Sunday 25 February 2018

Week to Feb 23rd

Chinese, Canadian and US markets were closed on Monday. After the rally in the previous week, equities turned down on Monday, with all indices (including SPX futures) ending lower. Only NKY managed to hold onto a small gain, after the yen retreated. After turning up the previous Friday, USD had another good day and was up slightly against all currencies and gold. Yields were roughly flat after a dip. Oil was slightly up on the day, but all in all, there was not a lot of volatility due to the President’s Day holiday.

We mentioned DJIA heavyweight WMT last week. It missed on earnings on Tuesday and fell 10.2%, nearly filling the gap up from the last earnings report, causing noticeable SPX/DJIA divergence. FTSE and NKY were also down on the day, but DAX managed to post a small (0.31%) gain helped by a weaker euro, and the German Producer Price Index beat at 0700 (although the ZEW Sentiment Survey at 1000 missed). USD rallied again, with DXY beating Monday and putting on 0.55%, up against all currencies, gold and oil. All this was against a background of the auction of $96bn of new three and six month T-bills at the highest rates for nine years, and $28bn of 2-year notes. The 10-year note yield was up 1bp.

Wednesday was FOMC day. After rallying earlier in the day, indices fell sharply after the release of the final FOMC minutes under Janet Yellen, where ‘elevated’ stock valuations were mentioned. The meeting was of course held prior to the early February correction, but this was enough to cause a 532-point (2.11%) pullback in DJIA, the largest volatility seen all week. Other indices faded by similar amounts. All had been rising all day, but ended the day down. (An unusual small rally was seen in the first few minutes after the release.). The minutes also caused a rally in USD, which had already being doing well, and DXY ended up 0.49%. The dollar was up against all major currencies and gold on the day, and bond yields soared to a new intraday four-year high of 2.957%. Oil was flat on the day. One currency that beat USD today was ZAR, putting on 0.57% after new President Ramaphosa’s budget speech, as we indicated last week.

Chinese markets re-opened on Thursday. The mood was distinctly positive, and all indices moved to recover the FOMC losses intraday. However, they then moved distinctly back giving up about half of the recovery, but nevertheless finished the day up. An unconvincing rally.  Fed Bullard said that central bankers should not raise rates too fast ot avoid slowing the economy. Although he is a noted dove, his remarks, together with the natural reversal we also saw on equities, caused USD to give up Wednesday’s gains and end the day down against most currencies (not ZAR) and gold was up in line. The smallest gain was from CAD, only up 0.05% after the Retail Sales Miss (and US Jobless Claims beat) at 1330 caused at 0.59% spike down. Of particular note was oil, which, for the first time in a while, reacted logically to the EIA stock beat (-1.62M vs +1.79M), and put on an instant 1.46% rising to 1.87% by the pit close time of 1930. EIA was of course a day late because of the public holiday.

Stocks continued to rally on Friday, with all indices making new highs for the week, and posting the highest closes for the week, but notably only to finish roughly where they started, as you ca see the weekly movements below, which mask the intra-week volatility. Whereas every other day this week (and largely for the past year!) USD moved inversely to equities, today the picture was very mixed. Ignoring ZAR (which put on another 1%), we saw EUR resume its fade after the Eurozone Core CPI MoM miss, JPY, AUD and Gold were roughly flat, and GBP and CAD were up, the latter putting on 0.59% after the impressive CPI beat (1.7% vs 1.4%), a move we pointed out last week. All this resulted in a nearly flat DXY (up 0.12% on the day). Oil extended Thursdays EIA beat gains, and yields were well off, down 5bp on the day to 2.24%

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.


USD recovered part, although not all of last week’s losses, and consequently AUD, EUR, GBP, NZD and Gold posted inside weeks. The best forex trade was to short NZDUSD for 1.33%. Volatility in indices was also down on last week, the best was NKY up a mere 1.45%. This left Oil to take the top spot, putting on 3.35%

The theme of the week in equities was a tail-off in volatility.

Last week’s equity reversals partly recovered so we had an inside week on all indices except NKY. DXY had another bad week, giving up all the previous week’s gains and then some. All currencies were up against the dollar, so selling USDJPY would have been the best trade, down 2.30%. The best index recovery, and overall best trade was SPX at 4.19% up.
Cryptocurrencies also lost volatility. Bitcoin was at $10,143 at midnight Friday, a mere 4.3% down on the week. Ethereum was $862 at the same time, a more volatile 10.4% down.

AUDUSD 0.7836 (-0.90%)
EURGBP 0.8797 (-0.48%) 
EURUSD 1.2293 (-0.93%)
GBPUSD 1.3969 (-1.06%)
NZDUSD 0.7292 (-1.33%)
USDCAD 1.2629 (+0.59%)
USDJPY 106.86 (+0.56%)
DAX     12544 (+0.45%)
FTSE     7268 (-0.33%)
NIFTY   10491 (+0.37%)
NKY     22034 (+1.45%)
SPX    2747.5 (+0.53%)
GOLD  1328.71 (-1.40%)
OIL     63.57 (+3.35%)

NEXT WEEK (all times are GMT)

Over the weekend, the South African ruling ANC hold a meeting, which may result in a cabinet reshuffle (ie to remove Zuma cronies).

