Sunday, 22 December 2019

Week to Dec 20th

Phase 1 China Deal, Santa Rally begins, GBP fades election spike

Mon Dec 16
The Friday ‘Phase 1’ trade deal inevitably gave a boost to indices, with FTSE outperforming, to join the FTSE250 after the euphoria of GBP last week came off. In currencies it was a mixed picture. Despite the poor German and Eurozone PMIs, EUR still rose, as did CAD following Oil. Gold was slightly up, and bonds were down in line with the equity move.

Tuesday December 17
A much flatter day on equities saw a slight rise in the US and Japan, but FTSE and particularly DAX fading as UK election euphoria cooled. In currencies, DXY was up mainly because GBP largely gave up its post election gains, falling 1.13% in addition to Monday’s 0.48% drop. Otherwise it was mixed with haven trio Gold, JPY and bonds slightly up, as was EUR and CAD following Oil, which had a good day.

Wednesday December 18
DAX continued to fall today, on concerns about the fallout for Europe on an accelerated Brexit, promised by UK PM Johnson, although other indices managed very slight advances. FTSE itself was slightly up as GBP continued to fall for the same reason, as did EUR. Nevertheless commodity currencies followed Oil up and haven trio Gold, Bonds and JPY were down, showing the market was still seasonally bullish.

Thursday, December 19
A mixed picture today as different forces moved indices. The US indices were quiet in futures, and then all rallied to new all-time highs in the cash sessions. DAX fell 80pts to hit a bottom before picking up US momentum to close flat, and FTSE climbed gently but only really in response to a further fade in sterling. The dollar had a flat day overall, with EUR hardly moving, but a 40 pip recovery in JPY after a series of misses in US data balancing the GBP slide. Oil followed stocks, but CAD was flat, as were yields. Gold surprisingly rallied all day, following the data misses but not the equity positive momentum.

Friday, December 20
The last day before the Christmas week coincided with quadruple witching day (the day, week, month and significantly, the quarter which is the expiration of index futures contracts). US indices rose sharply when the session opened, following earlier spikes up in the NKY and DAX opens, helped by GDP figures at 1330 and the Michigan CSI beat at 1500. Only FTSE was muted, affected by a further decline in GBP on the UK government’s decision to leave the EU on 31 Dec 2020, whether any agreement is in place or not. DXY followed SPX in a clear up day, pushing Gold and all currencies except AUD down. Oil moved sharply down, but this was a function of OpEx backwardation, the February contract having been traded about 60c lower. Yields were flat on the day.

A complete reversal of last week’s sterling euphoria meant shorting GBPAUD would have been the best trade. The falling pound inevitably pushed FTSE to pole position on index performance. Although BTC was flat, ETH moved down sharply, and a creditable performance from FB was outshone by a double-digit advance in NFLX.

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)

Monday December 23
This is the Christmas week, the quietest week of the year. Only today are there any meaningful released. Australian markets are closed.

04:30 JPY All Industry Activity Index (MoM) (Oct)
05:00 JPY Leading Economic Index (Oct)
13:30 USD US ND Capital Goods (MoM e-0.3% p1.1%)
13:30 USD Chicago Fed National Activity Index (Nov)
13:30 CAD Canada GDP MoM
15:00 USD New Home Sales (MoM)
23:50 JPY BoJ MPC Minutes

Tuesday December 24
Many markets are closed for a half-day including the US, and some, such as Germany, Sweden, Denmark and Portugal are closed all day. There are no important news releases.

Wednesday December 25
All major world markets except Japan are closed for Christmas Day.

Thursday December 26
Many markets, although not the US, are closed for Boxing Day. News is again light. The ‘core’ Santa Rally in US stocks is supposed to start today. There is a rate decision on EGP.

00:00 JPY BoJ's Governor Kuroda speech
13:30 USD Jobless Claims
23:30 JPY Tokyo CPI YoY (e0.6% p0.6%)

Friday December 27
Still light, with many traders taking the full week as holiday.

09:00 EUR Economic Bulletin

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