the FAANG stocks to the price movement list. Four of them were nearly flat, but NFLX hugely outperformed after an upgrade from advisor Sun Trust.

AUDUSD 0.7323 (+0.12%)
EURGBP 0.9042 (+0.84%)
EURUSD 1.1619 (+1.60%)
GBPUSD 1.2845 (+0.77%)
NZDUSD 0.6688 (+0.81%)
USDCAD 1.3025 (-0.28%)
USDJPY 111.22 (+0.69%)
DAX     12407 (+1.38%)
FTSE     7572 (+0.01%)
NIFTY   11557 (+0.75%)
NKY     22622 (+1.66%)
SPX    2875.9 (+0.94%)
GOLD  1204.91 (+1.57%)
OIL     68.50 (+4.48%)
BTCUSD   6693 (+1.62%)
ETHUSD 281.28 (-11.46%)
FB     174.65 (+0.52%)
AAPL   216.12 (-0.68%)
AMZN  1905.39 (+0.83%)
NFLX   358.82 (+13.68%)
GOOGL 1236.75 (+1.72%)

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

NEXT WEEK (High volatility items are in bold)

Monday August 27
The main news today is the German sentiment indicators, which analysts expected to be broadly in line with last month. Without much other news, the continuing Trump/Cohen circus is expected to dominate news, along with a fuller assessment of Jackson Hole. The UK is closed for the late summer bank holiday.

08:00 EUR Germany IFO Business Climate/Current Assessment/Expectations
12:30 USD US Chicago Fed National Activity Index

Tuesday August 28
Again not much to report in advance. The S&P/Case Shiller Home Price indices estimate the same annual increase as last month (6.5%), whereas the government monthly figures last month missed (0.2% vs 0.3% est). ECB Praet speaks in Germany at 11:00.

10:00 GBP UK Inflation Report Hearings
13:00 USD US S&P/Case-Shiller Home Price Indices (YoY)
20:30 WTI API Stock

Wednesday August 29
Today is the big day of the week with US GDP, which is estimated at 4%, a notch down from last month, but still very strong. The Fed have made clear that they are data driven, so this print, together with the PCE figure (a CPI proxy) may well have a strong effect on USD, and possibly equities as well. As always on Wednesdays keep an eye on the EIA stock print for Oil prices. BoJ Policy Board member Suzuki. speaks at 01:30

01:00 AUD Australia HIA New Home Sales (MoM)
06:00 EUR Germany Gfk Consumer Confidence Survey
12:30 CAD Canada Current Account
12:30 USD US GDP YoY/PCE QoQ (GDP est 4.0% prev 4.1%, PCE est 2% prev 2%)
14:00 USD US Pending Home Sales (MoM)
14:30 WTI EIA Stock
22:45 NZD NZ Building Permits s.a. (MoM)
23:50 JPY Japan Retail Sales

Thursday August 30
More PCE figures from the US today, although the effect is clearly muted with the QoQ release the day before. Nevertheless our comments about heightened Fed sensitivity (and therefore the dollar) apply. Two other inflation prints today, the real thing (CPI) from Germany and Japan (Tokyo only). Note as always that the German figure is important, the only reason it does not tend to move markets is that it usually comes in in line with estimates, ie it does not beat or miss.

08:00 EUR Germany Unemployment
08:30 GBP UK Mortgage Approvals
09:00 EUR Eurozone Business Climate
12:00 EUR Germany CPI (est 2.0% prev 2.1%)
12:30 USD PCE MoM/YoY (YoY est 2% prev 1.9%)
12:30 CAD Canada GDP
12:30 USD US Jobless Claims
23:01 GBP UK Gfk Consumer Confidence
23:30 JPY Tokyo CPI (est 0.7% prev 0.8%)
23:30 JPY Japan Jobs to applicants ratio/Unemployment

Friday August 31
A NAFTA agreement in principle is expected today from Mexico. (Canada’s deadline is later). ECB de Guindos speaks at 17:00. Although we have German Retail Sales, this figure is blunted by the CPI release the day before. Similarly, the Eurozone CPI moves markets less than you would think, mainly because the constituent countries have already reported, and the estimate is usually accurate. The end of the month may produce some rebalancing volatility.

01:00 CNY China PMIs
06:00 EUR Germany Retail Sales
09:00 EUR Eurozone Unemployment
09:00 EUR Eurozone CPI (Core est 1.1% prev 1.1%)
13:45 USD Chicago Purchasing Managers' Index
17:00 WTI Baker Hughes US Oil Rig Count
22:30 AUD Australia AiG Performance of Mfg Index

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