On Monday ECB President Draghi gives the introductory statement at the ECON hearing in Brussels. Board member Cœuré also speaks at 1000. One to watch is Luis de Guindos, currently a minister in the Spanish government, but nominated as the next ECB vice president. He is scheduled to speak at 1615, and we don’t yet know if he is a hawk or a dove. In the US we have St Louis Fed President Bullard (non-voter, dove) at 1300 and Fed Governor Quarles (voter, neutral) at 2015. To complete the CB picture, BoE Cunliffe (dove) speaks at 1800. The only news of import today are the NZ trade figures, released early Tuesday local time, 2145 GMT.

Tuesday’s speakers are ECB Mersch (hawkish) at 0840, followed by BuBa President Weidmann (hawkish) at 1000. The big event is the first day of the semi-annual Humphrey-Hawkins testimony, the first by new Fed Chair Powell. Today is prepared remarks, published 90 minutes ahead of the appearance. Also of interest today is a conversation hosted by the Brookings Institute between former Fed chairs Yellen and Bernanke. There are also plenty of news releases. After the important German CPI, we have the US Trade Balance and Durable Goods orders prints. All these could produce volatility.

Wednesday has the more important part of the Humphrey-Hawkins testimony, the Senate’s Q&A to Powell, as nobody knows what is going to be said. Expect a volatile US session. In Europe we have ECB Board Member Angeloni in Singapore at 0300. Another important data day with German unemployment, Eurozone CPI and US GDP and PCE (QoQ), the latter being a CPI proxy. Swedish GDP and Retail Sales are out at 0830. SEK is 4.2% of DXY.

Thursday has BoJ member Karaoke (dove) speaking in Okayama. We always watch extreme doves for the slightest sign of hawkishness. The MoM and YoY US PCE data is released at 1330, but this will have been overshadowed by the QoQ data the previous day. Of more interest is the US ISM Manufacturing PMI and Price paid at 1500, considered more important than the Markit figure released 15 minutes earlier. The Markit PMI for Canada, the first significant piece of Canadian data this week is 15 minutes before that. Markets are closed in South Korea, Thailand and Israel because of holidays.

Friday is the last trading day before the Italian Elections on Sunday Mar 4, and is also the deadline for the SPD membership postal ballot to ratify the coalition deal with Merkel’s CDU/CSU. ECB Mersch speaks at 0810. Expect some EUR volatility as traders position themselves for the weekend risk. The main news event of the day is Canadian GDP. January came in as expected, but the December miss (0.0% vs 0.2%) produced a 0.68% spike which reversed itself during the US session. The only US news is the University of Michigan sentiment index.

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

Mon Feb 26
0930 GBP UK BBA House Purchase Loans
1300 USD Fed Bullard speaks
1330 USD Chicago Fed National Activity Index
1400 EUR ECB President Draghi speaks
1500 USD US New Home Sales
1530 EUR Dallas Fed Manuf Business Index
1800 GBP BoE MPC Member Cunliffe speaks
2145 NZD NZ Trade Balance

Tue Feb 27
1000 EUR Eurozone Confidence/Sentiment
1000 EUR Bundesbank Pres Weidmann (hawkish) speaks
1300 EUR Germany CPI
1330 USD Fed Chair Powell H-H testimony released
1330 USD US Trade Balance
1330 USD US Durable Goods Orders
1400 USD US House Price Index
1500 USD US Consumer Confidence Index
1500 USD Fed Chair Powell H-H testifies (approx)
2130 WTI API Stock
2350 JPY Japan Retail Sales

Wed Feb 28
0001 GBP UK Nationwide House Price Index
0100 CNY China PMIs
0500 JPY Japan Housing Starts
0700 EUR Germany Consumer Confidence
0855 EUR Germany Unemployment
1000 EUR Eurozone CPI 
1445 USD Chicago PMIs
1500 USD Fed Chair Powell H-H Senate Q&A
1530 WTI EIA Stock

Thu Mar 01
0145 CNY China Caixin PMI
0500 JPY Japan Consumer Confidence
0930 GBP UK Mortgage Approvals
0930 GBP Markit Manuf PMI
1000 EUR Eurozone Unemployment
1330 USD PCE YoY
1330 USD Jobless Claims
1430 CAD Canada RBC Manuf PMI
1500 USD US ISM Manuf PMI/Prices Paid
2145 NZD NZ Building Permits
2330 JPY Japan Unemployment
2330 JPY Japan Household spending

Fri Mar 02
0700 EUR Germany Retail Sales
0930 GBP UK Construction PMI
1330 CAD Canada GDP
1500 USD Michigan Sentiment Index
1800 WTI Baker Hughes Rig Count

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Sunday 18 February 2018

Week to Feb 16th

The equity correction of last week was reversed on Monday, with SPX putting on 1.4% (DJIA 1.7%). Friday and Monday were the biggest two-day rise for SPX since January 2016. DAX, FTSE and NKY also rose, the first after a pullback. 10-year US Treasury yields briefly touched a new four-year high of 2.902% but then fell back to post only 2bp up on the day. Currency markets continued to ignore the equity and bond volatility with DXY down 0.3% on the day. Main components EUR and JPY were up, along with AUD, but GBP and CAD were slightly down. Gold was up in line with the DXY fade, and Oil posted its sixth successive red candle.

