Saturday, 17 August 2019

Week to Aug 16th


US delays some tariffs, 2/10 yield curve finally inverts, Textbook whipsaw week

Mon Aug 12
Trade war concerns continued to weigh on equities today, with SPX down 1.2%. Other world indices followed suit. The most severe move, though, was in yields, with the US 10-year falling 9bp to a new low of 1.65%, as investors moved from equities to bonds.

Risk instruments Gold and JPY were up, as was GBP, but a sharp weekend drop in EUR left DXY up 0.35%. Oil was surprisingly unaffected, and up slightly on the day.


Tuesday August 13
It’s all about the trade war, and this was proved today as President Trump announced (exactly as the US opened) that the additional tariffs on China would be delayed until December 1st. Markets reacted very strongly, as you can see from the charts above. SPX added 2% instantly, and a similar reaction was seen in all equity markets, which recovered Monday’s losses and then some.

Note what matters. DAX was up 0.6% and this was on a day that German inflation failed to beat estimates, and the ZEW Economic Sentiment estimate at 0900 came in at -44.1 (vs est -28.5), a new low.

In a textbook risk-on reaction, Gold, JPY and bonds instantly collapsed. A similar instant spike was seen in the commodity group, AUD, CAD and Oil. The effect was barely noticeable in EUR and GBP as these are not really considered to be risk on or off vis-a-vis the dollar. Both the European currencies were down on the day, coupled with the JPY move, added 0.45% to DXY.


Wednesday August 14
Before the bell today, the long-feared 2/10 yield curve inversion (the 10-year yield was lower than the 2-year) happened for the first time in 12 years. It had actually gone positive again by the time the market opened, but the move was enough to continue the whipsaw. Equity markets which all fell heavily, more than erasing Tuesday’s gains.

Everything went risk off again. Gold, JPY and bonds were sharply back up, AUD, CAD and Oil were equally sharply back down, and yields fell 12bp to a new low of 1.59%. Again the only quiet areas were EUR and GBP, the latter staying flat after the UK inflation beat at 0830.


Thursday August 15
Another bond record today, as the US 30-year bond yield fell under 2% for the first time since records began in the 1970s, and the UK equivalent fell to below 1% for the first time. Nevertheless, after the wild volatility of the last few days, equity markets took a breather. SPX was slightly up after the Retail Sales beat at 1230. The UK equivalent print at 0930 also beat, which was enough to send oversold GBP climbing, which inevitably depressed FTSE. NKY was also flat, but DAX fell.

The other components of DXY all fell, giving the basket a green candle (up 1.21%) for the day. The 10-year yield fell again, briefly touching the psychological 1.5% level. Oil was slightly down on the day, and Gold was slightly up.


Friday August 16
Markets recovered on Friday after a news report in Der Spiegel that Germany was prepared to run a budget deficit and increase debt and spending. DAX naturally rallied, and recoveries were seen in all equity markets. 

A smaller risk-on more today saw Gold, JPY and bonds fall slightly, and AUD, CAD and Oil rise. Further GBP gains and EUR decline saw a flat dollar overall.



WEEKLY PRICE MOVEMENT
The GBP recovery meant FTSE was the weakest index this week, and EURGBP was the weakest currency. A pullback was seen in crypto. FANGs followed the general trend, except for AAPL which outperformed.



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)

  • Jackson Hole Symposium
  • Earnings season ends
  • FOMC Minutes week
  • Minimal other US data


Monday August 19
A quiet Monday as is often the case, although the weekend may bring market-gapping news. Chinese ‘BAT’ stock BIDU reports after the bell. Markets are closed in Colombia.

23:50 JPY Japan Imports/Exports/TB (Sunday)
09:00 EUR Eurozone CPI


Tuesday August 20
The final DJIA component HD reports before the bell, which pretty much completes the Q2 earnings season. No other US news today. Markets are closed in Hungary and Estonia.

01:30 AUD RBA Meeting Minutes
06:00 EUR Germany PPI
14:00 NZD NZ GDT Milk Index
22:00 USD Fed Quarles speech


Wednesday August 21
Another slow day for releases as markets await the FOMC minutes and Jackson Hole. Markets are closed in the Phillippines, Morocco and Bangladesh.

08:30 GBP UK PSBR
12:30 CAD Canada CPI (BoC Core YoY p2.0%)
14:00 USD US Existing Home Sales (MoM)
18:00 USD FOMC Minutes
22:00 AUD Aus Commonwealth Bank Manuf PMI


Thursday August 22
Main news of the day is the German Manufacturing PMI which has been falling for months. The annual Kansas Fed Symposium at Jackson Hole, Wyoming starts today, although it the arrival day, and only plenary speechs are expected, and probably after the market closes. There is a rate decision on IDR.

