Week to Oct 1st

End of quarter, SPX worst week of the year, Dollar makes 2021 highs

MY CALL THIS WEEK : BUY NZDCAD

LAST WEEK

The raising of the debt ceiling prompted a rise in yields, which together with other negative factors such as the energy crisis, and Chinese slowdown meant SPX had its worst week of 2021, and worst month of the year, whereas the safe-haven dollar had its best week since June, making new 2021 highs, with all pairs except CAD down. The risk-off mood gave the DJI/NDX ratio its best week since May as NDX touched July lows. Oil also touched July highs, and is less than a dollar away from a seven-year high.


WEEKLY PRICE MOVEMENT

The biggest mover this week was NKY, down 4.89%. The top forex mover was NZDCAD this week, down 1.28%. Bitcoin and ETH bucked the general trend and were up over 12%.  FANGs were generally down as much as NDX.

My CADJPY short lost 0.29% taking my year to date profit to 7.23% and 27/38 wins. This week I will try the reversal strategy and buy NZDCAD.

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)

In September, Fed Chair Powell noted it'll take one more "decent" jobs report to set the taper wheels in motion - not a "super-strong" one, just one that's "reasonably good". This week’s estimate of 500K, if met or exceeded should do the trick. The market response will show how much taper is already priced in, after September’s 4% drop, the worst month since the pandemic started. We are at a juncture, DJIA has just bounced off the SMA200d as it did last November, but historically October is the second-worst month (after September!) for equities.  Our research suggests NFP week is usually positive, and next week onwards earnings will be the main driver.

On Monday, OPEC meet to review output. The current plan is to increase output by 400kbpd, the latest ‘tapering’ of the cuts. However, given that the price of oil is over $75, a level it has not breached for seven years, and recovery demand being stronger than expected, the committee may well agree a larger increase. Unusually, the market has not priced this in yet.

On Wednesday, COVID fortress New Zealand (only 4,000 cases and 27 deaths), which has already ended QE, is almost certain to double the NZD base rate to 0.5%, being the first of the major six to do so, and third overall (after KRW and NOK).


CALENDAR (High volatility items in bold)

Monday October 4
08:00 OPEC Meeting

14:00 US Factory Orders
21:30 Aus AiG Construction Index
22:00 Aus Commonwealth Bank Svcs PMI
23:30 Tokyo CPI

Tuesday October 5
00:00 Aus TD Securities Inflation
00:30 Aus Imports/Exports/TB (TB e10.6B p12.1B)
03:30 RBA Rate Decision/Statement (e0.1% hold)
07:55 Germany Markit Composite PMI
08:00 Eurozone Markit Composite PMI
12:30 US Trade Balance
12:30 Canada Trade Balance
13:45 US Markit Svcs/Comp PMI
14:00 ISM Services PMI (e59.8 p61.7)
17:15 Fed Quarles speech

Wednesday October 6
01:00 RBNZ Rate Decision/Statement (e0.5% p0.25%)
06:00 Germany Factory Orders
09:00 Eurozone Retail Sales
12:15 US ADP

Thursday October 7
05:00 Japan Leading Economic Index
06:00 Germany Industrial Production
11:30 ECB MPC Accounts
12:30 US Jobless Claims
12:40 Fed Williams speech
14:00 Canada Ivey PMI
16:00 BoC Governor Macklem speech
23:30 Japan Household Spending/Current Account

Friday October 8
01:45 China Caixin Services PMI
06:00 Germany Trade Balance
12:30 US NFP/AHE/UnEmp (NFP e500k p235k)
12:30 Canada NFP/AHE/UnEmp (UnEmp p7.1%)

Week to Mar 22nd

Fed signal no more hikes in 2019, Still no Brexit resolution, Very bad week in Germany

 Mon Mar 18

US markets continued last week’s rally today, as did FTSE on the back of weaker sterling. The mood did not extend to NKY and DAX, which were flat. The dollar was generally flat (DXY +0.08%). There was none of the usual intermarket correlation. Gold and JPY (and EUR) were slightly up despite SPX gains. AUD was up, CAD was slightly down despite Oil rising, as was GBP. Yields fell slightly despite stronger equities.