Our friends at tell us that DAX usually rises on a Tuesday. Well not this week it didn’t. After gapping down, the German index faded all day, despite a brief rally when NY desks first opened. After returning from Monday’s holiday, NKY similarly posted a massive 770 point drop during the Asian session, although 61.8% of this had been recovered by the US closing bell. FTSE was also down after GBP was boosted by the UK CPI/RPI/PPI beats at 0930, It was a turnaround Tuesday in Europe and Japan (not China, which rose), but the resilient SPX took no notice of this and gently rose all day to finish 0.3% up (DJIA 0.2%, NDX 0.5%). A complete US/others disconnect today. In forex, the yen continued its rally, adding 0.76%, and EUR and GBP were also up, producing a 0.4% drop in DXY. Yields were down in line, although this link is far from strong at the moment. AUD was flat and only CAD gave a little ground against USD, following a further decline in Oil. Gold continued to rally, up $6 in line with the equity turmoil.

Valentine’s Day saw traders loving equities which rallied hugely on Wednesday. The pre-market CPI beat and Retail Sales miss at 1330 initially cause a huge spike down (500 points exactly on DJIA), but this was then followed by a much larger rally in equities. From the pre-market low to the close, SPX put on 71 handles (2.72%). The huge rally was shared elsewhere with all indices dipping and then advancing sharply, with the VIX ending the day below 20. Everything was up today except the dollar, whose decline was as spectacular as the equity ramp. DXY gave up 0.76%, with all currencies advancing, and Gold had its best day since Brexit, up 1.58%. However, the initial equity spike down was accompanied by a short-lived rally in USD, and it was interesting to see which currencies moved. The strongest movers (down) on the spike were AUD and NZD, risk-on sells, but normally quiet in the US session. The others tended to move together, but tellingly, JPY hardly moved at all and commenced its decline much sooner.

Oil was up 3%, and yields disconnected themselves from the dollar again and made a new high, 7bp up at 2.91%. 

Thursday produced SPX price/action we see very rarely, an ‘echo’ of the previous day, where similar price action occurs but with less volatility. There was no particular trigger, like the CPI figure, as the spike down part lasted an hour from 1500, and can hardly have been caused by the NAHB Housing Market Index print coming in as expected at that time. The pattern was seen, to a degree across the other equity markets, and all finished up, although the increase in FTSE was only marginal due to the strong pound.

On Wednesday, the dollar moved (inversely and )concurrently with equities. Today, the dollar spike was far more muted, and was only really noticeable in AUD and CAD. (Incidentally, the big miss on the Australian jobs report only produced a 28 pip drop, quickly recovered, much less than this spike which faded AUD 44 pips) Nevertheless, by the close, USD was well down (DXY shed 0.8%) against all currencies by the end of the day, hitting a Trump-era low against JPY. Of course other currencies have long passed that point, DXY is 9.61% lower than election day. Gold was only slightly up after the previous days ramp, but still made a three-week high. Bond Yields and Oil dipped sharply and recovered with equities, but both only managed to close flat.

Friday was Opex day, and equities continued to recover following the US Michigan Sentiment beat at 1500. US indices reached the 61.8%  fibonacci retracement point from the Jan 29 high. Other indices were also buoyant, helped by their denominated currencies fading against USD, which came back up from three-year lows, and the VIX touched a post-correction low of 17.7. USD was up across the board, with DXY putting on 0.57% and Gold giving up $5 (0.41%). Oil was also up in line. Yields continued their pattern of moving inversely to USD, easing 3bp on the day.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.


Last week’s equity reversals partly recovered so we had an inside week on all indices except NKY. DXY had another bad week, giving up all the previous week’s gains and then some. All currencies were up against the dollar, so selling USDJPY would have been the best trade, down 2.30%. The best index recovery, and overall best trade was SPX at 4.19% up. Cryptocurrencies had a great recovery week. Bitcoin was up 26% from last week to $10,600 as I write and Ethereum up 18.6% at $963.

AUDUSD 0.7907 (+1.22%)
EURGBP 0.8839 (-0.33%)
EURUSD 1.2409 (+1.31%)
GBPUSD 1.4119 (+1.25%)
NZDUSD 0.7390 (+0.67%)
USDCAD 1.2555 (-0.21%)
USDJPY 106.27 (-2.30%)
DAX     12488 (+2.29%)
FTSE     7292 (+2.36%)
NIFTY   10452 (-0.54%)
NKY     21720 (+2.02%)
SPX    2733.0 (+4.19%)
GOLD  1347.60 (+2.39%)
OIL     61.51 (+4.17%)

NEXT WEEK (all times are GMT)

Monday is President’s Day, the birthday of first president George Washington and US markets are closed. Canada is also closed for Family Day. China is still out for the Golden (New Year) week. There are no economic releases on the calendar except the Japanese trade figures. US index futures trade as normal.