07:30 EUR Germany Markit PMIs (Manuf e43.0 p43.2)
08:00 EUR Eurozone Markit PMIs (Composite e52.1 p51.5)
11:30 EUR ECB MPC Minutes
12:30 USD US Jobless Claims
13:45 USD US Markit PMIs
23:30 JPY Japan National CPI


Friday August 23
The main day of the Jackson Hole symposium, with Fed Chair Powell speaking at 14:00. Note that Jackson Hole continues into Saturday, when the G7 Group meeting starts in France. There are therefore several possible new items over the weekend which may affect the market on Monday. Note that London is closed on Mon 26th, which may mute forex volatility.

00:00 USD Jackson Hole Symposium (all day)
12:30 CAD Canada Retail Sales (MoM, p-0.1%)
14:00 USD US New Home Sales (MoM)
14:00 USD Fed Chair Powell speech (at Jackson Hole)



This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.





Sunday, 11 August 2019

Week to Aug 9th



Worst day of 2019 on Monday, Surprise NZD 50bp cut, GBP and FTSE both fade

Mon Aug 05
Today was the worst day of 2019 for indices, SPX was down 3% at the close, and carried on falling throughout the Tuesday Asian session, the largest 24 hour drop since the 5/6 Feb 2018 collapse. It touched a low in Asia of 5.43% down on Friday’s close. This was generally blamed on the Trump tariff tweet of last week coming immediately after the rate cut, although not helped by the bad miss on the US Non-Manuf PMI at 14:00 (53.7 vs 55.1). Services are supposed to be strong in the US (tech etc.)

DXY was similarly affected, down 0.71% at the close (the worst day since Jan 25 2019), and a low of 0.92% in the Asian session. EUR and JPY were around 1% up, but CAD and GBP hardly moved, and AUD fell 0.6% even against the weaker dollar. Gold was up in line with the dollar, Oil down in line with equities, and yields down in line with both.


Tuesday August 06
After such a large drop on Monday, indices rebounded about a quarter of the drop, as did DXY although only CAD was notably down, following Oil which continued to slide. EUR, GBP, AUD were more or less flat, and risk-off markers Gold, JPY and bond prices (inverse to yields) were up again. The AUD rate hold had no effect.


Wednesday August 07
A quieter day today as volatility receded, with SPX and DJIA more or less flat, but an advance for NDX and European indices. The dollar (and yields) were fairly flat as well with a slight advances in JPY balancing a pullback in Oil-linked CAD. Oil was at one point down 5.5%, but found June support around $51 and rebounded. 

The big news was the 50bp rate cut in New Zealand, when only 25bp was expected, which triggered an immediate 2.5% drop in the kiwi, and a sympathetic 1.5% fade in AUD. The Aussie recovered to close flat. The Antipodean currencies are not, of course, part of the DXY basket.


Thursday August 08
The recovering SPX and DJIA passed into last weekend’s gap territory. This is known as an ‘air pocket’, ie there is no resistance. The indices advanced evenly and closed the gap by the end of the day. Foreign indices followed suit. Some attributed this to the Chinese Trade Balance beat, although the move only really took off when the US cash session opened. Also today the PBoC allowed USDCNY to rise above 7.0, a significant roundpoint, marking an 11-year low for the renminbi.

A small aside, renminbi or “people’s currency” is the currency, yuan is the unit of account. Most other countries use the same word for both, the nearest example is sterling and pound in the UK. So you wouldn’t say ‘a thousand renminbi’, but you could say ‘the yuan is weak’.

Yet another dollar indecision day, with a slight move down (in yields as well) with the heavily DXY-weighted euro balancing moves up in JPY and CAD. AUD performed surprisingly well up 0.73%, possibly due to Gold pushing through the $1500 barrier for the first time in six years. 


Friday August 09
President Trump told reporters he was not ready to make a deal with China yet, and indices pulled back again today, although there was a partial recovery towards the US close. Of course, like all week, movement has been also a technical whipsaw following the enormous move on Monday. The dollar was well down (DXY -0.55%), and would have been more if GBP had not cratered again, as PM Johnson and allies rhetoric increases fears of a no-deal Brexit, and GBP keeps sliding towards 1.20 ‘Brexit floor’ and important psychological points, as it also tends to EURGBP parity. This ended the week with DXY down 1.09%, The yen was of course up, but despite all this, other risk indicators were contrarian: Gold was down, and yields and Oil were both up.


WEEKLY PRICE MOVEMENT
The Monday rout recovered to various degrees, but Brexit-troubled FTSE for once did not benefit from sterling weakness, and fell the most. Buying EURNZD would have been the best forex trade. BTC continued to rise, although not joined by ETH. FANGs are more volatile than NDX and therefore fell more, with NFLX the worst performer.




