Sunday 29 October 2017

Week to Oct 27th

Last weekend saw Shinzo Abe’s LDP party re-elected in Japan, an anti-EU party elected in the Czech Republic, and autonomy votes in Northern Italy. Also the Catalan crisis rumbled on. The Japanese election gave NKY a brief boost to a 21 year high in the Monday Asian session, and USDJPY touched a 15-week high, but as Europe opened, markets were in risk-off mode. All indices were down by the end of the day, and only Gold and JPY were up. Other currencies all faded slightly against USD, and Oil was flat. Interestingly, the Brent/WTI spread narrowed by 0.8% to $5.50.

Tuesday saw a sharp rise in NKY to a fresh high. European indices rose slightly after mixed German (0730) and Eurozone (0800) PMIs, and SPX was largely flat. However the DJIA hit a new intraday all-time high after strong earnings by Caterpillar (3.91% of DJIA) and 3M (6.52%). In currencies, EUR crept up slightly in the run-up to Thursday’s rate and QE decision, but other currencies fell against USD, especially NZD, which hit a five month low as the incoming government said it planned to reform the Central Bank mandate. Similarly yields were up and Gold was down. Oil had a lacklustre 50c rally.

Wednesday saw equity markets take a breather. All markets were down, SPX posting its worst day for over a month, despite beats in Durable Goods (1230) and the Housing Price Index (1300). Other markets followed suit, particularly FTSE which reacted to the GBP movement.

In currencies there was more volatility than we have seen for a while, due to three major releases. In the Asian session, there was a miss on Australian inflation at 0030, which send AUD tumbling 0.94% on the day. Then at 0830, the UK GDP beat made traders feel next week’s rate hike was a near-certainty, and the British pound put on 0.95%. in three hours. Finally we had the Canadian rate decision. Although another hike after last months 0.25% increase was very unlikely, the effect of the hold print was an immediate 1.1% rise in USDCAD.

Unsurprisingly the risk-off note to equities meant that, after spikes down, Gold, JPY were up. Money has to flow somewhere. Otherwise EUR was up and NZD was down, continuing the same trend as Tuesday. Visa (3.22% of DJIA, not 8% as reported last week), and Boeing (7.54%, not 4.66%) both reported earnings beats, but this didn’t affect the overall mood. Oil eased very slightly on the day. Bond yields were initially up, at one point touching a seven-month high. They faded but still ended the day up. This means that in one day money rotated out of stocks and bonds into safe haven assets, and then some of that money went back into bonds.

It was business as usual on Thursday, and indices were up again. DAX had its best day since Sep 11th, putting on nearly 200 points (1.5%) to finish at an all-time high on EUR weakness. Other indices were similarly impressive, recovering Wednesdays losses to varying degrees. IBEX benefited from both the euro, and hopes that the Catalan president might pull back on secession plans. At 1145 the ECB announced, as expected, the tapering calendar for QE, saying it will last through 2018, and rate hikes may not appear until 2019. Most of the announcement was expected, so the fall in EUR was not instant. However, it slowly sold off all day, finishing 162 pip (1.38%) down.

The dollar had a very strong day across the board, on reports than (dove) Janet Yellen was now out of the running for the Fed Chair position, forcing GBP and JPY to give up all of their Wednesday gains. AUD was down as the Australian government had lost their majority due the High Court deciding that their deputy Prime Minister being ineligible to sit in parliament as he has dual nationality. Gold and bond prices were down in line, as was CAD, despite Oil putting on about 50c.

AMZN, GOOGL, MSFT and INTC all reported after the US bell Thursday. All four beat estimates, and NDX immediately rose 60 points (1%), and finished Friday 126 points (2.08%) up. The day saw strong beats (at 1330) in US YoY GDP (3.0% vs 2.5%) and QoQ PCE (1.5% vs 1.2%), which pushed all indices up. The print was particularly impressive given the recent hurricanes. SPX, NDX and DAX closed at all-time highs again, and NKY at a 21-year high. The DJIA was weighed down by Chevron (3.51% of the DJIA) which fell 4.2%, who reported a decline in output (despite beating revenue and EPS estimates). The other loser was IBEX as it became clear that Catalan President Puigdemont was going ahead with his illegal independence declaration, forcing Madrid to take unilateral action.

After a very strong day for USD on Thursday, DXY was nearly flat on Friday, managing only a 9c (0.1%) gain, driven mainly by continuing EUR (and to an extent GBP) weakness. Despite the stocks blowout, the classic indicators of risk-off were surprisingly present (Gold, JPY and bond prices all up), and even beleaguered AUD and NZD posted green candles for the day. However, the 2-year bond yield hit a nine-year high of 1.63%. It was notable that oil rose sharply to a six-month high on further speculation that OPEC cuts will be extended, adding 2.43% for the day, and 4.15% for the week (and CAD followed suit). Signs perhaps, as on Wednesday, that we are seeing brisk intermarket rotation.


These are the prices movements for the week on the instruments we cover. The dollar was again up across the board, and best forex trade of the week would have been short AUDUSD at 1.80%. The strongest index movement was (as last week) NKY up 2.76%, but as often happens, the most volatile instrument was Oil, up 4.15%

AUDUSD 0.7672 (-1.80%)
EURGBP 0.8836 (-1.02%)
EURUSD 1.1605 (-1.46%)
GBPUSD 1.3124 (-0.46%)
NZDUSD 0.6873 (-1.18%)
USDCAD 1.2807 (+1.47%) 
USDJPY 113.83 (+0.28%) 
DAX     13226 (+1.83%)
FTSE     7499 (-0.32%)
NIFTY   10379 (+2.30%)
NKY     22050 (+2.76%)
SPX    2580.6 (+0.19%)
GOLD  1272.85 (-0.59%)
OIL     54.19 (+4.15%)

NEXT WEEK (all times are GMT)

Over the weekend, we saw Spain implement their direct control of Catalonia, following the regional president’s refusal to back down. This was expected, so it remains to be seen what will actually happen. Markets generally ignored the statement by special prosecutor Robert Mueller that charges have been filed in his Russiagate investigation. Notably President Trump’s Twitter account has been uncharacteristically quiet. Note also that Daylight Savings Time in Europe (including the UK) has ended, but does not end in the US until next weekend. This means that, for Europeans, all US events are an hour earlier than usual. Don’t forget!