Tuesday sees the RBA monthly minutes, although nothing untoward is expected. There is some data from Europe, as listed below, and Swedish CPI at 0830, but in general another quiet day. However, volatility in the US was rampant right up to Friday’s close, so there is no reason not to expect more. WMT (2.86% of DJIA) reports before the US Open.

Wednesday is much busier, and is of course FOMC Day. These are the minutes from Jan 31, Janet Yellen’s last meeting and before the recent correction in equities. Nevertheless, there may be some less guarded swan song remarks from the outgoing chair. Also from the Fed, we heard Harker (neutral, non-voter) at 1400. In the UK traders will be keenly watching the average earnings, the sticking point for rate rises. Later in the day, BoE Gov Carney, Sep Gov Broadbent, Chief Economist Haldane, and MPC member Tenreyro will all be testifying to the UK Parliament. Another chance for the recent hawkishness we have seen from the BoE. If either of these event disappoints, the rate hike in May will look less assured which would push cable down. In South Africa, new President Ramaphosa makes his first Budget Speech at 1200, after the CPI release there at 0800.

China’s markets open after Golden (New Year) Week on Thursday.  The day is dominated by the ECB Minutes at 1230. Traders will be looking for further details of QE unwinding. There is little US data, but we have several Fed speakers as listed. Canadian Retail Sales are also important. The data is only released on a MoM basis, there is no YoY figure. Tech heavyweight HPQ reports after the bell.

Friday’s main event is Canadian CPI. Although a hint will have been given in the Retail Sales data, this is the one which moves markets. The miss last month caused an immediate 0.49% fade in the loonie. Central bank speakers today are ECB Coeure (hawkish) at 1830, and Fed Mester (hawkish, voter) at 1830 and Williams (hawkish, voter) at 2040.

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

Sun Feb 18
2350 JPY Trade Balance/Imports/Exports

Mon Feb 19
1745 GBP BoE Governor Carney speaks
2215 AUD RBA Asst Governor Bullock speaks

Tue Feb 20
0030 AUD RBA Meeting Minutes
0700 EUR Germany Producer Price Index
1000 EUR Eurozone Consumer Confidence
1000 EUR Germany ZEW Sentiment Survey
1000 EUR Eurozone ZEW Sentiment Survey

Wed Feb 21
0430 JPY Japan All Industry Activity Index
0800 EUR Eurozone ECB non-MPC Meeting Minutes
0830 EUR Germany Markit PMIs
0900 EUR Eurozone Markit PMIs
0930 GBP UK Unemployment/Average Earnings
1415 GBP BoE Carney speaks
1445 USD US Markit PMIs
1900 USD FOMC Minutes
2130 WTI API Stock
2350 JPY FDI

Thu Feb 22
0115 FOMC Kashkari (dove) speaks
0515 Fed Quarles speaks
0900 EUR Germany IFO Expectations/Business Climate
1230 EUR ECB MPC Meeting Minutes
1330 USD Jobless Claims
1330 CAD Retail Sales MoM (est -0.1% prev 0.2%)
1500 USD Fed Dudley speaks
1530 WTI EIA Stock
1710 USD Fed Bostik (voter, neutral) speaks
2330 JPY Japan CPI

Fri Feb 23
0700 EUR Germany GDP
1000 EUR Eurozone CPI (est 1.3% prev 1.3%)
1330 CAD Canada CPI (est 1.5% prev 1.9%)
1515 USD Fed Dudley (voter, neutral) speaks
1800 WTI Baker Hughes Rig Count
1830 USD FOMC Mester speaks

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Sunday 11 February 2018

Week to Feb 9th

Monday saw the floodgates open. After the (relatively) gentle decline of last week, and a fairly lacklustre Asian and European session, the US bell saw a classic crash. SPX fell 165 handles (5.99%) during the cash session and indices around the world followed suit. The DJIA was at one point down over 1,500 points, and it was the largest one-day fall in points terms ever, and the largest in percentage terms since the 2008 crash, exceeding even the similar event on Aug 24, 2015 (the last time the VIX ticked higher, it hit 50.3 today, compared to 17.9 on the previous Friday’s decline). Commentators blamed rising 10-year Treasury Yields, which are at four year highs. They dropped a stunning 12bp as the market crashed. Gold was up in line (at last), although only by 0.64%, its first real test to confirm the disconnect as a safe haven that we have seen in the last year.

The day in currencies was very calm by comparison. Despite the bond yield drop, DXY was up a gentle 0.56%, although this masked, as you would expect, a substantial (0.70%) appreciation of JPY. Oil was also down, continuing the slide from Friday’s high. The news releases of the day had no bearing on the market.

