Sunday, 7 April 2019

Week to Apr 5th

Equities rally on China hopes, Flat dollar despite wild GBP, Best crypto week for over a year

Mon Apr 01
The first day of the week, the month and the quarter opened strongly after the China Manufacturing PMI beat at 0145. We pointed out the significance of this last week. The figure came in at 50.8 vs 49.9 est, only 0.9 beat, but critically crossing the 50 point, the line between contraction and expansion. The important US ISM similar release beat at 1400, giving a sharp uptick to USDJPY. (the same release for Germany at 0700 - 44.1 vs 44.7 est - showed that last month’s print of 47.6 was not an outlier, as some commentators had thought.

The net result was a strong risk-on run for equities across the board, and an advance of 0.13% for DXY. EUR, JPY, Gold and 10-year Bonds (inverse to yields) dropped suddenly after the ISM print. Against this, CAD perked up after hawkish (well less dovish than expected) remarks from the BoC at 1755. AUD, without news, was flat. The dollar advance would have been greater expect for cable, up 1% on ‘soft’ Brexit hopes.

Tuesday April 02
As we predicted last week, the RBA did indeed join the chorus of doves at 0330, and the day started with a sharp fall in AUD. GBP had collapsed overnight, but climbed back to end the day flat on reports of bipartisan (ie May and opposition leader Corbyn) Brexit talks. CAD faded the Poloz gains. As AUD is not part of DXY, and the other majors had a quiet day, the DXY basket closed virtually flat (-0.03%), as did yields. Gold was slightly up. Equities had another good day, but mostly outside the US. NDX managed to add 0.3% but SPX was flat.

What was interesting is that after months in the doldrums, BTC spiked up 20% up in an hour from 0430, with, obviously, over 100x normal volume (and held onto these gains). This was accompanied by a similar move in ETH, but that took two days to complete. Naturally rumours abounded an Asian ‘whale’ in this unregulated world.

Wednesday April 03
Reports in the FT that the US and China were close to finalising their trade deal, plus a raft of PMI Services beats, resulted in a third day of equity gains, particularly in DAX. Only the US wobbled slightly after their ISM Non-Manufacturing print missed at 1400, trimming an SPX 0.6% advance to 0.2% at the close. After two green days Oil was down slightly after the substantial EIA stock miss (+7.2M vs -0.4M, more is worse) at 1430.

DXY shed 0.22% today, on the contrasting US and other PMIs, and possibly the ADP jobs miss at 1215. Gold was down, and yields and AUD were up in line with risk-on equities. JPY and CAD were probably pulled in two directions, risk on vs dollar weakness and Oil respectively. Both currencies were flat. EUR and GBP were both up.

Thursday April 04
Another up day from equities as Trump confirmed the China progress, although the pace was slowing. FTSE gapped down 0.4% to reflect overnight GBP strength but managed to recover this to end flat. The dollar recovered to close where it ended on Tuesday, evenly across all currencies. Oil faded slightly in line with the dollar. Gold was unusual, spiking down 0.5% through six hours to touch it Mar 7 low before recovering. Yields were flat on the day.

Friday April 05
Without a lead from China, which was closed, markets breathed a sigh of relief on the NFP beat at 1230, showing that last month was an outlier, and all were up, although the DAX gain was marginal. The SPX ran nicely to a pattern we have pointed out before, where after an instant spike, the price fades until the cash open, and then the size of that spike is repeated, as shown in the chart here. The trade is to buy SPX at the open, with a stop below the pre-NFP price, and a target of the ramp repeated. Oil was up 1.5% in line with the mood.

DXY was only very slightly up (+0.07%), EUR made small gains to offset the fall in GBP (Brexit) and CAD (Canadian NFP miss). After a strong week, yields fell 4bp after Trump called for the Fed to reintroduce QE.

The US major markets are now very close to previous all-time highs. SPX and DJIA are 1.68% away, NDX is even nearer at 1.39%, although notably RUT, DAX, NKY are around 10% off. It will be interesting to see if the SPX record close of 2930 is beaten next week.