Tuesday March 19

An early rally in SPX today fell off sharply on reports that China is pushing back on some US trade demands, with indices flattening off. Only DAX managed to stay green, after upbeat comments on the automotive sector (about 20% of the index) from BAML. The dollar had another flat and directionless day (DXY +0.12%), with a Turnaround Tuesday on most currencies, bonds and Oil. Only Gold and EUR moved in the same direction as Monday. This was despite decisive beats in UK AHE and unemployment (the latter the lowest since 1971) at 0930, and German ZEW Sentiment at 1000. It seems like everyone was waiting for the Fed.

Wednesday March 20

The big story today was the Fed minutes, with a hugely dovish move in the ‘dot-plot’ (the views of individual FOMC members) from two rate hikes in 2019 to zero. The reaction in USD was immediately, an instant 0.5% down, which is where it ended the day. All currencies, Gold and bonds (inverse to yields) were up with the exception of GBP, which was already down 0.75% on Brexit concerns that it still managed to close red on the day. The third parliamentary vote on Brexit was postponed. Oil was up sharply on the EIA beat at 1430.

US equities had been falling all day following a statement by President Trump that the US will most likely leave tariffs in place during negotiations to ensure “China lives by the deal”. They were given a small short-lived boost by the Fed announcement, but all ended red. DAX woes were compounded by a 13% drop in BAYN.DE (BAYRY) following a court judgment that Roundup weedkiller caused cancer, and 5.7% drop in BMW on a profits warning.

Thursday March 21

Stocks slid in the Asian and European markets, as did US futures, but on the cash open there was a classic risk-on surge with SPX adding 1.1% and the riskier NDX was 1.4% higher. It was clear that this was a reaction to the dovish Fed as financials (which benefit from high interest rates as they are lenders when everyone else is borrowers) were the only sector to fall. Other indices followed, except DAX, beleaguered with individual component problems, today it was DBK.DE (DB) and CBK.DE (CRZBY) opening 5% and 4% lower.

DXY recovered most of its Wednesday drop, and all currencies, Gold, Oil and bonds were down. However this was not even. Although EUR exactly retraced (as did AUD), the key instruments of JPY and bond yields only faded a little of the Fed move. It was a large further drop (0.57%) in GBP which evened out the basket. The BoE rate decision did not cause any notable move, selling was fairly even all day.

Friday March 22

In the European session today, DAX and EUR were hit hard by a surprisingly bad miss on the German Manufacturing PMI at 0830 (44.7 v 48.0 est). The German Bund yield went negative for the first time since October 2016.

The Eurozone equivalent print half an hour later was 47.6 vs 49.5 est. FTSE also fell as GBP recovered. Following that, US markets were sapped by the US 3-month bond yield rising above that of the benchmark 10-year note, as the latter hit a 14-month low of 2.418%. This inversion is considered to be a recession indicator and was last seen in August 2007, just before the massive equity pullback. The sell-off was strong, SPX down 1.9%, NDX down 2.5% and RUT losing 3.6%.

USD was generally back up again today, although Gold, JPY and bonds rallied in the risk-off conditions, and GBP bounced back from the Thursday low. The Canadian CPI beat

and Retail Sales miss at 1230 cancelled each other out. Oil 

gave up Wednesday’s gains in line with the equity fade.

WEEKLY PRICE MOVEMENT

The collapse of DAX after a string of issues for individual stocks such as Bayer, BMW and Wirecard made in the biggest index mover in a generally flat week for equities. For the third week, the biggest forex mover was GBPJPY, the best short two weeks ago, the best buy last week, and now the best short again. It was a second quiet week for cryptos, and FANGs were mixed, although generally outperforming NDX.

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)

• Brexit endgame approaches
• Large CB speaker roster
• NZ rate decision
• Final week of Q1/2019

Weekend News

The latest on Brexit is that the EU have offered to extend Friday’s deadline until May 22 if the deal is passed in Parliament this week, but only until Apr 12 if it isn’t. Weekend reports suggest no progress. In the US, Special Prosecutor Mueller is due to publish his report into Russian election meddling, but has already said there will be no further indictments. 

Monday March 25

USTR Lighthizer and TreasSec Mnuchin return to China this week to resume trade talks. Apple are holding a special product event, widely believed to be a new streaming service. There is another attempt by British MPs to take control of Brexit from the government. Fed Evans (centrist, 2019 voter) speaks today at 0145, followed by Harker (dove, 2020 voter) at 1000. Markets are closed in Greece and Colombia.

