Week to Mar 11th

Gold and Oil hit and retreat from highs

MY CALL THIS WEEK : SELL GBPJPY

LAST WEEK

The war in Ukraine continues with no clear progress by either side, and this is keeping markets depressed, but hugely volatile. US markets fell but held the Feb 24th invasion low, however European markets, which dipped below last week recovered, with a particularly strong showing from oversold DAX. The main news item, US CPI, was in line with estimates, and had little effect on markets.

The dollar (DXY) hit a new two-year high, and all currencies were down. EUR rose into the ECB meeting, and then fell away despite a relatively hawkish stance from President Lagarde, paving the way for rate hikes. GBP was sharply down, making a 16-month low. Notably, and unusually JPY fell sharply all week, unlike its fellow safe haven Gold, which shot up to $2,070, within a whisker of its all-time high, before falling back sharply. Similarly, Oil spiked up to highs not seen since 2008, before pulling back sharply. 10-year yields followed the dollar and reversed last week's drop.

WEEKLY PRICE MOVEMENT

The biggest index mover was oversold DAX, up 4.07%. The top forex mover was USDJPY down 2.18%. Bitcoin and Ethereum were flat again. Tech underperformed generally as the rate hike looms. We are seeing notable divergence by the weaker FANGs NFLX and FB.

Last week's EURNZD long position made 0.66%, which means I am ahead 8.25% this year, with 6/9 (66.7%) wins. This week I am expecting the BoE will not raise rates and selling GBPJPY.

 

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

Although Ukraine is still dominating the headlines, all eyes will be on the Fed on Wednesday for their anticipated first rate hike (25bp to 0.50%) since 2019. This is 97% likely (and priced in) according to the CME Fedwatch tool. Also notable is the BoE decision. They raised rates by 25bp last month, so a further hike is less likely. The US, China and Canada all report Retail Sales, expected to be sluggish. And finally, next week is the two week period we get every March where the US enters DST two weeks before Europe, meaning US markets open and close an hour earlier for Europeans.

CALENDAR  (all times are GMT, volatile items in bold)

Monday March 14

02:00 China FDI (time approx.)

Tuesday March 15

00:30 Aus House Price Index

00:30 RBA MPC Minutes

02:00 China Retail Sales (e2.8% p1.7%)

07:00 UK AHE/UnEmp (UnEmp e4.0% p4.1%)

10:00 Eurozone Ind Production

10:00 Eurozone ZEW Economic Sentiment

10:00 Germany ZEW Economic Sentiment

12:30 US PPI

23:50 Japan Import/Exports/TB

Wednesday March 16

04:30 Japan Industrial Production

10:30 Germany 10Y Bond Auction (time approx.)

12:30 US Retail Sales (MoM e0.6% p3.8%)

12:30 Canada BoC CPI (Core e4.8% p4.3%)

18:00 Fed Rate Decision/Statement (e0.5% p0.25%)

18:30 FOMC Press Conference

Thursday March 17

00:30 Aus Jobs/UnEmp (UnEMp e4.1% p4.2%)

10:00 Eurozone CPI

12:00 BoE Rate Decision/Statement (e0.5% hold)

12:30 US Building Permits/Housing Starts

12:30 US Jobless Claims

12:30 Philly Fed Mfr Survey

23:30 Japan National CPI

Friday March 18

03:00 BoJ Rate Decision/Statement (0.1% hold)

06:00 BoJ Press Conference

10:00 Eurozone Labor Cost

12:30 Canada Retail Sales (e-2.1% p-1.8%)

Week to Jul 23rd

Strong earnings, new ATHs, largely V-shaped flat week

MY CALL THIS WEEK : BUY GBPJPY

LAST WEEK

After a sharp COVID-driven drop on Monday, markets recovered on strong corporate earnings to reach new all-time highs. V-shaped (or inverted) patterns were also apparent in other markets, with Oil, yields GBPUSD, and FTSE posting long-tailed hammer candles for the week. The dollar was choppy, driven primarily by an equally choppy euro in ECB week, although the yen pattern was a lot smoother. The Nikkei was closed on Friday for a one-off public holiday for the Olympic opening.

WEEKLY PRICE MOVEMENT

The biggest mover this week was NDX, up 2.93%. The top forex mover was CADJPY up 0.82%. Crypto recovered quite sharply. FANGS had a good week outperforming NDX.