The week is one of those where the Fed rate decision and NFP are both present. It promises to be the heaviest week for a long time, and volatility is assured. We cannot remember an NFP week where NFP was not the main event!  Monday sees the important YoY and MoM US PCE inflation proxy figure, although as we had the QoQ on Friday, the effect is somewhat muted. HSBC, the largest individual component of the FTSE (7.7%) reports earnings at 0400 during the Asian session 

Tuesday brings the BoJ Rate Decision. JPY touched long-term support last week, and anything hawkish could bring significant downside for USDJPY. A double Eurozone whammy of GDP and CPI is released at 1000. This allows us unusually to calculate disinflationary growth by deducting one from the other, which is est 1.0%, prev 0.8%. CPI growth is more important than GDP as a positive for EUR. Canadian GDP is less important. Although loonie hawks were clearly looking for a rate hike last week, the next decision is not until Dec 6, and we have the Canadian jobs report, another GDP and CPI print, and a speech by Gov Poloz between then and now. Another FTSE heavyweight, BP (4.8%), reports before the UK open.

If that wasn’t enough, the week really starts on Wednesday. The ADP report estimate is a huge 75k lower than the NFP estimate. A miss would be startling. After that is the key figure of all PMIs, the ISM Manufacturing figure and prices paid, a forward indicator for growth. The Fed announcement is expected to be a rate hold (CME Fedwatch give that a 98% chance), with an indication of a rate hike in December. However, this could be Janet Yellen’s last appearance, and so the accompanying statement will be watched carefully. Note also that this is the day that the draft tax bill is due to be released. The question of course is how much of the benefit is already priced into the markets, which are of course at all-time highs. The ‘high tax’ index of stocks is still lagging the SPX.

Finally, we have Facebook (3.41% of NDX, 1.84% of SPX) and TSLA (0.75% of NDX) both reporting after the bell. We saw what happened to Amazon last week. If FB performed similarly that would translate to 27 points in NDX. TSLA of course is not a large component, but a miss has the potential to move the stock by a huge amount.

Thursday will also be volatile as President Trump is scheduled to announce his decision for the Fed Chair. The current consensus is that he will pick either current Governor Jay Powell (a continuity candidate). The second favored candidate is John Taylor (a hawkish outsider and author of the ‘Taylor Rule’). Reappointment of Yellen is considered an outside chance. The political spread betting site PredictIt rates Powell at 78, Taylor at 13 and Yellen at 10. A Taylor or Yellen appointment should therefore depress USD and bond yields slightly, whereas a Taylor appointment may cause a bigger move to the upside. One possible scenario being mentioned is a Powell appointment with Taylor as vice-chair. This should also be positive for USD.

In the UK, a doubling of the base rate to 0.50%, the first increase for ten years, is expected at 1200 following mostly hawkish central bank comments and good data over the last couple of months. The overall trend for GBP is still bearish, and the hike is largely priced in. We saw last week how the spike up on UK GDP beat faded within 24 hours. We may see a similar price/action pattern here, especially if the MPC vote is less than 6-3 in favour. Obviously if the decision is a hold, cable should fall substantially. Also in the UK, Royal Dutch Shell (two stocks RDSA and RSDB, totalling 9.8%) of the FTSE report earnings before the open.

To finish the day, AAPL, the world’s biggest company reports earnings after the bell. AAPL is 11.84% of NDX, 4.79% of DJIA and 3.70% of SPX.

The pace continues unabated on Friday with the US and Canadian jobs reports. The US estimate of 300k is the highest for many years, after last month’s first time contraction for years. The Canadian estimate is much less ambitious at 14.5k (equivalent to 130k in the US relative to populations. Given everything else that has happened this week, and the reduced effect of NFP on the markets, compared to, say, three years ago, we don’t expect anything momentous, unless of course, there are big surprises. We will focus on USDCAD at the time of the release, other markets will depend where we are by then.

The following weekend sees US Daylight Savings Time end, to realign with Europe.

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

Mon Oct 30
0700 EUR Germany Retail Sales
0930 GBP UK Mortgage Approvals
1000 EUR Eurozone Sentiment Indicators
1230 USD Personal Consumption Expenditure YoY/MoM (inflation proxy)
1430 USD Dallas Fed Manuf Business Index
2145 NZD NZ Building Permits
2330 JPY Japan Unemployment/Jobs
2330 JPY Japan Overall Household Spending

Tue Oct 31
0000 AUD Australia HIA New Home Sales
0001 GBP UK Gfk Consumer Confidence
0100 CNY PMIs
0200 JPY BoJ Rate Decision (est -0.1% hold)
0350 JPY BoJ MPC Statement
0630 JPY BoJ Press Conference
1000 EUR Eurozone GDP (est 2.4% prev 2.3%)
1000 EUR Eurozone CPI (est 1.4% prev 1.5%)
1230 CAD Canada GDP
1300 USD Home Price Indices
1345 USD Chicago PMI
2030 WTI ADP Oil Stock
2145 NZD NZ Employment/Unemployment
2230 AUD AIG Performance of Manuf Index

Wed Nov 1
0145 CNY China Caixin Manuf PMI
0930 GBP Markit Manuf PMI
1215 USD ADP Payrolls (est 225k prev 135k)
1400 USD US ISM Manuf PMI/Prices Paid
1400 USD US Construction Spending
1430 CAD Canada Markit Manuf PMI
1445 USD US Markit Manuf PMI
1800 USD Fed Rate Decision (est 1.25% hold)
2350 JPY Japan FDI

Thu Nov 2
0030 AUD Australian Imports/Exports
0855 EUR Germany Markit Manuf PMI
0900 EUR Germany Unemployment (est -11k, prev -23k)
0900 EUR Eurozone Markit Manuf PMI
0930 GBP UK PMI Construction
1200 GBP BoE Rate Decision (est rise to 0.50%, prev 0.25%)
1230 USD US Jobless Claims
1230 GBP BoE Gov Carney speaks

Fri Nov 3
0030 AUD Australia Retail Sales
0145 CNY China Caixin Services PMI
1230 USD US NFP (est 300k, prev -33k)
1230 CAD Canada Net Change in Employment (est 14.5k prev 10k)

1445 USD Markit PMIs

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Sunday 22 October 2017

Week to Oct 20th

The equity momentum from last week continued on Monday after the Chinese inflation beat at 0130. SPX, DJIA and NDX all made closing all-time highs again, and NKY posted a 21-year high. However DAX and FTSE did not join the party and ended the day slightly down. USD was up across the board, following bond yields, and Gold was down. Following fighting in the oil-strategic Iraqi city of Kirkuk, WTI climbed 0.8%, at one point touching $52.34, a three-week high.