It was Turnaround Tuesday for all indices, but not before SPX fell a further 2.56% in the Asian market from the cash low, to touch a four-month low, and with DJIA shedding a shocking further 930 points from the close. However as the volatile day progressed, with movements we have not seen for over two years, with DJIA making a 650 point rally in the first 30 minutes of the cash session, and routinely moving 100 point per hour, the markets closed with SPX up 1.7% and DJIA up 2.3%, having recovered about 75% of the previous days losses. DAX, NKY and FTSE showed similar turnarounds. The forex market also turned, with all currencies except GBP and JPY appreciating, and Gold reversing. Oil was flat on the day. AUD fell after the RBA rate hold at 0330, but recovered during the European and US sessions.

The volatility continued on Wednesday, with NKY losing 500 points in the Asian session, although DJIA and SPX futures only faded slightly. After then rallying to the highest point since the Monday crash, they gave up some ground and finished the day down. The VIX however was back at 27, as hyper volatility receded. DAX and FTSE were actually up again on the day, partially because their cash sessions closed at 1630GMT when the high point was reached. USD was up again against all currencies except JPY, with NZD being a particularly poor performer, dropping 55 pips on the rate hold at 2000, after spend all day falling. Gold was down to a one-month low and yields were sharply up by 9bp, both in line with a stronger dollar. Oil continued to retreat from last week’s highs.

There was no let-up on Thursday, the closing fade on the previous day continued, with VIX back above 33. SPX ended 3.8% lower and DJIA was off 4.2%, over 1,000 points. FTSE (down 1.5%), DAX (down 2.6%) and NKY (3.02%) followed suit and tumbled. It was risk off today with the yen and Gold both up (although not hugely). This continuing lack of flight into safe havens (CHF was only up 0.09% on Monday) has been an interesting feature of events of the last two weeks.

The currency picture was oddly (given the completely different equities picture) much like Tuesday, with GBP and JPY up, everything else down against USD, to deliver a flat DXY. This time there was a reason with sterling; the BoE held rates as expected, but upwardly revised their view of future economic growth. Cable put on an immediate 161 pips (1.16%), although this rally almost completely faded, and the pair ended the day mere 0.25% up. Yields carried on rising, briefly approaching last week’s four-year high, but ended the day flat. Oil continued its week-long fade. Interestingly, CNY was down 0.9% against USD, its biggest fall in over a year.

In case you don’t know, the terms renminbi and yuan are interchangeable. (Strictly, renminbi is the currency, and the unit is the yuan, so maybe like sterling and pound, but all other currencies use the same word for both). However, the onshore version (CNY) is not the same as the offshore version (CNH), the latter being allowed to be owned and traded by foreign citizens in Hong Kong and elsewhere. Although the exchange rate is around parity, it does vary as you can see from this chart.

Friday was another highly volatile day, with an almost perfect, deep V-pattern in equities during the US session. DJIA fell 750 points in US morning, only to then rally over 1000 points in the afternoon, before fading slightly to end the day a modest 0.91% up. After a relatively mild Asian and European session, the other indices did likewise. Interestingly DAX did the move twice, first falling 250 points and recovering all then falling 315 points to similarly recover. An 1130 point journey to finish only 90 points up.

Currencies were again mixed, with DXY’s making a tiny 8 point move up. There was a small fall in EUR, the largest DXY component, and a larger (0.8%) dip in GBP as EU negotiator Barnier warned that a transition deal for Brexit may not be reached. JPY, for once was fairly flat on the day. CAD was unusual. The NFP figure at 1330 was a big miss (-88k vs +10k) and the loonie instantly fell by 88 pips (0.70%). However, the now all-important average hourly earnings rose by 3.3%, the strongest figure in nearly two years, and traders changed their minds quickly, and bid the currency up in the next 30 minutes by 128 pips (1%). This then pared back, and CAD ended up 0.19% up on the day. The volatility did not extend to Gold and Oil, which were slightly down on the day, and yields were flat.

The most volatile week since January 2016 ended with relatively little USD and yield movement, but with indices posting their worst week since that date.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.


The sharp drops from last week accelerated in moves reminiscent of January 2016. DXY put on 1.27% the best week since the week after the Trump election. The VIX hit its highest level since August 2015, and at one point DJIA was down 9.32% on last Friday’s close. However forex was largely stable during all this. USD was up across the board, except for NZD, so the best forex trade would have been to sell EURNZD for 2.18%. NKY was the best index short down 7.31%, but shorting Oil (-9.24%) would have been the best overall trade.

Cryptocurrencies had another terrible week. Bitcoin was down to $6,000 at one point, and at the time of writing is back at $8,400, which is 11.5% lower than the $9,500 snapshot figure I referred to last week. Whereas this figure exceeds the whipsaw indices movements, in crypto terms that is relative stability.