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)
  • All eyes still on China
  • US and UK inflation
  • More European GDP
  • Retail earnings, retail sales

Monday August 12
There are several possible USTR announcements in the tariff saga this week, but there are no exact schedules. Markets are closed in India and Turkey. Scheduled news is light, as is often the case on Mondays. 

22:45 NZD NZ Electronic Card Retail Sales (Sunday)
18:00 USD US Monthly Budget Statement
22:00 AUD RBA Kent speech


Tuesday August 13
US and Germany inflation are the key prints today. Otherwise, we continue to listen for trade war remarks or tweets.

06:00 EUR Germany CPI (YoY e1.1% p1.1%)
08:30 GBP UK AHE (e3.7% p3.4%)/UnEmpl (e3.8% p3.8%)
09:00 EUR Germany/EU ZEW Economic Sentiment (Germany e-22.3 p-24.5)
12:30 USD US CPI (MoM Core e0.2% p0.3%)


Wednesday August 14
Eurozone and German GDP will inevitably weigh on EUR today, but UK inflation probably more so, given GBP recent volatility to the downside. NDX heavyweight CSCO reports after the bell.

00:30 AUD Aus Westpac Consumer Confidence
01:30 AUD Aus Wage Price Index (QoQ)
02:00 CNY China Retail Sales/Industrial Production
02:00 CNY China NBS Press Conference
06:00 EUR Germany 19Q2 Preliminary GDP (QoQ e-0.1% p0.4%)
07:30 AUD RBA Debelle speech
08:30 GBP UK CPI (YoY e2.0% p2.0%)
09:00 EUR Eurozone 19Q2 Preliminary GDP (e0.2% p0.2%) 
15:30 WTI EIA Oil Stock
23:00 AUD RBA Debelle speech


Thursday August 15
The day starts with DJIA component WMT earnings, and Bitcoin mining chip maker NVDA reports after the bell. There are rate decisions on NOK and MXN. Markets are closed in some European countries for Assumption Day (but not the UK and Germany), and also in India and South Korea.

01:30 AUD Aus NFP/UnEmp (NFP e26.8k p0.5k)
08:30 GBP UK Retail Sales
12:30 USD US Retail Sales (Control Group e0.3% p0.7%)
12:30 USD US Jobless Claims/Unit Labor Costs/Productivity
12:30 USD Philly Fed Manufacturing Survey
13:15 USD US Industrial Production (MoM)
22:30 NZD NZ Business PMI


Friday August 16
Today is monthly OpEx, so expect heightened volatility. The main event is the increasingly important semi-monthly Michigan Consumer Sentiment report.

07:00 CNY China FDI
12:30 USD US Building Permits/Housing Starts
14:00 USD Michigan CSI (e97.7 p98.4)


This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.




Monday, 5 August 2019

Week to Aug 2nd



First rate cut for over a decade, Risk off on tariff tweet, GBP collapses

Mon Jul 29
In the absence of any specific news, which is often the case on Mondays, US equity markets slipped slightly from Friday’s highs, where other world markets advanced, in particular FTSE, which was up 1.82%, its best day in six months, mainly on currency, but also strong gains from LSE.L (up 15%) and JE.L (up 25%) on merger news, and AZ.L (up 4%) and VOD.L (up 6.4%) on earnings.

The currency market was directionless, with slight moves in EUR and Gold (up), AUD and JPY (down), but the big mover was GBP, down 1.33% as new PM Johnson’s bold ’no-deal’ Brexit plans continued. Oil was up, but yields were flat.


Tuesday July 30
Today President Trump criticised China’s intransigence in the trade talks (ie saying a deal is less likely/further away). Markets were down again, with DAX coming off particularly sharply, after the Eurozone Business Climate at 0900 and German inflation print at 1200 missed. (CPI 1.1% v 1.3% est).

DXY was completely flat, with a further 0.46% fade in GBP balancing slight gains in other currencies and Gold. Oil followed the weaker dollar and yields had a second flat day.


Wednesday July 31
The long awaited Fed rate cut came today, and it was only 25bp, and Chair Powell made it clear this was an “insurance” cut, and not a start of a series of easing moves. As you know from previous reports, some people were hoping for 50bp. Equity markets, which had been flat, fell on the news, and USD appreciated sharply (DXY +0.50%) with all currencies, Gold and Oil down. Yields fell 5bp on bond/stock rotation.