There was no stopping indices again on Tuesday, and SPX and DJIA again posted closing ATHs, as did DAX (despite the ZEW Sentiment miss at 0900). DJIA touched 23,000 in the daytime and NKY hit a new high, as markets continued to await the Trump tax reforms. DXY was also up again, partly on speculation that Trump might replace Janet Yellen with someone more hawkish on monetary policy. USD rose against all currencies except CAD, which followed Oil up (after a spike down). In line, Gold was down and bond yields were up again. In particular GBP fell sharply on the UK inflation print. It came in as expected at 3.0% but by not beating, may have reduced the certainty felt about a November rate hike.

Another day, another set of highs. On Wednesday, FTSE (which was up) was the only index not to make another all-time high. In particular the DJIA was boosted by a revenue and EPS beat by IBM. The stock rose 9%. As IBM’s weight is 6.18% of the DJIA, this alone translated to 128 points (23,000 x 9% x 6.18%) of the 175 point gain on the day. Treasury Sec Mnuchin warned that the current market boom was based on tax cut anticipation, and in a thinly veiled warning to Congress, that if this were not delivered, the market would reverse by “a significant amount”. If the crash does come soon, we now know upon what hook the history books will blame it.

The currency picture was more mixed. With equities moving like this, the market is obviously risk-on, and so as you would expect Gold and JPY fell, and bond yields were up. However other currencies manage to edge up slightly against USD, and with a particularly strong showing for EUR, DXY ended 0.07% down on the day. Oil had a quiet day, ending roughly flat after trading only a 1% range.

Maybe it was superstition. Maybe the markets are overbought. Maybe it was the fact that Chinese GDP only came in as expected at 0300, but the 30th anniversary of the 1987 crash on Thursday brought a 168 point (0.73%) fade in DJIA during the Asian session, the largest pullback for six weeks. All other indices followed suit. However, as soon as the European session opened, the indices recovered, and once again SPX made an all-time high, and other indices ended at least flat. However NDX underperformed as AAPL shares fell 2.4% on rumours of weak demand for the iPhone 8.

Currencies were very mixed. EUR, AUD and JPY were all down, whereas CAD and GBP were up. NZD was sharply down 2% on news that the incumbent National Party were unable to form a coalition, and the Labour Party will be the new government. Gold recovered a little after falling for three days, but Oil eased a little after a good run.

The bullish trend continued on Friday, as the US Senate passed the budget, paving the way for the long-awaited Trump tax reforms. All indices ramped sharply in the Asian session, although DAX and FTSE gave up some of those gains as the day continued. SPX and NKY however finished the week on new highs. USD performed equally well, with DXY up 0.53% on the day. All currencies and Gold retreated sharply. The effect was particularly seen in CAD after a miss on the relatively unimportant Retail Sales produced an immediate 0.79% rise in USDCAD which had extended to 1.26% by the end of the day. NZD also continued downwards, to break the psychological 0.70 barrier for the first time in five months. Oil spiked down in early trading but ended the day flat. Despite all this volatility, EUR, AUD and GBP all had inside weeks for the first time since March in the case of the latter two.


These are the prices movements for the week on the instruments we cover. The dollar was up across the board, and best forex trade of the week would have been short NZDUSD at 3.00%. The strongest index movement was again the NKY up 1.43%, following USDJPY. The largest overall movement was NZDUSD.

AUDUSD 0.7813 (-0.93%)
EURGBP 0.8927 (+0.40%)
EURUSD 1.1777 (-0.34%)
GBPUSD 1.3185 (-0.70%)
NZDUSD 0.6955 (-3.00%)
USDCAD 1.2621 (+1.22%) 
USDJPY 113.51 (+1.51%) 
DAX     12988 (-0.05%)
FTSE     7523 (-0.27%)
NIFTY   10146 (-0.21%)
NKY     21457 (+1.43%)
SPX    2575.8 (+0.83%)
GOLD  1280.36 (-1.76%)
OIL     52.03 (+1.21%)

NEXT WEEK (all times are GMT)

Over the weekend is the Japanese election. It is expected that incumbent Shinzo Abe’s LDP will win with a comfortable majority, especially as traditional challenger, the Democratic Party has collapsed.

Janet Yellen, speaking in Washington on Friday after the markets had closed in what may be her last speech as Fed Chair, struck a somewhat dovish tone, stating that the reasons for low inflation were not clear, and although “removing accommodation is working well”, she warned that “the probability that short-term interest rates may need to be reduced … is uncomfortably high, even in the absence of a major financial and economic crisis.”

President Trump is expected to nominate the new Fed Chair on Nov 2nd, and according to a CNBC Survey, Wall Street professionals expect Fed Reserve Governor Jay Powell to be nominated, although they would prefer Yellen’s reappointment. Powell is regarded to be similar to Yellen on the dove-hawk scale. The other two likely candidates John Taylor and Kevin Warsh are much more hawkish. 

Last week the US budget, which paves the way for tax cuts was passed by the US Senate. On Monday, the process starts in the House of Representatives. The sticking points will be in the detail, especially on state and local taxes. Fast resolution could be positive for the market. The New Zealand market is closed for Labour Day, which may depress Sunday evening trading, although Globex is still open.

Tuesday sees the monthly German Bund (10 year bond) auction, which may have a knock-on effect on DAX. Otherwise the only news is PMIs. Manufacturing, services and composite are all reported. All estimates are comfortably over 50, the point between expansion and contraction. 3M (5.71% of the DJIA) report before the open.