AUDUSD 0.7905 (-0.18%)
EURGBP 0.8868 (+0.51%)
EURUSD 1.2249 (-1.65%)
GBPUSD 1.3945 (-1.23%)
NZDUSD 0.7341 (+0.53%)
USDCAD 1.2490 (+0.56%)
USDJPY 108.77 (-1.25%)
DAX     12208 (-3.96%)
FTSE     7124 (-3.60%)
NIFTY   10509 (-2.33%)
NKY     21289 (-7.31%)
SPX    2623.1 (-4.78%)
GOLD  1316.16 (-1.11%)
OIL     59.05 (-9.24%)

NEXT WEEK (all times are GMT)

Monday is quiet on data, and Japan is closed for the National Foundation Holiday, as in Brazil and other South American markets for Carnival. RBA Assistant Gov Ellis speaks at 2150. Trump’s (bipartisan) budget plan is due to be presented to Congress. Indian CPI is released at 1200.

Tuesday’s big story is UK CPI. The pound was unable to hold its rally last week after hawkish economic growth forecasts by the BoE, so it remains to be seen how it will react to this important indicator. Fed Mester (hawkish, voter) is discussing monetary policy and economic outlook at 1330, with a Q&A to follow. Carnival continues in Brazil and elsewhere, and the Indian NSE is closed for Mahashivrati. Hungarian CPI is released at 0800. DJIA heavyweight KO reports before the bell.

No holidays on Wednesday, and the data starts to flow, starting with German inflation and Eurozone GDP in the European session. Also Bundesbank President Weidmann (hawk) speaks at 0800, followed by ECB Exec Member Yves Mersch (hawkish, crypto-sceptic) at 1020. The SEK (4.2% of DXY) rate decision (est -0.50%, prev -0.50%) is at 0830. The main story of the day is the double release at 1330 of US Retail Sales, and the all-important US CPI. US inflation is probably the most important item of the week. A miss would dampen rate hike expectations, and therefore bond yields, the movement in which has been linked to the recent equity volatility.

Thursday’s Asian session opens with the Australian ‘NFP’. The estimate at 15k is less than half last month’s print. A miss of this lower figure can only be bad for AUD, already 4% down from the late January high. RBA Governor Lowe testified to the Australian House Economics Committee (in Sydney, not Canberra) at 2230. In Europe, we have three ECB speakers, Mersch (hawkish) at 0815, Praet (dove) at 1045, and Lautenschlager (hawkish) at 1200. Over the pond, TreasSec Mnuchin is before the House Ways and Means Committee at 1500, and BoC Deputy Gov Schembri is on at 1830. 

The Chinese markets close today (half day to 0400 in Hong Kong) for the Year of the Dog, which starts on Friday. They will not reopen until the following Thursday (Feb 22). Singapore is also closed. Happy New Year to all our Chinese readers wherever in the world you may be.

Friday is another light news day. UK Retail Sales (inflation proxy) is normally important, but less so this week, as the actual CPI figure precedes it by three days. ECB Coeure speaks in FYR Macedonia at 0820. The only US data worth watching is the University of Michigan sentiment index at 1500.

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

Sun Feb 11
2145 NZD NZ Electronic Card Retail Sales

Mon Feb 12
0200 CNY China FDI
1900 USD US Monthly Budget

Tue Feb 13
0930 GBP UK CPI (est 2.9% prev 3.0%)
1300 USD FOMC Mester speaks
2130 WTI API Stock

Wed Feb 14
0700 EUR Germany CPI (est 1.4% prev 1.4%)
0700 EUR Germany GDP
0800 EUR Bundesbank Pres Weidmann speaks
1000 EUR Eurozone GDP (est 2.7% prev 2.7%)
1000 EUR Eurozone Industrial Production
1330 USD US Retail Sales (est 0.2% prev 0.4%)
1330 USD US CPI (est 1.9% prev 2.1%)
1530 USD EIA Stock
2330 AUD Westpac Consumer Confidence
2350 JPY Japan Machinery Orders

Thu Feb 15
0000 AUD Australia Consumer Inflation Expectations
0130 AUD Australia Payrolls/Unemployment (like NFP) (est 15k prev 34.7k)
1330 USD US Jobless Claims
1330 USD US Producer Price Index
1415 USD US Capacity Utilization/Industrial Production
1500 USD NAHB Housing Market Index
2130 NZD NZ Business PMI
2230 AUD RBA Governor Lowe speaks
2350 JPY Japan FDI

Fri Feb 16
0700 EUR Germany Wholesale Price Index
0930 GBP UK Retail Sales
1330 USD US Housing Starts/Building Permits
1500 USD Michigan Sentiment Index
1800 USD Baker Hughes Rig Count

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Saturday 3 February 2018

Week to Feb 2nd

Monday saw a change in sentiment which continued all week. As the US 10-year Treasury yield climbed to its highest level in nearly four years, equities came off across the board, with SPX, DAX, NKY and FTSE all posting simultaneous red candles for the first time in a while. Notably AAPL was down 2% pre-earnings. The Personal Consumption Expenditure miss at 1330 didn’t help.