Thursday August 01
Today was most unusual. Markets quickly recovered from yesterday’s sharp move (and USD similarly gave up its gains), only for everything to change again when President Trump tweeted his plans to impose yet more tariffs on $300bn of Chinese goods. SPX moved from a +1% to -1% position in minutes. World equities followed suit, this time NKY showing the biggest move.

The USD reaction was pure risk-off. DXY was up 0.18% because EUR moved little, and GBP and CAD hardly at all. AUD fell sharply along with indices. However there was a huge move up in JPY (up 1.3%)  and Gold (up 2%), classic risk-off instruments. Oil had its worst day for nearly three years, falling 7.4% at one point, to close 5.9% down. Similarly yields fell nearly 12bp, the largest one-day drop for 15 months.


Friday August 02
The rout continued today, with all markets falling, ignoring the normally very important NFP print, although this unusually (and must be for the first time in years) came in exactly as estimated at 164k, as did the the AHE and unemployment figures. Other currencies followed the yen and Gold and all moved upwards against USD. DXY was down 0.3%. Yields continued down to touch 1.846%, a level not seen since the day of Trump’s election. Oil made a slight recovery.


WEEKLY PRICE MOVEMENT
Markets all fell on the ‘hawkish’ rate cut and the Trump tariff tweet. DAX fared worst losing 4.41%. Risk off yen and Brexit GBP meant a GBPJPY short would have made you 3.61%, the largest weekly forex move for years. A relatively quiet week in crypto, and the FAANG stocks all suffered more than NDX itself, with AMZN losing most.



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)

  • Aus and NZ rate decisions
  • Further trade war news expected
  • China inflation and trade figures
  • Will UK GDP help sterling?

Monday August 05
The only releases today are PMIs. Of more interest is any retaliation to Trump’s tariff tweet on Thursday. The president mollified his position with a tweet on Saturday saying things are going “very well” with China. The weekend proprietary market run by British broker IG Markets didn’t buy it, with DJIA down another 80 points.

Fed Brainard (voter) speaks today, but only on payment systems. Also today are USTR hearings on EU Airbus subsidies, and EU/|US talks continue this week.

There is a rate decision on RON. Markets are closed in Canada, and also in Ireland, Croatia, Iceland, Barbados and Ghana.

01:45 CNY Caixin Services PMI
07:55 EUR Germany Markit PMI Composite
08:30 GBP UK Markit Services PMI
13:45 USD US Markit Services/Composite PMIs
14:00 USD ISM Non-Manufacturing PMI (e55.1 p55.1)
22:45 NZD Employment Change Q2 (e0.4% p-0.2%)


Tuesday August 06
No US news today, but DJIA high-flyer DIS reports after the bell. The company has come long way from Mickey Mouse recently with Avengers: Endgame the highest grossing movie of all time, and their planned Netflix-killer streaming service. The stock is of course already up 30% this year .

01:30 AUD Aus Imports/Exports/TB
04:30 AUD RBA Rate Decision/Statement (e1.0% hold)
06:00 EUR Germany Factory Orders s.a. (MoM)
14:00 NZD NZ GDT Milk Index
16:00 USD Fed's Bullard speech
20:30 WTI API Oil Stock


Wednesday August 07
Fed Evans (voter) speaks today. There are also a rate decisions on INR and THB. Markets are closed in Colombia, Bolivia and Jamaica.

02:00 NZD RBNZ Rate Decision/Statement (e1.25% p1.50%)
03:00 NZD RBNZ Governor Orr Presser
06:00 EUR Germany Industrial Production s.a. (MoM)
07:30 EUR ECB Coeuré speech
14:00 CAD Canada Ivey PMI
14:30 WTI EIA Oil Stock
21:30 AUD RBA Bullock speech


Thursday August 08
The main event today is probably the Chinese trade figures. Despite the trade war, the trade balance keeps on rising. There is a rate decision on PHP. Markets are closed in Tanzania.

02:00 CNY China Imports/Exports/TB
12:30 USD US Jobless Claims
23:30 AUD RBA Governor Lowe speech
23:50 JPY Japan 19Q2 Preliminary GDP (QoQ e0.1% p0.6%)


Friday August 09
Chinese inflation and UK GDP are the main events today. The Canadian NFP comes a week after the US. Markets are closed in Singapore, South Africa, and Namibia. There are elections in Argentina this weekend.

01:30 AUD RBA MPC Statement
01:30 CNY China CPI (YoY e2.7% p2.7%)
06:00 EUR Germany Trade Balance s.a.
08:30 GBP UK 19Q2 Preliminary GDP (QoQ e0.0% p0.5%)
08:30 GBP Manufacturing/Industrial Production
12:30 USD US PPI
12:30 CAD Canada NFP/AHE/UnEmp (NFP e10k p-2.2k)



This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.