On Wednesday, the focus is on Australian inflation and the Canadian rate decision. Given recent RBA comments, it is not likely that a variation would have much effect. We recently seen AUD spikes on Australian news correct quickly, usually by the time Europe opens. Similarly, after the unexpected rate rise last month, and lacklustre data since then, a hold this month is almost certain. Of course we saw a strong CAD fade last Friday on the relatively small CPI miss. What Poloz says at the press conference may have more effect than the actual rate print. UK GDP is also important, given the high expectations of a UK rate hike in November. Visa (8.12% of the DJIA, the largest component) and Boeing (4.66%) report before the US open.

Thursday is the big day, the ECB rate decision and conference. As in previous months, the press conference is where the volatility appears, and this month is crucial, as the detail of unwinding QE is expected. Commentators are expecting a dovish approach, because of recent Euro strength concerns (although EURUSD is down 2.6% from its Sep 8 high). So anything hawkish, such as immediate unwinding action, could cause a strong EUR upside reaction. We will be publishing our fractal on this event as usual. Amazon (6.53% of NDX) and Alphabet (9.05% of NDX across GOOG and GOOGL) report after the close.

After a light week on US statistics, Friday is the big day, with GDP and PCE released simultaneously. Like Retail Sales, Personal Consumption Expenditure is a proxy for inflation. If both beat, or both miss, expect some USD movement. If one beats and the other misses, you will see which one is considered to be more important. The figures continue to be affected by the summer hurricanes. Chevron (4.43% of the DJIA) reports before the US open. The company has already said it was not affected much by Hurricane Harvey.

Daylight savings in Europe and Mexico ends on Sunday Oct 29, and one week later in the US and Canada.

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

Mon Oct 23 
0500 JPY Japan Leading Economic/Coincident Indices
1230 USD Chicago Fed National Activity Index

Tue Oct 24
0730 EUR Germany Markit PMIs
0800 EUR Eurozone Markit PMIs
1345 USD US Markit PMIs
2030 WTI API Oil Stock

Wed Oct 25
0030 AUD Australian inflation (CPI) (est 2.0% prev 1.9%)
0800 EUR German IFO Business Climate
0830 GBP UK GDP est 1.4% prev 1.5%
1230 USD US Durable Goods
1300 USD US Housing Price Index
1400 CAD BoC Rate Decision (est 1%, prev 1%)
1430 WTI EIA Stock
1515 CAD BoC Press Conference
2245 NZD Imports/Exports/Trade Balance
2350 JPY Japan FDI

Thu Oct 26
0600 EUR German Gfk Consumer Confidence
1145 EUR ECB Rate Decision (est 0% prev 0%)
1230 EUR ECB Press Conference
1230 USD US Jobless Claims
1400 USD US Pending Home Sales
2330 JPY Japan inflation (CPI)

Fri Oct 27
1230 USD US GDP (est 2.6% prev 3.1%)
1400 USD University of Michigan Consumer Sentiment Index

1700 WTI Baker Hughes Rig Count

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Sunday 15 October 2017

Week to Oct 13th

On Monday the Spanish IBEX35 gapped up as Catalan worries receded. As we predicted last week, the markets were very quiet because of Columbus Day. SPX was slightly down (2 handles) and DAX and NKY were near-flat, the latter market being closed. FTSE gave up ground to rising GBP as the poor performance Conservative Party conference faded in traders’ minds. NDX managed to eke out an intraday all-time high, after gapping up, but ended the day down. The Chinese markets opened after a week, gapping up to a 21-month high. USD was generally flat against most currencies, only GBP showing any gain, and Gold and Oil advanced a little. The only interesting price/action of the day was USDTRY which rose 4.5% after a threat from the US to refuse all visas to Turkish citizens. US bond markets were closed.

On Tuesday we were expecting two events, a North Korea missile which didn’t happen, and a Catalan declaration of independence, which did, but was immediately ’suspended’ by separatist President Puigdemont. The Spanish IBEX fell again, but this concern was not reflecting in Spanish 10-year bonds, or EUR, which was healthily up on the day. SPX made an intraday all-time high, as did NDX, and DJIA made another ATH close. NKY hit a 10-year high, and FTSE rose strongly (despite GBP strength) after a strong beat on Manufacturing Production, yet a miss on the UK Trade Balance. Only DAX was flat, despite the Trade Balance beat at 0600, probably reflecting Euro strength. USD had its worst day in a month, with DXY down 0.4%, all other currencies were up, as was Gold. Oil also surged 2.7% on reports of further Saudi cuts. Bond yields dipped with USD, ending the day 2bp down at 2.34%.

Wednesday was another strong day for equities. SPX, DJIA and NDX all closed at all-time highs again, and DAX and NKY followed suit. FTSE pulled back slightly, and then started to recover but finished the day slightly down. The FOMC minutes, although outlining a ‘dot-plot’ of further rises, showed concern that inflation was not picking up. (September’s inflation print was 1.9%, but core PCE on Sep 29 was a miss at 1.3%, the inflation target is 2%). As we envisaged last week, USD fell, particularly against CAD, and to a lesser extended elsewhere, and despite an initial dip, to stay flat against JPY by the close. Bond prices (inverse to yields) and Gold were similarly up. Oil held on to the previous day’s gains, but did not advance any further. The API stock print (after the pit closes) was a day late due to Columbus Day, and came in as a miss at 3.09M (prev -4.08M).

US equities took a breather on Thursday, but not before DJIA and NDX made another intraday ATH. Along with SPX they all closed slightly down. The euro broke its four-day winning streak which helped DAX beat the trend, at one point breaking 13000 for the first time, and closing up. The FTSE All World index made its third ATH in as many days. The UK FTSE 100 also made a record cash closing high at 7556, after a large spike which entirely reflected GBP, which was the main story of the day.