My AUDNZD buy lost 0.09% taking my year to date profit to 4.50% and 20/28 wins. This week I will follow the hammer candle and buy GBPJPY.

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)

The final week of July is the busiest in earnings season, with the remaining FANGS all reporting. Over 50% by weight of NDX reports, and the main event is after the bell on Tuesday, when AAPL, MSFT and GOOGL report. With other companies, this is 30% by weight of NDX reporting simultaneously.  Also there is the Fed rate decision, where a 0.25% hold is 100% priced in. All eyes will be on the wording of the latest FOMC view on QE taper. Also this week are inflation report from Eurozone, Australia, Canada and Germany, and preliminary Q2 GDP from the US, Canada, Germany and Eurozone.

CALENDAR

Monday July 26

08:00 Germany IFO Sentiment Indicators

11:00 BoE Vlieghe speech

14:00 US New Home Sales

Tuesday July 27

07:30 BoJ Governor Kuroda speech

12:30 US Durable/ND Capital Goods (NDC e0.6% p0.1%)

12:35 RBA Debelle speech

13:00 US Home/Housing Price Indices

14:00 US Consumer Confidence(Jul)

21:00 Earnings MSFT, GOOGL

21:30 Earnings AAPL

Wednesday July 28

01:30 Australia CPI (RBA Trimmed Mean QoQ e0.5% p0.3%)

06:00 Germany Gfk Consumer Confidence

12:30 Canada CPI (BoC Core YoY e2.4% p2.8%)

18:00 Fed Rate Decision/Statement (e0.25% hold)

18:30 FOMC Press Conference

21:00 Earnings FB

Thursday July 29

07:55 Germany Unemployment Rate/Change

09:00 Eurozone Consumer Confidence/Business Climate

12:00 Germany CPI (e3.0% p2.1%)

12:30 US PCE QoQ

12:30 US Jobless Claims

12:30 US Q2 Prelim GDP (e8.2% p6.4%)

14:00 US Pending Home Sales

21:00 Earnings AMZN

23:30 Japan Jobs/Unemployment

23:30 Japan Retail Sales/Ind Production

Friday July 30

06:00 Germany Q2 Prelim GDP (QoQ e2.0% p-1.8%)

09:00 Eurozone Prelim CPI (Core YoY e0.8% p0.9%)

09:00 Eurozone Q2 Prelim GDP s.a. (QoQ e1.5% p-1.3%)

09:00 Eurozone Unemployment

12:30 US PCE MoM and YoY

12:30 Canada GDP MoM

13:45 Chicago PMI

14:00 Michigan CSI

Week to Apr 2nd

Four day Easter week, SPX breaks 4,000, Blowout NFP on Good Friday

MY CALL THIS WEEK : SELL GBPJPY

In a shortened Easter week, the S&P500 and DJI closed the month of March and the first quarter near all-time highs, setting up continuation in April, the most bullish month of all for the S&P500 which duly ramped through 4000 on the first of the month. Yields continued higher with the 10Y making a new high of 1.77% proving yet again that a yield rally under the right conditions is bullish for the stock markets. Even the weakened Nasdaq and high growth names put in a strong reversal higher with Tesla making a 17% gain in 3 sessions.  

It was a slow news week, with the highlight, NFP, coming after the markets closed for the Easter break. An inflation beat in the Eurozone did little to lift the Euro which slid to 1.17 against the USD. The OPEC+ meeting finally saw the group decide to curb cuts, but only gradually with 350k bbd coming back on line in May. Oil stayed steady all week even with President Biden’s $2.3trn infrastructure plan focusing on clean energy and electric vehicles.  

Next week sees President Biden’s infrastructure bill go to Congress. This bill could add up to 1% to the current 5.2% GDP estimate, and the benefits would largely flow to industrials, possibly increasing the rotation out of tech we have seen recently.

However, the bill also includes the restoration of the 28% corporation tax rate, reversing Trump’s 7% cut in 2017. This translates to an approximate 7.4% hit on SPX earnings (a 280 point drop), but have less effect on tech. Note that corporate earnings are expected to increase by 24.2% from their position a year ago. Remember EMH would suggest all this is priced in. SPX is currently 19% ahead of its pre-pandemic high in Feb 2020. NDX is 38.3% higher.

Note of course that although Congress is all blue, it would only take one Democrat to stall the tax hikes in the Senate. The degree of debate may of course take us into the following week’s earnings season opening, which then adds an additional dimension to what is priced in.