09:00 EUR Germany IFO Business Climate/Assessment/Expectations

12:30 USD Chicago Fed National Activity Index

17:00 AAPL Apple Product Event

20:30 AUD RBA Ellis speech

21:45 NZD NZ Imports/Exports/TB

Tuesday March 26

The third and final Brexit deal vote is planned for today, although weekend reports suggested it may be cancelled due to lack of support.

The Boao Forum opens in China today, with Premier Li Keqiang giving the opening remarks. Fed Harker (dove, 2020 voter) speaks at 1200 followed by Rosengren (hawk, 2019 voter). There are rate decisions on HUF (est 0.9% hold) and NGN.

07:00 EUR Germany Gfk Consumer Confidence Survey

12:30 USD US Housing Starts/Building Permits

13:00 USD US S&P/Case-Shiller Home Price Indices (YoY)

14:00 USD US Consumer Confidence

20:30 WTI API Oil Stock

Wednesday March 27

Senate Aviation Committee hearings on the Boeing 737-Max start today. The FAA and NTSB will testify. Traders will be listening to see if the RBNZ joins the dovish chorus. There are plenty of other CB speakers. RBA Asst Gov Kent speaks at 0010, and Fed George (hawk, 2019 voter) is on at 2130. From the ECB we have Chair Draghi (0800), Praet (0845), De Guindos (1045) and Mersch (1330). There is rate decision on KES.

01:00 NZD RBNZ Rate Decision/Statement (1.75% hold est)

09:40 EUR DE10 Bond Auction

12:30 USD US Trade Balance

12:30 CAD Canada International Merchandise Trade

14:30 WTI EIA Oil Stock

Thursday March 28

Today is the most important day in the week for data, with the final US GDP print for Q4, as well as PCE, the Fed’s preferred inflation indicator, and German inflation as well. Fed Quarles (centrist, 2019/2020 voter) speaks at 1115, followed by Williams (hawkish, 2019/2020 voter) at 1325 and Vice-Chair Clarida (centrist 2019/2020 voter) at 1330, and Bullard (dove, 2019 voter) at 2120. SNB Maechler is on at 1700. There are rate decisions, all expected to hold on CZK (1.75%), ZAR (6.75%) and MXN (8.25%).

In the British Parliament, today is the last day to pass the Brexit extension bill (short or long) as the House does not sit this Friday.

08:00 EUR ECB Pres Draghi speaks

10:00 EUR Eurozone Business Climate

12:30 USD US Jobless Claims

12:30 USD US 18Q4 GDP Final (est 2.4% prev 2.6%)

12:30 USD US PCE

13:00 EUR Germany CPI (est 1.6% prev 1.7%)

14:00 USD US Pending Home Sales (MoM)

21:45 NZD NZ Building Permits s.a. (MoM)

23:30 JPY Tokyo CPI (est 1.1% prev 1.1%)

23:30 JPY Japan Unemployment Rate

23:50 JPY Japan Retail Sales

Friday March 29

Today is the end of the week, month and quarter. In the UK, it is Brexit Day, unless an extension is granted and passed by Parliament, which seems almost certain. Taxi firm LYFT makes their IPO on the Nasdaq. Fed Quarles speaks again at 1645. A Moodys rating review is due in South Africa. There is a rate decision on CLP.

00:00 GBP Brexit Day - UK Initial Departure Day

00:01 GBP UK GfK Consumer Confidence

07:00 EUR Germany Retail Sales

08:55 EUR Germany Unemployment Rate/Change

09:30 GBP UK 18Q4 GDP Final

12:30 USD US Personal Income (MoM)

12:30 CAD Canada GDP Jan (MoM)

13:45 USD Chicago PMI

14:00 USD Michigan CS Index

14:00 USD US New Home Sales (MoM)

17:00 WTI Baker Hughes Rig Count

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Week to Mar 30th

Monday March 26

The week opened with a sharp rebound after the worst week for two years. US indices and NKY were up as trade war fears receded, and Chicago Fed National Activity beat at 1230. However, DAX and FTSE were down, reflecting their currency strength, EUR was up 0.8% and GBP up 0.7%. USD was weak everywhere except against JPY, with DXY falling 0.4%. Gold rose in line with the weaker dollar, however US 10-year bond yields were up. Oil prices slipped slightly after Friday’s sharp rise.