Sterling had been fading since the European open, and then spiked down an instant 45 pips (0.33%) at 0943 after EU chief Brexit negotiator Michel Barnier said talks were “at deadlock”. However, this drop was fully recovered an hour later only for the fade to start again. However at exactly 1230, it then spiked up an immediate 47 pips to carry on rising during the US session. This is the normal time for main US economic releases, and many traders, including ourselves will have searched fruitlessly for some US data miss. There was none, the only releases at that time were beats on PPI and weekly jobless claims. It seems the recovery was based on positive remarks in the German Handelsblatt newspaper. Despite all this volatility, GBP actually posted an inside week.

In other currencies, the DXY picture was deceptive. The basket rose 0.16% on the day, but this was entirely due to EUR coming off again, and to a small extend CAD which faded slightly as Oil unwound some of Tuesday’s gains, despite the EIA stock beat at 1500 (also a day later than usual). But Gold, JPY and AUD were up, and yields were down, as the FOMC inflation concerns continued to weigh.

On Friday, the Fed’s concerns about inflation were strengthened. The CPI figure came in at 1230 as a miss (2.2% vs 2.3%) and the Core CPI at 1.7% (set 1.8%). Retail Sales MoM also missed, although the annual figure was as per estimate. DXY immediately fell 49 cents (0.53%), and USD fell on the day against all currencies except EUR. Gold was up, posting the first weekly green candle for five weeks, and bond yields fell sharply. As the day continued, USDCAD to end the day flat.

Equities continued to blow out, with SPX, DJIA, NDX and DAX all making intraday and closing ATHs again, and NKY hitting a 20-year high. FTSE also rose but couldn’t quite match the previous day. Oil posted a slight gain. The summary of the week was a consistent rise in equities, and a consistent fall in USD, a pattern we have seen many times this year.


These are the prices movements for the week on the instruments we cover. The dollar was down across the board, and best forex trade of the week would have been long AUDUSD at 2.06%. The strongest index movement was the NKY up 2.41%, surprising as USDJPY was down. The largest overall movement was once again Oil, erasing last week’s losses to finish 4.56% up.

AUDUSD 0.7886 (+2.06%)
EURGBP 0.8891 (-0.90%)
EURUSD 1.1817 (+0.72%)
GBPUSD 1.3278 (+1.64%)
NZDUSD 0.7170 (+1.11%)
USDCAD 1.2469 (-0.48%) 
USDJPY 111.82 (-0.70%) 
DAX     12995 (+0.20%)
FTSE     7543 (+0.24%)
NIFTY   10167 (+1.80%)
NKY     21155 (+2.41%)
SPX    2554.5 (+0.30%)
GOLD  1303.25 (+2.15%)
OIL     51.41 (+4.56%)

NEXT WEEK (all times are GMT)

Over the weekend the IMF meet in Washington and there will be speeches from Yellen, Carney and Kurd, amongst others. Also elections are being held in Austria, with eyes on the far-right FPO vote. They are new and neck for second place. Also New Zealand may announce the final coalition for the next government. The right-wing NZ First party is kingmaker here.

Following on the heels of the IMF on Monday is a G30 meeting, also in Washington. Again Janet Yellen and BoJ Governor Kuroda speaks, along with PBoC Governor Zhou, and ECB member Constancio. The US House of Representative goes into recess, whilst the Senate returns. News releases include New Zealand CPI, the first of many this week, although no surprises are expected.

Tuesday’s European session sees two more inflation prints, for UK and Eurozone. If the UK figure beats the 3.0% estimate, the case for a November GBP rate hike becomes very strong. Carney also gives testimony to the UK Parliament’s Treasury Committee, which will also be watched for rate hike pointers.

Wednesday sees the minutes of the extraordinary EU Economic Summit, and the UK unemployment report. Traders may look beyond the headline figure for any indication of wage growth, the sticking point for rate increases. In China, the 19th Annual Communist Party Congress begins.

Thursday brings the Australian jobs report. The estimate this month is 10k, well below the 54.2k last month. A beat is likely, but whether this helps AUD, given the previous clear RBA statement of not following the rest of the world, remains to be seen. Also important in the Asian session is China GDP. In Europe, focus is once again on the UK, with Retail Sales at 0830.

Friday sees BoJ Kuroda speaking, but the focus of the day will be on Canada as inflation and retail sales are issued simultaneously as they were in the US last Friday. CPI is expected to increase from 0.1% to 0.3% and as we have seen in the past, CAD volatility usually follows. Janet Yellen speaks at the National Economists Club, but this is after the markets closed. The weekend sees elections in the Czech Republic.

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

Mon Oct 16
0130 CNY China PPI/CPI
0900 EUR Eurozone Trade Balance
1430 CAD BoC Business Outlook Survey
2145 NZD NZ inflation (CPI)

Tue Oct 17
0030 AUD RBA Meeting Minutes
0600 EUR Germany Wholesale Price Index
0830 GBP UK Producer Price Index
0830 GBP UK inflation (CPI) (est 3.0% prev 2.9%)
0900 EUR Germany ZEW Sentiment Survey
1000 EUR Eurozone inflation (CPI) (est 1.5% prev 1.5%)
1315 USD US Industrial Production/Capacity Utilization
1400 USD US NAHB Housing Market Index

Wed Oct 18
0700 EUR EU Extraordinary Economic Summit
0830 GBP UK ILO Unemployment Rate/Claimant Count change
1200 USD Fed Dudley speaks
1230 USD US Building Permits/Housing Starts
1430 WTI EIA Stocks
1800 USD US Fed Beige Book
2350 JPY Japan Imports/Exports/Trade Balance
2350 JPY Japan FDI

Thu Oct 19
0030 AUD Australia Jobs/Unemployment/Participation (their NFP)
0200 CNY China Industrial Production
0200 CNY China GDP (est 6.8% prev 6.9%)
0430 JPY Japan All Industry Activity Index
0830 GBP UK Retail Sales
1230 USD US Jobless Claims
1230 USD Philadelphia Fed Manuf Survey

Fri Oct 20
0600 EUR Germany Producer Price Index
1230 CAD Canada inflation (CPI)
1230 CAD Canada Retail Sales
1700 WTI Baker Hughes Rig Count

2315 USD Fed Yellen speaks

Sunday 8 October 2017

Week to Oct 6th

On Monday, as predicted, the Catalans voted for independence, and unsurprisingly EUR lost ground, as did the Spanish IBEX. Details emerged of more US tax cuts, and there was speculation that hawkish Kevin Warsh would be appointed to replace Fed Chair Janet Yellen. Also the important ISM Manufacturing PMI print was a beat. On the back of all this SPX, DAX, FTSE and NKY were all up, continuing the trend from last week and USD also rose against all other currencies. SPX, DJIA, and NDX all made new all-time highs. Gold was down as expected, but 10-year yields were however only 1bp up. Oil had a bad day, continuing its retreat from the previous week, and gave up 2% on the day.