Also this week we get the minutes from the Fed’s Mar 17 meeting and the seven-day Spring Meeting of the IMF and World Bank all week at which Chair Powell speaks on Thursday. Scheduled releases are thin, with only the RBA rate decision and Canadian NFP of note.

Mon Mar 29

Indices were flat today overall, however some bank shares took a hit on the failure of Archegos Capital, a hedge fund. Credit Suisse and Nomura were hit worst. The dollar continued to rise in line, pushing gold down and yields rose. Oil was slightly up.

Tuesday March 30

Stocks fell today, with NDX hit worst as the rotation into post-pandemic stocks started again. European indices rose, partly due to weak currencies again a strong dollar (DXY +0.45%), and a rise in German inflation from 1.6% to 2%. Gold fell even more (GLD -1.71%) in line with the dollar, and Oil reversed. Bonds were flat on the day.

Wednesday March 31

A summary of the $2trn Biden plan was released today, which includes huge spending and also tax hikes. Whether it will be passed is another matter. Most sectors were flat or down, but tech shares (more immune to tax hikes) rose, reversing yesterday’s rotation. A lot of the move was in the afternoon, suggesting end of month positioning may also have been an effect. USD took a breather and pulled back (with Gold up). Oil which follows industrials was down. Yields were slightly down.

Thursday April 1

The new month and quarter opened with a further rally, with NDX outperforming, and SPX closing above the psychological 4,000 mark for the first time. It took 14 years for the doubling from 1,000 to 2,000, yet only six and a half from that point to 4,000.

The dollars was down and yields continued to fall in line producing an inverted-V week for both instruments. Gold was down in line. Oil was up to close the short week more or less flat.

Friday April 2

On Good Friday markets are closed almost everywhere, the exception being futures, forex and Japan. The blowout NFP (916k vs 647k) led to a rise in US and European futures indices, particular into the close. USD advanced notably as well. Gold, Oil and bonds were not traded.

WEEKLY PRICE MOVEMENT
A positive week for most indices with NDX the leader. GBPJPY was the top forex mover up 1.29%. Bitcoin was up, but ETC advanced much further, making an all-time high. FANGS were very strong, outperforming NDX.

I made 0.71% selling EURNZD, total to date -1.06% 8/12 wins. Let’s try the reversal of the biggest mover again and sell GBPJPY.

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)

• Biden Infrastructure & Tax Bill
• IMF/World Bank meeting
• FOMC Minutes
• RBA rate decision

Monday April 5

Today is Easter Monday and Ching Ming in Hong Kong. Almost everywhere except China, Japan and the Americas are closed. Expect light forex (London), but a possibly more volatile US. There is a rate decision in Chile.

01:00 Aus TD Securities Inflation

13:45 US Markit Svcs/Comp PMI

14:00 US ISM Svcs PMI (Mar) (e57.5 p55.3)

Tuesday April 6

Hong Kong is closed for a second day. The main news is the Australian rate decision.

01:45 Caixin Svcs PMI(Mar)

04:30 RBA Rate Decision/Statement (e0.1% hold)

09:00 Eurozone UnEmp Rate

22:00 Aus Commonwealth Bank Svcs PMI(Mar)

Wednesday April 7

Some attention will be paid today to the minutes from the Mar 17 Fed meeting, but otherwise only low-level data. There are rate decisions in India and Poland.

05:00 Japan Leading Economic Index

07:55 Germany Markit Comp PMI

08:00 Eurozone Markit Comp PMI

12:30 US Trade Balance

12:30 Canada Trade Balance

14:00 Canada Ivey PMI

18:00 US FOMC Minutes

23:50 Japan Current Account

Thursday April 8

In another light news day, Fed Chair Powell speaks online today at 1600 at the IMF Debate on the Global Economy.

06:00 Germany Factory Orders

11:30 ECB MPC Minutes

12:30 US Jobless Claims

16:00 Fed Chair Powell speech

Friday April 9

The week ends with the Canadian NFP, a week after the US. The IMF meeting continues into the weekend. There is a rate decision in Romania.

01:30 China CPI (e-0.4% p-0.2%)

06:00 Germany Trade Balance/Ind Production

12:30 US PPI

12:30 Canada NFP/AHE/UnEmp (NFP e75k p259.2k)