Tuesday March 27

The Monday rally was short-lived, and US equities fell on Tuesday, led by the tech fallout which itself was led by growing concern about the wholesale political use of data by Facebook, and the Uber self-driving car pedestrian fatality. Uber is not of course listed, but the autonomous component manufacturers, such as NVDA fell sharply.  DJIA dropped by 1.4%, NDX by nearly 3%, and the FANG stocks had their worst day ever. Some of the rotation was into bonds, not Gold, and so both yields (down to a seven week low at 2.77%) and the precious metal fell, whereas the equity risk-off sentiment was demonstrated by the fact that JPY rose against the dollar, whereas all other currencies fell. Oil fell in line with the dollar strength. A complete Turnaround Tuesday across all asset classes. To put the post-February crash volatility into perspective, Deutsche Bank reported that the average DJIA move for the last four days was 541 points, compared to 2017 where the average daily move was 68 points, and there were only three days last year where there was a 300 point move.

Wednesday March 28

The tech collapse continued on Wednesday although less aggressively, NDX was down 1.06%. However the four FANG stocks (that we cover) were down 2.46%. SPX was only down 0.3%, and DAX, FTSE and NKY, which have little in the way of tech components, rose, although this was largely helped by firm moves down in their respective currencies. USD rallied after the GDP Q4 beat at 1230 (2.9% vs 2.7%, comfortably above inflation), and DXY put on 0.8% on the day, with all currencies and Gold down. Yields were back up in line. Oil fell sharply by 1.5% after the EIA miss (which matched the API miss the day before), although it quickly recovered to finish  the day roughly flat.

Thursday March 29

We said last week that the last trading day of the week, month and quarter (and the fiscal year for some European companies) should see volatility, and so we did, with DJIA putting on 500 points from the 0400 low to the 2000 high, then giving up 200 points in the final hour. All indices were up, continuing the see-saw price/action, particularly into the close. Even troubled FB put on 4.42%. The dollar picture was very mixed, DXY fell a mere 12 cents (0.14%), but this was the effect of EUR and GBP fading slightly, whereas JPY and CAD [despite the GDP miss at 1230] appreciated, as did AUD (not in DXY). Oil was back up, touching $65 again, whereas Gold was flat on the day. There was also some bond buying into the quarter close at yields fell 4bp to close at a low for the week.

Friday March 30

Equity and bond markets, indeed the entire US and European exchanges were closed for the Good Friday holiday. NKY traded the cash session dipping 150 points but recovering to end flat. Forex markets were, as you would expect very subdued, with a very slight bias against USD. The most notable move was a 0.25% appreciation in CAD in 90 minutes from 0800, but this faded, and the loonie ended the day down. A similar pattern was seen in GBP, but EUR and JPY were up. If DXY had been quoted on Friday, it would have ended about 0.1% down.

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

USD was up across the board this week, but not by much. The only pair that moved more than 1% was USDJPY, which would have been this week’s best forex trade. Despite all indices except DAX and NKY putting in inside weeks, movement was a bit more lively, with NKY the standout winner, helped by the falling yen.

Crypto-currencies had another crash, were mixed, with Ethereum hitting a four-month low. Bitcoin has now lost 65% from its December high. (Our prices are given as at 0000GMT Saturday, two hours after the other markets close.)

AUDUSD  0.7679 (-0.32%)

EURGBP  0.8786 (+0.50%)

EURUSD  1.2321 (-0.30%)

GBPUSD  1.4029 (-0.76%)

NZDUSD  0.7232 (-0.12%)

USDCAD  1.2895 (+0.17%)

USDJPY  106.26 (+1.35%)

DAX      12121 (+2.79%)

FTSE      6990 (+1.87%)

NIFTY    10113 (+1.15%)

NKY      21476 (+4.17%)

SPX     2634.9 (+1.58%)

GOLD   1325.03 (-1.68%)

OIL      64.88 (-1.28%)

BTCUSD    6803 (-23.78%)

ETHUSD  389.25 (-28.32%)

NEXT WEEK (all times are GMT)

A new week, month, quarter, and for many Europeans, fiscal year. Also Australia and New Zealand have exited DST. Australia is now GMT+11, New Zealand GMT+12. Plenty of data this week, but in the end it will be a build-up to NFP. The Jewish festival of Pesach runs all week.

Monday April 2

Easter Monday is a public holiday in the UK, Australia and NZ, so expect lower volatility in forex in the morning session, as London provides the most volume in this asset class. FTSE and ASX will of course be closed, but Germany, Japan and the US are open. The important print of the day is the US ISM PMI, but it is more likely that new quarter positioning will influence price/action on the day.