The momentum continued on Tuesday, which saw another record high for SPX, and DAX, FTSE, and NKY followed suit, the latter being particularly strong. The RBA rate decision at 0330 had little effect on AUD, and in general USD did a ’Turnaround Tuesday’ retreating to give up Monday’s gains against most currencies, Gold and bond values (inverse to yields) also gave up their Monday losses. The exception was GBP, which did not recover, on the UK PMI construction miss, concerns about UK PM  May’s leadership and continuing Brexit worries. Oil continued to lose ground.

The bull run continued on Wednesday, albeit at a slower pace. Nevertheless the DAX made a new all-time high, the first since Jun 21st. SPX also made its third record high of the week. FTSE was also up, and NKY was more or less flat after its strong run on Tuesday. The ADP jobs report, a precursor to NFP on Friday came in slightly ahead on estimates (135k vs 125k), but the estimate had been reduced, it was given as 135k last weekend as you may have seen in our report. Note that the effect of the recent hurricanes has made the figure less important this month.The Spanish IBEX fell heavily, losing 2.56% on the day on Catalonia concerns. USD was mixed, after Markit (1345) and ISM (1400) Services PMI beats, but concerns about the Fed Chair position, now another candidate Jerome Powell (slight dove, similar to Yellen) has emerged. EUR, AUD and GBP were flat, JPY was down (after a brief spike up) and bond yields were up, yet gold was also up. Oil faded slightly, after a brief spike up following the WTI EIA beat at 1430.

Another day, another all-time high. On Thursday SPX, DJIA, NDX, RUT and even the Wilshire 5000 micro-cap index all hit all-time highs, as did DAX, despite the fade in EUR. Also posting all-time highs were the stock markets in Norway, Belgium, The Netherlands and Denmark. Even the Spanish market recovered the previous day’s losses. Analysts pointed to the progress in US tax reform as the main driver, although Trade Balance and Jobless Claim beats at 1230 also helped. In currencies, USD was also sharply up against all currencies, following hawkish remarks from Fed members Harker and Williams. Both supported another rate rise this year (ie on either Nov 1st or Dec 13th, CME FedWatch predicts the latter). Only JPY held its own, as it had already been rising during the Asian and European sessions. Yields of course were also up, although only 2bp, and Gold was down. Oil had a good day, recovering the previous two day’s losses.

The exuberant mood changed on Friday for two reasons. There was talk of North Korea preparing to conduct another missile test (see our Next Week analysis below) and the NFP report was negative for the first time in seven years (-33k vs +90k est). SPX broke its seven day rising streak and fell on the day, as did DAX and NKY, although FTSE was slightly up on GBP weakness following political uncertainty after the lacklustre Conservative party conference, and disquiet about PM May’s leadership. Otherwise USD was weak, and fell against other currencies. The Canadian jobs report also missed estimate (10k vs 14.5k est) but this was less shocking, and CAD appreciated, ie USDCAD duly fell. The reaction from Gold and JPY was particularly interesting. These initially fell sharply on the jobs print, but then quickly (although not instantly) recovered to end the day up. Bond yields similarly spiked, but faded to end the day only slightly up. Oil fell sharply to end the week below the psychological $50 mark as fears of hurricane production cuts receded.


These are the prices movements for the week on the instruments we cover. The best forex trade of the week would have been short GBPUSD at 2.47%. The strongest index movement was (therefore) the FTSE up 2.03%, but the largest overall movement was Oil down 4.78%

AUDUSD 0.7727 (-1.29%)
EURGBP 0.8972 (+1.78%)
EURUSD 1.1733 (-0.67%)
GBPUSD 1.3064 (-2.47%)
NZDUSD 0.7091 (-1.50%)
USDCAD 1.2529 (+0.53%) 
USDJPY 112.61 (+0.13%) 
DAX     12969 (+0.97%)
FTSE     7525 (+2.03%)
NIFTY    9987 (+1.81%)
NKY     20658 (+1.52%)
SPX    2546.9 (+1.10%)
GOLD  1275.82 (-0.28%)
OIL     49.17 (-4.78%)

NEXT WEEK (all times are GMT)

There was Twitter chatter going into the weekend that North Korea might attempt another missile launch soon, and the Catalan situation in Spain is still unresolved. The New Zealand electoral commission declares the official result of the Sep 23 election. Coalition talks can now start. Similarly, the German CDU/CSU party hold strategy talks to determine their preferred coalition.

Monday sees the Chinese (and Korean) markets open after a week’s holiday. It is Columbus Day in the US, but unlike the bond markets, the US stock market is open. However, activity is expected be greatly reduced, and in the absence of any US data releases, a quiet day is expected. Also the Japanese and Canadian markets are closed for Health-Sports Day and Canadian Thanksgiving respectively.

Tuesday is the anniversary of the founding of the North Korea Bureau of the Communist Party in 1945, and as such, the chances of a missile launch on this day are higher. As we have seen before, no launch could result on a relief rally. Also the Catalan parliament are planning to make a unilateral declaration of independence. FOMC dove Kashkari speaks as the US session opens. There are quite a few releases, but nothing particularly important.

Wednesday is the big day this week, with the FOMC minutes. The next rate decision is in November and the CME FedWatch tool is suggesting a 98.5% chance of a hold. Rhetoric has been hawkish recently, and a failure by Chair Yellen to continue this line could cause USD to falter. Fed Dallas President Robert Kaplan is of course speaking earlier (5pm PDT Tuesday in the US), and he is viewed to be slightly dovish, on the same page as Yellen. We will be publishing our non-rate decision fractals for subscribers.