In currencies, USD followed the bond yields (and Trump’s remarks last week), and turned up with DXY put on 0.3% on the day. Key DXY components EUR, JPY and GBP were down, whereas CAD and AUD were flat. Gold and Oil were down in line with the stronger dollar.

Tuesday was more of the same, with yields up again, Gold and Oil fading, and all indices continuing to fall. SPX had its worst day since August 2017.  Healthcare stocks fell on news that AMZN, BRK and JPM were planning to set up their own company to take healthcare in-house. However, the trend was not the same with USD, which was down against all currencies except AUD. EUR was up 0.2% despite the German inflation (1300, reported later than scheduled) and Eurozone GDP (1000) misses. GBP briefly dipped below $1.40 before recovering to end the day up after bullish comments on UK growth by BoE Governor Carney.

As the month closed, the equity rout was halted (temporarily, see later) on Wednesday despite yields once again posting a near 4 year high. SPX and DAX were flat, and NKY was up (on weaker JPY) but FTSE was down (on stronger GBP). DJIA was helped by a beat from BA, its largest component, which we mentioned last week. This pause may have also been partly to do with month end rebalancing, not any change in momentum, which we know is always stronger on the downside.

The USD picture was mixed. DXY was flat, as was EUR, with the universally expected Fed rate hold at Chair Yellen’s final meeting at 1900 having little effect. As stated JPY was down, along with AUD (following the CPI miss at 0030), and GBP was up along with CAD. Gold and Oil changed direction and rose, the latter shrugging off the EIA stock miss at 1530.

February started on Thursday, and the equity fade continued in all markets (ignoring the US ISM PMI/Prices Paid beat at 1500), with a particularly sharp fall of 1.82% (1.4% cash period) in DAX, after a strong EUR rally, which saw it break above $1.25, together with a rise to 0.71% in German Bund yields, the highest since December 2015. Only NKY managed to remain flat, due to JPY coming off. The US10Y was similarly up 7bp to another high, the best day for yields this year. With the exception of EUR, the currency and commodity picture was the same as Wednesday, AUD and JPY down, GBP and CAD, Gold and Oil up. Oil completed a V-shape for the week to return to roughly where it opened.

We said last week that markets have been paying little attention to NFP, and so it was on Friday. Not only did the headline figure beat at 1330 (200k vs 180k), but so did the all-important Average Hourly Earnings (2.9% vs 2.6%), no doubt linked to the ‘Trump Christmas Bonuses that we mentioned last week. It was the best monthly improvement since the crash recovery in 2009, as shown in this chart from Friday's FT.

AHE is of course the sticking point for rate hikes, so the print should be bullish for USD, and sure enough yields put on another 5bp, to post the best weekly candle since Trump election week, and another 4-year high. DXY also put on 0.63%, and was up against all currencies. It is surprising that the dollar was not up more, perhaps next week. CAD was even further off after a report that Canadian PM Trudeau had said he would “walk away” from a bad NAFTA deal, and the loonie ended the day down 1.25%, its worst day for over a year. A triple whammy for CAD; great US employment figures, falling Oil (down 1.39% on the day), and NAFTA.

However, the big story of the day was the total rout in equities. DJIA fell 669.06 points (2.55%), its worst day in percentage terms since the Brexit vote, and in points terms since the 2008 crash. SPX fell 1.67%, ending the 17-month run without a 3% pullback, DAX fell 2.02%, NKY 1.36%, FTSE 1.32%. SPX and DJIA had their worst week in two years. Of course this is only to be expected given the price/action over the last few weeks and months. Following late Thursday earnings, AAPL and GOOG fell over 4%, but in a rare patch of green in a sea of red, AMZN was up 2.9% after a record profits beat. In the continually curious correlation between Gold and equities, the metal was down 1.32%, more than the dollar.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.


The week saw a complete reversal in a year-long trend. Indices posted their worst week since Brexit, and DXY posted the first green weekly candle for two months. Only EUR held up, so the best forex trade would have been to buy EURAUD, up 2.54%. Shorting the DAX would have delivered 5.06%. Commodities were, surprisingly, relatively flat.

Unusually, and as a consequence of the USD turn, EUR, GBP, NZD and JPY all posted inside weeks against USD, although not against each other.

Cryptocurrencies had a terrible week, with many saying the bubble has truly burst. Bitcoin was down 32% at one point, below $8,000. At the time of writing it has recovered to $9,500.

AUDUSD 0.7919 (-2.33%)
EURGBP 0.8823 (+0.54%)
EURUSD 1.2455 (+0.21%)
GBPUSD 1.4119 (-0.31%)
NZDUSD 0.7302 (-0.76%)
USDCAD 1.2421 (+0.87%)
USDJPY 110.15 (+1.44%)
DAX     12712 (-5.06%)
FTSE     7390 (-3.27%)
NIFTY   10760 (-2.75%)
NKY     22969 (-3.21%)
SPX    2754.8 (-4.15%)
GOLD  1330.94 (-1.46%)
OIL     65.06 (-1.78%)

NEXT WEEK (all times are GMT)

Over the weekend, German politicians are expected to finally conclude coalition talks, which may help the beleaguered DAX.

