Sunday, 12 May 2019

Week to May 10th

Trump tweet cast shadow on the week, Trade Talks still unresolve, AUD, NZD brief spikes only

Mon May 06
President Trump tweeted at weekend to confirm that he would be implementing China tariffs on Friday, and although this was the default condition, the confirmation caused SPX to gap down 1.5%, touching 2.2% by the middle of the Asian session, although this reversed when the US opened and the primary index closed down 0.5% on the day. It was a similar story with world indices. The dollar only moved very slightly (DXY -0.08%). Most currencies were up but the basket loss was trimmed by a GBP fade, as no progress appears to be being made on Brexit. Gold was down, surprisingly, and Oil was up 2%. Yields were roughly flat in line with the dollar.

Tuesday May 07
Equity markets slid further today on trade war fears, with SPX down 1.7% and the risk-sensitive NDX down 2%. DJIA posted its worst day since Jan 3. The risk-off assets (bonds, JPY and Gold) all rose, but with risk currencies falling, the net effect on DXY was a rare totally flat day. AUD spiked up 40 pips when the RBA did not cut rates, as a minority of commentators expected, but this was short-lived. Oil’s volatility continued, giving up most of Monday’s gains.

Wednesday May 08
There was some worry that Chinese vice-premier Liu may not even attend the latest talks after the Trump tweet, but it was confirmed they would go ahead tomorrow and Friday. Markets paused, and SPX ended flat, and NKY continued to slide. However, DAX and FTSE were up. We may have been seeing a rotation into (cheaper) European equities.

It was third flat day for the dollar (DXY+0.04%), again a GBP slide was covered by slight appreciation in EUR and JPY (EUR had not moved out of a 35 pip range since Monday). NZD plunged 1.2% in thin trading as the RBNZ cut rates, but quickly recovered to its opening level a few hours later. A later fade ended the Kiwi 0.4% down on the day. Both Gold and Bonds rallied then collapsed quickly to end the day lower, despite there being no obvious triggers. Oil was up slightly.

Thursday May 09
A fourth day of trade gloom was only slightly mitigated by President Trump saying he had received a “beautiful letter” from his counterpart in China, moving SPX from a low of 1.5% to ‘only’ 0.3% down at the close. Other indices followed suit. DXY finally made a noticeable move, down 0.17%, largely due to a sharp move in EURUSD which shot up 0.5% in 30 minutes as the US opened. There was no European news to prompt this, so it may have been a rotation into EUR similar to the equity rotation we mentioned yesterday. Most currencies (and Gold) were up, although AUD only managed to end flat. Oil was down in line with stocks.

Friday May 10
Despite the trade talks failing [to produce an agreement], positive remarks from US TreasSec Mnuchin and Vice-Premier Liu produced an end-of-week rally which put indices into positive territory, but still posting the worst week of 2019. USD paid little attention to the CPI miss at 1230, the only notable move was a big surge in CAD which added 100 pips (0.75%) on the Canadian NFP beat. DXY was down 0.1% on the day, with very slight appreciation across the board (including Gold and Oil). Yields were fairly flat.

All indices fell, with the NIFTY falling furthest. Last week the most volatile pair was GBPJPY up 2.41%, this week it’s down 2.38%. Yet another crypto rally, and notably Bitcoin added another 14% over the weekend. FANGs were all considerably further down than NDX as a whole.  

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)
(Calendar High volatility items are in bold)
  • German and Eurozone GDP
  • US Retail Sales but little else
  • Option expiration week
  • Several CB speakers

Monday May 13
A quiet start to the week with no significant European or US news. Markets are closed in Hong Kong. Fed Rosengren (hawk, voter) and Clarida (vice-chair) speak today. There is an election in the Philippines.

01:30 AUD Aus Investment Lending for Homes
02:15 CNY China FDI - Foreign Direct Investment (YTD) (YoY)
05:00 JPY Japan Leading Economic Index
21:30 CAD BoC Lane Speech

Tuesday May 14
All the news is from Europe today, with another day of nothing from the US. Fed George (hawk, voter)speaks today.

06:00 EUR Germany CPI (e1.7% p2.1%)
08:30 GBP UK Unemployment/AHE (Core AHE e3.4% p3.4%)
09:00 EUR Eurozone & Germany ZEW Sentiment
20:30 WTI API Oil Stock

Wednesday May 15
After the simultaneous German and Eurozone GDP, we have US Retail Sales and Canadian inflation, both at 1230. Expected USDCAD volatility. Fed Barkin (hawkish, non-voter) speaks today. NDX heavyweight CSCO reports after the bell. There are rate decisions on RON and PLN.

00:30 AUD Aus Westpac Consumer Confidence
01:30 AUD Aus Wage Price Index (QoQ)
02:00 CNY China Retail Sales (YoY)
02:00 CNY China Industrial Production (YoY)
02:00 CNY China NBS Presser
06:00 EUR Germany 19Q1 GDP (prelim) (QoQ e0.3% p0.0%)
09:00 EUR Eurozone 19Q1 GDP (prelim) (QoQ e0.4% lunch.)
12:30 USD US Retail Sales Apr (Control Grp e0.4% p1.0%)
12:30 CAD Canada CPI (Core YoY e1.8% p1.6%)
13:15 USD US Industrial Production (MoM)
14:30 WTI EIA Oil Stock

Thursday May 16
The most important print of the day is the Australian jobs report. DJIA component WMT reports before the bell. There are rate decisions on IDR and MXN.

00:00 EUR Eurogroup Meeting (all day)
01:30 AUD Aus NFP/UnEmp (NFP e14k p25.7k)
02:45 AUD RBA Bullock speech
08:15 EUR BuBa President/ECB Weidmann speech
12:30 USD US Housing Starts/Building Permits (MoM)
12:30 USD US Jobless Claims
12:30 USD Philly Fed Manufacturing Survey
17:30 GBP BoE Haskel speech
21:30 NZD Business NZ PMI

Friday May 17
Today is monthly OpEx day, so expect additional volatility. The key release is the Michigan Consumer Sentiment Index. Markets are closed in Denmark and Norway. This weekend is the Australian Federal Election, and the results from India are due next week.

00:00 AUD Aus Consumer Inflation Expectations
09:00 EUR Eurozone CPI
14:00 USD Michigan CSI (prelim) e97.2 unch.

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