Thursday is packed with low-level data, but the key event of the day is a panel discussion in Washington when ECB President Draghi and Fed dove Lael Brainard both speak at a panel in Washington. The headlines are published at 1415, when the US and European sessions are both open. Markets are closed today in Israel and Brazil.

Friday is the second big day, where we see US Retail Sales, followed an hour later by US inflation. The  2% Fed’s [tightening] target figure has not been hit since May. This month’s estimate predicts we return upwards. A beat would surely strengthen the beleaguered US dollar. After the prints, we see various speeches by Fed members as the day goes on.

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

Mon Oct 09
0245 CNY Caixin China Services PMI
0600 EUR Germany Industrial Production
2245 NZD NZ Electronic Card Retail Sales

Tue Oct 10
0001 GBP UK BRC Like-For-Like Retail Sales
0320 AUD RBA Asst Gov Debelle Speaks
0500 JPY Japan Eco-Watchers Survey
0600 EUR Germany Trade Balance/Imports/Exports
0830 GBP UK Manuf/Industrial Production
0830 GBP UK Trade Balance
1200 GBP NIESR GDP estimate
1215 CAD Canada Housing Starts
1400 USD FOMC Kashkari (dove) speaks
2130 WTI API Stock (prev -4.08M)
2350 JPY Japan Machinery Orders

Wed Oct 11
0000 USD FOMC Kaplan speaks
1400 USD JOLTS job openings
1800 USD FOMC Minutes (no rate decision)
2330 AUD Australia Westpac Consumer Confidence

Thu Oct 12
0001 GBP UK RICS Housing Price Balance
0030 AUD Australia Home Loans/Investment Lending for Homes
0100 AUD Australia Consumer Inflation Expectation
0200 CNY China FDI
0430 JPY Japan Tertiary Industry Index
1000 EUR Eurozone Industrial Production
1230 USD US Initial/Continuing Jobless Claims
1415 USD Fed Brainard (dove) speaks
1415 EUR ECB Pres Draghi speaks
1430 USD FOMC Powell speaks
1500 WTI EIA Stocks (prev -6.023M)
1800 USD US Monthly Budget Statement
2130 NZD Business NZ PMI
2350 JPY Japan FDI in stocks/bonds

Fri Oct 13
0200 CNY China Trade Balance/Imports/Exports
1230 USD US Retail Sales MoM (est 0.4%, prev -0.2%) 
1330 USD US inflation (CPI) (est 2.0% prev 1.9%)
1425 USD Fed Evans speaks
1530 USD FOMC Kaplan speaks
1700 USD FOMC Powell speaks
1700 WTI Baker Hughes Rig Count

This report is published every week as an email by - you can sign up to receive it here.

Sunday 1 October 2017

Week to Sep 29th

LAST WEEK (all times GMT)

Monday saw a reaction to Angela Merkel being re-elected in Germany with a reduced share of the vote, and emergence for the first time of the far-right AfD party in the Bundestag. Aided by the IFO Sentiment miss at 0800, DAX fell and so did EUR, SPX and NKY also dipped but recovered somewhat in the US session. Notably the Spanish IBEX was down 0.9% on worries about the forthcoming Catalunya election. In currencies NZD joined EUR in reacting to the unclear NZ election result, falling 1%.. In any event, USD was up in general against most currencies. The exceptions were JPY and Gold, which were up as you would expect in risk-off sentiment, fuelled by further North Korea sable-rattling. 10-year T-Bill yields were down. The exception to the trend was oil, which was sharply up by nearly 4% after Turkey threatened to shut down the pipeline from Kurdish territories. 

Tuesday saw DAX and NKY recover Monday’s losses, the latter largely responding to yen weakness, as “missile fatigue” once again set in. SPX was flat on the day and FTSE faded slightly. The IBEX fell again, and it was Turnaround Tuesday for Gold which gave up Monday’s gains. As Fed Chair Yellen hawkishly cautioned against waiting too long to raise rates again, USD continued it’ advance against all currencies except CAD which also turned around Monday’s losses despite Oil being flat. Yields rose accordingly.

Wednesday saw Trump confirm his tax reform plans. The details had already been released, but nevertheless all indices resume their upward path, particularly NKY as JPY extended its losses. USDJPY hit a 2-month high,  Gold continued to fall to close at $1,281, the lowest level for a month, and SPX made another intraday all-time high. The dollar was up against all other currencies after the tax plans and Tuesday’s Yellen statement, and yields followed. The strongest move was against CAD, which fell 128 pips (1.04%) as Governor Poloz said that there was ‘no predetermined path for for interest rates’ in Canada, and the BoC will proceed ‘cautiously’ on rate hikes. The RBNZ rate decision (1.75% hold) had little effect, and did the WTI stock beat, as oil remained flat.

On Thursday FTSE was fairly flat, but DAX rose very gently all day after the German Gfk Confidence miss (0600) was followed by the various Eurozone Sentiment/Confidence beats (0900). SPX also hardly moved, but after the GDP beat (3.1% vs 3.0%) at 1230, it did manage to close at a new ATH of 2510. NKY on the other hand faded almost tick for tick with USDJPY decline. The story was different for USD, which gave up some of the gains earlier in the week. It was down against all currencies, as were yields, and Gold was up, as the market digested the Trump tax plans and wondered whether they would get through Congress. Oil had a volatile day, up 1.62% at one point, but finishing the day 0.85% down.

As the week, month and quarter drew to a close, equities rallied hard on Friday, with SPX at another all time high, and the other indices closed at highs of the day. EUR was also up again, back to where it was on Tuesday, despite the Eurozone inflation miss. However, other currencies fell against the dollar and despite EUR, DXY finished the month with its first green monthly candle since February. A surprise news item was that Trump had met former Fed Governor Kevin Warsh as a possible replacement for Chair Yellen. Warsh was on the Fed during the 2008 crisis, and is considered to be more hawkish than Yellen. Bond yields moved up sharply on the announcement, putting on 4.3bp in an hour, the same kind of move we saw at last week’s FOMC. Gold gave up Thursday’s gains, and Oil was flat on the day.


