Monday was Labor Day and US markets were closed, and SPX futures were slightly down. Foreign markets were mixed, with NKY falling slightly (after a 200 point rally in the Asian session faded) DAX was also flat, and only FTSE showing a noticeable increase which was entirely down to a sharp fall in GBP which gapped down after negative remarks from EU Chief Brexit Negotiator Barnier over the weekend, and finished the day 0.63% lower. The British index posted its only green candle of the week. The other currency to fall was CAD, after President Trump attacked the Canada NAFTA deal at the weekend, and threatened to pull out. EUR took up the slack to end DXY flat and AUD showed modest gains, with JPY and Gold flat. Oil was also quiet, adding 0.4%. Bonds were not traded due to the holiday.
Tuesday September 04
The equity downward trend continued today, as trade wars continued to weigh on sentiment, which made AMZN’s 0.64% gain to cross the line and join AAPL as a $1 trillion ($1,000 billion) dollar company all the more impressive. The company’s share price has doubled this year. All indices were down on the day. In forex, DXY had a good day adding 0.29% after the ISM Manufacturing PMI beat (14:00) which we highlighted last week as important. Gold fell sharply by $8 (0.7%) in line with the stronger dollar, as were yields, up 4bp. All currencies were down, particularly CAD after their Manufacturing PMI (13:30) missed. Oil spiked briefly to new six-week high of 71.37, but the retreated to end the day down. NZD didn’t react to the positive GDT Milk auction, and had already fallen nearly 1% in the Asian session. AUD spiked briefly on the rate decision (1.5% hold) at 04:30 but had given up all its gains by the time Governor Lowe spoke, during the European session at 09:30.
Wednesday September 05
Same problem, same result. The trade wars, and the continued EM currency crisis continued to depress markets, despite one ray of hope, Italian bond yields, which had fallen sharply on Tuesday continued to retreat, settling below 3% for the first time since in two weeks. Equities were down across the board, with SPX giving up 0.3%., and a strong tech sell-off with NDX down 1.2%, although DJIA was flat. Oil continued to slide down in line with the markets, as it does when the concern is trade. We explained this a few weeks ago, obvious though it is. Most (see the chart) oil is used for transport fuel. Less trade, less transport, less demand for oil. The API beat after the close arrested the fall for a few hours only.
There were more problems in the EM market today, as ZAR and INR made record lows, and IDR fell to a 20-year low, and this against a falling DXY which give up all of Tuesday’s gains. AUD spiked on the GDP beat at 01:30, but as yesterday, gave up that gain by the end of the Asian session, and ended down on the day. AUD is of course not part of DXY. CAD on the other hand is, but was surprisingly weak after the rate hold, adding only 0.1% despite hawkish BoC comments. Clearly NAFTA trumps Poloz if you’ll pardon the pun. The yen was flat as were US yields. The main reason for the DXY move was a huge spike up in both GBP and EUR following news that Germany and the UK had made progress on a Brexit deal. We are now in the final two quarters before exit, and these Brexit announcements are starting to make a difference. Note however that this spike only took GBP to close the weekend gap, after which it faded.
Thursday September 06
No letup today, markets continued to fall. There was no specific trade war news and economic releases were mixed, the Markit PMIs at 13:45 missed but the ‘official’ ISM figure 15 minutes later was a beat. However, and more importantly the ADP jobs figure (NFP preview) figure at 13:15 missed (163k vs 190k estimate). Always remember that Fed policy is the principal driver of markets, and jobs and inflation are what the Fed use to determine policy (the ‘dual mandate’). Even GDP releases are secondary to this. This is why proxy prints like Retail Sales and PCE for CPI, or ADP for NFP have a strong influence. Traders were also concerned about the $200Bn China tariff package as the consultation period came to an end. So—SPX sold off sharply at the cash open, giving up 21 handles (0.74%) in the first hour and never really recovered. The speed of the drop drove VIX above 15, the first time for two weeks. Note also that September is historically the worst month for markets.
There may also be a technical component to this as SPX has been in a parallel channel for the last eight weeks, and hit the upper boundary as shown in our chart. A centre line can be drawn in parallel channels and it is very common when this line breaks for the moves to be accelerated, as you can see in early July, early and mid-August from the chart. Needless to say, other indices followed suit, FTSE falling with Oil. The master chart for the week shows FTSE and Oil moving almost identically. This was despite the EIA Stock beat at 14:30.
The currency picture was much milder. The only serious mover was JPY, up a safe haven in line with the sharp equity drop, but moves up in GBP and CAD, and a flat Euro meant a nearly flat DXY (-0.08%). CAD and AUD were nearly flat and Gold only added $3. Yields were down 2bp as equity cash moved into fixed income.
Friday September 07
A positive NFP (201k vs 195k estimate) was not positive enough to stop the downward momentum, and SPX posted its fourth red candle, the first time all four days after Labor Day were red since 2001, when SPX went on to drop 16.63% from its August close by September 21st. The only previous time to that was 1987, and we know what happened then. European and Asian indices were also down. It was clear to see that the old ‘good news is bad news’ factor has returned, something we saw a lot during the unwinding of QE, where market see a good economic print as an indicator that rate hikes might be accelerated. How do we know this? The 10-year yield shot up 4bp immediately on the release, and ended the day 6.8bp up, the largest one-day move since May 30. Bond yields are a much surer indicator of interest rate expectations than the dollar itself, although this was also up, with DXY adding 0.38%
All other indices were also down, and all currencies (and Gold) gave up ground against the strong dollar. Oil was down in line with the indices. Canada missed on their NFP, posting a 51.6k contraction, and CAD duly fell 73 pips immediately, and ended the day 25 pips down. A creditable performance given the current NAFTA worries, although the loonie is down 2% in the last six working days.
Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.
WEEKLY PRICE MOVEMENT
A second nearly flat week for DXY (up 0.16% after falling 0.08% last week), and also for the second week, NZD was the worst performer. The other currencies also fell except for a tiny increase in yen, which means shorting NZDJPY earned one pip more than NZDUSD. Indices were all down, with trade war sensitive DAX falling even further than Oil. The crypto carnage resumed after last weeks lull, with yet another double-digit loss for ETHBTC. After last week’s stellar rises, the FAANGs all faded as well, and all fell more than NDX which only lost 2.61%. FB was the biggest casualty.
AUDUSD 0.7102 (-1.21%)
EURGBP 0.8937 (-0.17%)
EURUSD 1.1551 (-0.43%)
GBPUSD 1.2914 (-0.29%)
NZDUSD 0.6533 (-1.30%)
USDCAD 1.3166 (+0.95%)
USDJPY 111.04 (-0.01%)
DAX 11946 (-3.37%)
FTSE 7285 (-2.11%)
NIFTY 11589 (-0.78%)
NKY 22307 (-2.25%)
SPX 2872.8 (-1.14%)
GOLD 1196.47 (-0.42%)
OIL 67.77 (-3.01%)
BTCUSD 6395 (-8.83%)
ETHUSD 215.17 (-23.60%)
FB 163.04 (-7.22%)
AAPL 221.30 (-2.78%)
AMZN 1952.07 (-3.01%)
NFLX 348.68 (-5.17%)
GOOGL 1177.59 (-4.40%)
(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)
NEXT WEEK (High volatility items are in bold)
Monday September 10
The USTR meet with the European Trade Commission today, following President Trump’s agreement to negotiate before increasing European car tariffs. This is a working group also looking at boosting US LNG exports and WTO reform. Public comments are due on US uranium imports. The most important economic release is UK GDP, given the rate decision on Thursday. Also we will have the results of the Swedish General Election, where the far-right are expected to make gains.
01:30 CNY China CPI/PPI
03:05 AUD RBA Assistant Governor Bullock Speech
08:30 GBP Manufacturing/Industrial Production
08:30 GBP UK GDP (MoM)(est 0.3% prev 0.1%)
12:00 USD FOMC Member Bostic speech
19:00 USD US Consumer Credit Change
Tuesday September 11
This ominous anniversary has no US release of note, but another important GBP print, Average Earnings opens the European session. The German sentiment indicators may give direction to the beleagurued DAX index, currently 12.63% off its all-time high in January, and level with its Feb 6 bottom.
02:15 CNY China FDI (time approx)
08:30 GBP UK Average Earnings (est ex Bonus 2.7% prev 2.7%)
08:30 GBP UK Claimant Count Change/Unemployment
09:00 EUR Germany ZEW Economic Sentiment/Current Situation
12:15 CAD Canada Housing Starts s.a (YoY)
20:30 WTI API Stock
Wednesday September 12
US PPI today is a forward looking inflation indicator, and will set the scene for the actual CPI print tomorrow. As always, watch the API stock. Although the beat last week could not lift the Oil market, the print has been influential for most of the summer. Argentina have a Central Bank rate decision today, although no move from the world record 60% imposed last week is expected. Today is the AAPL product launch event (1700GMT).
00:30 AUD Australia Westpac Consumer Confidence
09:00 EUR Eurozone Industrial Production s.a. (MoM)
09:30 USD Fed's Bullard speech
12:30 USD US Producer Price Index ex Food & Energy (YoY)
14:30 WTI API Stock
18:00 USD Fed's Beige Book
Thursday September 13
This is the most important day for the week for releases with both the BoE and ECB rate decisions. Expect considerable volatility in both currencies, and of course the important cross EURGBP. A hold is overwhelming expected in both cases, but as always, it is the press conference remarks that traders will be examining for direction. The ECB always hold the conference 45 minutes after the rate decision. To add to the volatility mix, the important US CPI release comes at the same time as ECB President Draghi speaks. There is also German CPI today, although this rarely affects markets, as the figure is usually in line with estimates. Earlier in the day is the Australian jobs report. The currency is languishing at two-and-a-half year lows, 12.75% off its 2018 high.
00:00 EUR EcoFin Meeting (all day)
01:00 AUD Australia Consumer Inflation Expectation
01:30 AUD NFP/Unemployment/Participation Rate (est 26.7k prev -3.9k)
07:00 EUR Germany CPI
11:00 GBP BoE Rate Decision/Statement (est 0.75% hold)
11:45 EUR ECB Rate Decision (est 0% hold)
12:30 USD Jobless Claims
12:30 USD CPI (Core est 2.4% prev 2.4%)
12:30 EUR ECB Statement/Press conference
12:30 CAD Canada New Housing Price Index
13:15 USD FOMC Member Bostic speech
18:00 USD US Monthly Budget Statement
22:30 NZD Business NZ PMI
Friday September 14
The US Retail Sales print today is less important that usual as Retail Sales is a CPI proxy after the actual CPI itself. Or more interest is the University of Michigan sentiment index for indices, whereas currencies will probably be still feeling the effect of the BoE and ECB decisions the day before.
02:00 CNY Retail Sales/Industrial Production (YoY)
10:00 EUR Eurozone Labour cost
10:00 GBP BoE Governor Carney speech
12:30 USD US Retail Sales (MoM) (Core est 0.3% prev 0.6%)
13:15 USD US Industrial Production/Capacity Utilization
14:00 USD Michigan Consumer Sentiment Index
14:30 CAD BoC Review
17:00 WTI Baker Hughes US Oil Rig Count
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