Tuesday April 3

The RBA are expected to hold rates, and any upsets are unlikely. Otherwise we have various PMIs and Fed voting dove Neel Kashkari as the sole listed speaker of the day.

Wednesday April 4

Eurozone inflation is at 0900, although this rarely moves EUR as the constituent countries report in advance of the continent-wide figure. Of more interest is the ADP figure. The estimate is 205k, only 6k different from the NFP estimate. As always, a strong beat or miss may cause equity and USD volatility. Two Fed speakers today, both voters. Bullard (dove) is at 1445 and Mester (hawkish) at 1600. Bullard’s topic is the economy and monetary policy so his words are likely to be of more interest to traders. Taiwan is closed today until the following Monday. Watch oil for the EIA print, it has been reacting the last few weeks, and more importantly even when the API print has given a clear clue.

Thursday April 5

The UK personal tax year ends. Expect some private investors to ‘bed-and-breakfast’ their holdings, ie to sell and re-buy the next day, to crystallise gains or losses, and use their annual £11,300 ($15,800) capital gains tax allowance, although this is not likely to seriously affect FTSE, and we don’t cover the UK junior markets. The ECB minutes will only move EUR if something unexpected appears. There is a small volatility opportunity in USDCAD at 1230, when both countries report trade figures simultaneously. Obviously one has to beat and the other to miss to get the desired effect.

Friday April 6

The first NFP day of Q2 has a ‘normal’ estimate of 198k, but as always watch for the AHE print. Last month we had a stellar jobs number but disappointing AHE and the market still soared. Of course logically the jobs affect equities whereas AHE affects USD (as it is the important determinant of rate rises). The Canadian print is simultaneous so we get another opportunity to trade USDCAD volatility, which is assured. The Canadian estimate is an extremely modest 4.1k. Also, Fed Chair Powell gives his first speech since the March rate hike in Chicago at 1530.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Apr 01

23:50 JPY Japan Tankan Large Manufacturing Index/Outlook/Capex

Mon Apr 02

01:45 CNY China Caixin Manufacturing PMI

13:30 CAD Canada Markit Manufacturing PMI

14:00 USD US ISM Manufacturing PMI/Prices Paid

22:00 NZD NZIER Business Confidence (QoQ)

22:00 USD FOMC Member Kashkari Speech

22:30 AUD Australia AiG Performance of Mfg Index

Tue Apr 03

04:30 AUD RBA Rate Decision/Statement

06:00 EUR Germany Retail Sales (MoM)

07:55 EUR Germany Markit Manufacturing PMI

08:00 EUR Eurozone Markit Manufacturing PMI

08:30 GBP UK Markit Manufacturing PMI

13:30 USD FOMC Member Kashkari Speech

14:00 NZD GDT Milk Index (time approx)

20:30 WTI API Stock

Wed Apr 04

01:30 AUD Australia Retail Sales (MoM)

01:30 AUD Australia Building Permits (MoM)

01:45 CNY Caixin China Services PMI

08:30 GBP UK PMI Construction

09:00 EUR Eurozone Unemployment Rate

09:00 EUR Eurozone CPI

12:15 USD US ADP Employment Change

13:45 USD Markit Services/Composite PMI

14:00 USD US ISM Non-Manufacturing PMI/Factory Orders

14:30 WTI API Stock

15:00 USD FOMC Member Mester speech

Thu Apr 05

00:30 AUD Australia Exports/Imports/Trade Balance

08:00 EUR Eurozone Markit Services/Composite PMIs

08:30 GBP UK Markit Services PMI

08:55 EUR Germany Markit Services/Composite PMI

11:30 EUR ECB MPC Minutes

12:30 USD US Trade Balance

12:30 USD US Jobless Claims

12:30 CAD Canada International Merchandise Trade

23:30 JPY Japan Overall Household Spending (YoY)

Fri Apr 06

06:00 EUR Germany Industrial Production (YoY)

12:15 CAD Housing Starts (YoY)

12:30 USD NFP/Unemployment/AHE/Participation (NFP est 198k prev 313k)

12:30 CAD Canada NFP/Unemployment/AHE/Participation

14:00 CAD Canada Ivey PMI

17:00 WTI Baker Hughes US Oil Rig Count

19:00 USD US Consumer Credit Change

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