These are the prices movements for the week on the instruments we cover. The best forex trade of the week would have been short AUDUSD at 1.72%. The strongest index movement was again NIFTY at 1.74% as it continues to unwind gains earlier in the year.

AUDNZD 1.0860 (+0.10%)
AUDUSD 0.7828 (-1.72%)
EURGBP 0.8815 (-0.43%)
EURUSD 1.1812 (-1.14%)
GBPUSD 1.3395 (-0.75%)
USDCAD 1.2463 (+1.00%) 
USDJPY 112.46 (+0.42%) 
DAX     12844 (+1.83%)
FTSE     7375 (+0.93%)
NIFTY    9809 (-1.74%)
NKY     20349 (+0.11%)
SPX    2519.1 (+0.68%)
GOLD  1279.42 (-1.37%)
OIL     51.64 (+1.93%)

NEXT WEEK (all times are GMT)

Over the weekend we have the controversial Catalan independence election on Sunday. As we said in our subscriber email this week, the markets are not really taking much account of this, although a yes vote now seems very likely — although Madrid will ignore it. The British Conservative (government) party conference starts in Manchester, UK and runs until Wednesday. Surprises are unlikely on the first day.

The Chinese (including Hong Kong) markets are closed all week for the National Day Golden Week. South Korea’s KOSPI also closed all week for the Chuseok (Harvest Festival). Note this is celebrated in Pyongyang as well, possibly indicating a pause in the war of words. The pause gives a good indication of Chinese trading activity, by its absence, for example, will Bitcoin volatility reduce? It is also of course NFP week.

Monday sees the start of a new week, month and quarter. NIFTY is closed due to the Mahatma Gandhi Jayanti holiday. The day sees Markit Manufacturing PMIs for most countries we cover, but the more significant one is from the US Institute for Supply Management at 1400.

Tuesday’s Asian session sees the RBA rate decision. No large volatility is expected. Traders will be looking for further reference to whether Australia takes account of the global hawkish trend to tightening, or not. The DAX is closed for German Unity Day, so the European open is unlikely to be volatile, especially as there is little news. Of course EUR, which is traded mainly from London, not Frankfurt will still be active and may react to the PPI print at 1000.

Wednesday is another light day, with less important Markit Services PMIs following Monday’s manufacturing figures. PMIs are a survey of production levels, new orders, inventories and so on, and are much more meaningful for businesses which supply goods rather than services. Note that PMI surveys do not include prices (inflation), nor do they include sentiment. These factors are reported in separate releases.

The main news of the day (short of Janet Yellen saying something new) is the ADP jobs report, which as you know, is an indicator for NFP on Friday. This month’s estimate is far lower than last month, although considerably higher at 135k than the NFP estimate of 98k.

Thursday’s main release is the ECB MPC accounts (i.e. minutes) with a raft of ECB speakers on the day, Praet at 0915, Liikanen and Jazbec at 0930 and Coeure at 1315. Look out for talk about the strength of EUR, any concerns about this can only push it down. The central bank theme continues with Powell, Williams, Harker and George all speaking during the US day. Both the US and Canada report Trade Balances at the same time, a possibly volatility spot for USDCAD. As an aside, markets are closed in Portugal.

Following on from that US/Canada theme, Friday is of course double NFP day, when both sides of the 49th parallel report at the same time. The US estimate is unambitious, being only two-thirds of last month, as is Canada’s at 15k (22k prev). Again, if one country beats and the other one missed, USDCAD volatility will resume. The reason for the lower US figure is the hurricanes, which of course have not touched Canada. CAD upside is therefore a distinct possibility.

There is a three-day weekend for Japan as Mon Oct 9th is Taiiku no hi, the health-sports holiday. Also in the US Monday 9th is Columbus Day, where the bond (but not stock) markets are closed.

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

Sun Oct 01
2230 AUD Australia AiG Performance of Manuf Index
2350 JPY Japan Tankan Manuf Index/Outlook

Mon Oct 02
0000 AUD Australia TD Securities Inflation
0755 EUR Germany Markit Manuf Index
0800 EUR Eurozone Markit Manuf Index
0830 GBP UK Markit Manuf Index
0900 EUR Eurozone Unemployment
1330 CAD Canada Markit Manuf Index
1345 USD US Markit Manuf Index
1400 USD US ISM Manuf PMI/Prices Paid
1400 USD US Construction Spending
1430 CAC BoC Outlook Survey
1800 USD Fed Kaplan speaks
2200 NZD NZIER Business Confidence

Tue Oct 03
0330 AUD RBA Rate Decision - hold 1.5% expected
0830 GBP UK Construction PMI
1000 EUR Eurozone PPI
2030 WTI API Stock

Wed Oct 04
0700 EUR ECB non-MPC meeting
0755 EUR Germany Markit Services PMI
0800 EUR Eurozone Markit Services PMI
0830 GBP UK Markit Services PMI
1215 USD ADP Employment change (est 135k prev 237k)
1345 USD US Markit Services PMI
1400 USD ISM Non-Manuf PMI
1430 WTI EIA Stock
1915 USD Fed Yellen speaks
2350 JPY Japan FDI

Thu Oct 05
0130 AUD Australia Retail Sales
0130 AUD Australia Trade Balance/Imports/Exports
1130 EUR ECB MPC Accounts
1230 USD US Trade Balance
1230 USD US Initial/Continuing Jobless Claims
1230 CAD Canada Trade Balance/Imports/Exports
1310 USD Fed Powell speaks
1400 USD US Factory Orders
1400 USD Fed Harker speaks

Fri Oct 06
0500 JPY Japan Leading Economic/Coincident Indices
1230 USD US NFP/Unemployment  (est 98k prev 156K)
1230 USD US AWH/AHE/Labor Force Participation
1230 CAD Canada Net change in Employment/Unemployment (est 15k prev 22.2k)
1230 CAD Canada Labor Participation Rate
1400 CAD Canada Ivey PMIs
1615 USD Fed Dudley speaks
1645 USD FOMC Member Kaplan speaks

1700 WTI Baker Hughes Rig Count