Monday sees a raft of Services PMI reports, and like Manufacturing last week, the ISM print is the most important. There is a presentation by ECB President Draghi at 1600, but it is only concerning the ECB Annual Report. EU Brexit negotiator Michel Barnier meets UK Brexit Sec Davis in London for talks, although little news is expected on the day.

Tuesday’s main event is the RBA rate decision, preceded by Australian Retail Sales and Trade Balance. The RBA is on record as saying it is not bound to follow the Fed, and commentators do not expect anything hawkish, given the weak last CPI release. A hold could push the currency further back down from the 0.80 psychological roundpoint. Elsewhere Fed Bullard (dove, non-voting) speaks at 1350 In Kentucky. Although New Zealand markets are closed, the milk auction results will be released sometime around the US open.

After Australia, it is New Zealand’s turn on Wednesday (which is early Thursday local time). The decision is followed an hour later by a press conference. Traders are looking for revised inflation projections following the December CPI miss. There is also a rate decision in India at 0900, 6% hold expected. Fed speakers are Kaplan (neutral, non-voting) at 1100, Outgoing member Dudley (neutral, voting) at 1330, Evans (dove, non-voter) at 1515, and Williams (hawk, voter) at 2220. TSLA earnings are released after the US bell.

Thursday’s main event is the fourth rate decision of the week, with the BoE decision at 1200. An unanimous hold vote is expected. GBP has of course largely recovered to a pre-Brexit level, and any dovishness now must surely cap its recovery. The continuing shutdown farce in the US continues. Today is the next expiry date. How long can Congress kick this ball into the long grass. ECB speakers today are Weidmann (hawk) at 0845, Villeroy (neutral) at 1015, Mersch (hawkish) at 1030, and Praet (dove) at 1045. Earnings season is coming to an end now, the only interesting ones (after the US bell) are TWTR and NVDA, the latter being the manufacturer of the GPU chips that power cryptomining.

Friday’s big event is the Canadian jobs report. It is unlikely to beat last month’s bumper 78.6k, but the estimate (at time of writing, watch for changes) is once again a lowly 10k, which will surely be beaten. We will have to see where CAD is after a week when NAFTA will be in the news. There is no US news at the same time (their NFP was last week), so the effect should be more muted than usual.

Also important is the RBA quarterly statement on Monetary Policy, which includes inflation and GDP forecasts. CB speakers today are Fed George (hawk, non-voter) at 0200 and BoE Cunliffe (dovish) in California, so towards the end of the session. A fifth rate decision for the week, the CBR is expected to cut the RUB rate by 0.25% at 1030, given the sharp fall in Russian inflation.

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

Mon Feb 05
0145 CNY China Caixin Services PMI
0855 EUR Germany Markit Services PMI
0900 EUR Eurozone Markit Services/Composite PMI
1445 USD US Markit Services/Composite PMI
1500 USD ISM Non-Manuf PMI

Tue Feb 06
0000 AUD Australia HIA New Home Sales
0001 GBP BRC Like-for-like Retail Sales
0030 AUD Australia Retail Sales
0030 AUD Australia Trade Balance
0330 AUD RBA Rate Decision (1.50% hold est)
0900 EUR Germany BuBa Pres Weidmann speaks
1330 USD US Trade Balance
1330 CAD Canada International Merchandise Trade
1350 USD Fed Bullard speaks
1500 CAD Canada Ivey PMI
1500 USD JOLTS Job Openings
2130 WTI API Stock
2145 NZD NZ Unemployment
2230 AUD Australian Construction Index

Wed Feb 07
0500 JPY Japan Coincident/Leading Economic Indices
0800 EUR ECB non-MPC minutes
1530 WTI EIA Stock
2000 NZD RBNZ Rate Decision (1.75% hold est)
2100 NZD RBNZ Press Conference
2145 NZD NZ Employment Change
2350 JPY Japan FDI
2350 JPY Japan Trade Balance

Thu Feb 08
0001 GBP UK RICS Housing Price Balance
0200 CNY China Trade Balance
0500 JPY Economy Watchers Survey
0700 EUR Germany Trade Balance
0845 EUR Germany BuBa Pres Weidmann speaks
0900 AUD RBA Governor Lowe speaks
1200 GBP UK rate decision
1300 USD Fed Harker speaks
1315 CAD Canada Housing Starts
1330 USD US Jobless claims
1400 USD Fed Kashkari speaks
1745 CAD BoC Wilkins speaks

Fri Feb 09
0030 AUD Australia Home Loans
0030 AUD RBA MPC statement
0130 CNY China CPI/PPI
0430 JPY Japan Tertiary Index
0930 GBP UK Manuf/Industrial Production
1300 GBP UK NIESR GDP estimate
1330 CAD Canada NFP/Unemployment/Participation

1800 WTI Baker Hughes Rig Count

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