Another strong week for DAX makes it the top index mover again. In forex, the best trade would have been AUDJPY, up 0.90%. FANGs all beat their parent NDX index, with a particularly strong showing from FB, and the Tuesday crypto spike held, to give BTC and ETH their best week for over a year.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on UUP. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT, not BST)

(Calendar High volatility items are in bold)
  • EU consider further Brexit delay
  • US, China and German inflation
  • ECB rate decision and statement
  • Earning season starts on Friday

Monday April 08
After last weeks big calendar and start to the week and quarter, we are back to the usual quiet Monday today. Watch out for any weekend news, particularly on Brexit or Trump tweets. There are rate decisions on ILS and LKR. Markets are closed in Thailand.

06:00 EUR Germany Trade Balance
14:00 USD US Factory Orders (MoM)

Tuesday April 09
Another quiet day, with no releases in the European and US cash sessions, except the JOLTS jobs openings at 1400. Fed Vice Chair Clarida, (voter, obviously) centrist by definition, but thought to be leaning dovishly at the moment. Markets are closed in the Philippines and in Israel where there is an election, where the incumbent Likud government may not win. There is a rate decision on RSD.

01:30 AUD Aus Home Loans
05:45 CHF Switzerland Unemployment Rate
20:30 WTI API Oil Stock
22:45 USD Fed Clarida speech
23:01 GBP UK BRC Like-For-Like Retail Sales
23:50 JPY Japan Machinery Orders

Wednesday April 10
Easily the busiest day of the week, the EU summit is almost certain to grant UK PM May a long extension to Brexit, rather than the short one she has asked for, figuring that the longer the extension, the softer the eventual Brexit, which is the EU’s stated preference. With Bund yields still negative, the ECB statement should prove interesting. Further TLTRO details may be unveiled, and if not, may be asked about in the presser.

US CPI is expected to be unchanged, which validates the Fed’s current no hike policy. The risk is to the upside, ie a beat may make traders think again. Although not a rate set meeting, the FOMC March minutes today put some flesh on the bones of the dovish reversal seem recently.

00:30 AUD Aus Westpac Consumer Confidence
02:30 AUD RBA's Debelle speech
06:15 JPY BoJ Governor Kuroda speech
08:30 GBP UK Manufacturing/Industrial Production
08:30 GBP UK GDP (MoM Feb)
11:45 EUR ECB Rate Decision/Statement (est 0% hold)
12:30 USD US CPI (Core YoY est 2.1% prev 2.1%)
12:30 EUR ECB Presser
15:30 WTI EIA Oil Stock
15:50 USD Fed Quarles speech
18:00 USD FOMC Minutes

Thursday April 11
Voting in the Indian election starts today. The world’s largest electorate will take six weeks to vote, with the counting starting on May 23. Exit polls are notoriously unreliable, but nevertheless, any significant move from the BJP to the Congress party may have an effect on markets. Chinese and German inflation are the key prints on the day.

00:00 AUD Aus Consumer Inflation Expectations
01:30 CNY China CPI (est 2.3% prev 1.5%)
02:30 AUD RBA's Debelle speech
06:00 EUR Germany CPI (est 1.4% prev 1.5%)
12:30 USD US PPI
12:30 USD US Jobless Claims
13:30 USD Fed Clarida 2nd speech
20:00 USD Fed Bowman speech
22:30 NZD Business NZ PMI
22:45 NZD NZ Electronic Card Retail Sales 

Friday April 12
The Q1/2019 Earnings Season starts today with the usual first reporter JPM, and fellow bank WFC, before the bell. The dovish Fed is bad for banks, and traders will be watching forward estimates closely. The IMF begin a three-day meeting in Washington DC. Today is the next Brexit 'deadline' although it is likely another extension will have been granted before then. Markets have a half-day in Sri Lanka. There are elections in Finland on Sunday.

02:00 CNY China Imports/Exports/Trade Balance
02:15 CNY China FDI
09:00 EUR Eurozone Industrial Production
14:00 USD Michigan Consumer Sentiment Index (est 98.0 prev 98.4)
17:00 WTI Baker Hughes Rig Count

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