Sunday 28 October 2018

Week to Oct 26th

Monday Oct 22
The week opened with a strong rally in Chinese stocks, with the CSI 300 adding 4.32%, its best day since 2015, making 6.8% over two days. Similarly Italian stocks and bonds rallied briefly after Moody’s Friday rating left the country bonds as still investment (as opposed to junk) grade—just. However concern still weighed over the Italian budget. The net result of all this was a very mixed bag. DAX and NKY were flat, whereas in the US SPX and DJIA faded 0.4% and 0.5% respectively, but NDX (unaffected by Europe or bonds) was up 0.3%. FTSE was also up, following the stronger Oil price after vague concerns about the need to take action against Saudi Arabia after the Khashoggi affair.
The picture was clearer in currency. Continuing last week’s direction, DXY was up 0.38% and all currencies and Gold faded, and US Treasury 10-year yields were up in line.
Tuesday October 23
A definite Turnaround Tuesday for the CSI300 which gave up most of Monday’s gains, and Italian bond yields rose again as the EC—as predicted—rejected the Italian budget as incompatible with EU fiscal rules. Oil fell sharply with WTI down 5%, and BNO a little more, in line with the Chinese move, and on reports that Saudi Arabia could provide more output quickly if needed. Indices all fell, heavily at first, but recovered as bond yields fell 2bp. DXY was virtually flat on the day (-0.08%), as all currencies (and Gold) moved up, but only very slightly, although Gold hit an intraday three month high at that point when SPX was down over 2%. NZD was completely flat.
The sentiment hit earnings reports from DJIA components MMM and CAT whose stock fell heavily despite earnings beats. MMM missed on revenue and guidance, and CAT warned of tariff-driven cost increased. Both stocks initially fell 6% pre-market. MCD, VZ and UTX on the other hand beat on all metrics, and were up on the day, paring the DJIA daily loss to 0.5%
Wednesday October 24
The rout continued today, with SPX down 2.58%, and DJIA down 3.90%. BA opened the day with blowout earnings (EPS 3.58 vs 3.47), and crucially a substantial upgrade in Q4 guidance. It is a measure of the current mood that this only briefly lifted the stock 5% in the pre-market, and most of this had evaporated by the close, leaving the aircraft maker down on the week. FTSE, DAX and NKY also fell hard. MSFT after the bell was similar story. A substantial beat on EPS (1.14 vs 0.96), a revenue beat and no guidance change still saw an initial AH spike down of nearly 7%, although the the stock then recovered. It was a similar story with T which beat on revenue (although not EPS), gave up 8% instantly, to end the week 11.9% down, a seven-year low, and the worst week for ten years, ie in the middle of the 2008 financial crisis.
DXY was up 0.42%, and most currencies duly fell. However, the picture was not uniform. The yen, and for once, Gold did what they are expected to do in equity risk-off, and advanced. Also up was CAD after the BoC increase rates by 25bp to 1.75%, despite this move being widely expected. The loonie did what it usually does, a sharp spike (116 pips/0.89%) and then started to retrace, and ended the day up 0.23%. The surprising move was in yields, which fell sharply by 6bp, but sharp unexplained moves are often seen at elevated levels. 
Thursday October 25
Finally some relief came today, as markets rebounded, with tech leading the way as TWTR’s beat before the bell on a 50% surprise EPS (0.21 vs 0.14), and subsequent 14% leap, coupled with tiny SHOP (revenue a mere $270m) crossing the vital line into profit (EPS +0.04 vs -0.03) gave a somewhat irrational exuberance to AMZN and GOOGL buyers before earnings. The two giants put on 4.63% and 2.16%, in line with NDX as a whole rising 3.35%, its best day this year. SPX (+1.9%) and DJI (+1.0%) rose more modestly, as did DAX and FTSE, although NKY failed to move at all.
The closing bell was however a handbrake turn performance for tech.. Remember the ‘pass mark’ is 100% these days—all metrics must be beats. AMZN had a stellar EPS beat (5.75 vs 3.14—an 83% beat for the second largest company in the world is amazing), and a tiny 0.8% miss on revenue), but a reduction in Q4 guidance knocked 7% off the price AH. The GOOGL story was similar, they surprised by +25% on EPS, but only missed by 5% on revenue. Some economists would say making more profit on less revenue is a good thing, but not the market—the stock dropped 5%, although over half that was clawed back on Friday. Just to confirm how negative sentiment is this week, INTC announced a perfect scorecard, and faded its 6% rally in under two hours in the AH market, and only ended up 2.89% up the next day as shown here.
It was inevitable that DXY would have a good day. At the ECB rate meeting conference, President Draghi had little choice but to be dovish, so as not to cause a further run on Italy, and EUR duly fell. GBP also fell on Brexit worries, JPY and Gold on the risk on mood, and CAD doing its usual retracement after the rate hike spike. Only AUD appreciated on the day. Oil was up slightly in line with equities, and bonds were flat. Notably CNH hit a new 10-year low against the dollar.
Friday October 26
Thursday was only a brief respite. The tech results cast a pall over the whole market. Although the pre-market actually opens at 0900, it tends to be 1230, an hour before the US Open that the market take its cue from the economic releases at that time. Although GDP beat (3.5% vs 3.3%), the Core PCE miss (1.6% vs 2%) was probably more significant as the drivers for Fed rate decisions are the dual mandate, jobs (NFP) and inflation (CPI), not growth. PCE is an inflation proxy. Notably, the safe havens of bonds and JPY both spiked up on the report (ie USDJPY and yields fell) but retraced some of that quite quickly as you can see on the main chart. It remains to be seen whether bonds will continue to behave as risk-off havens.
SPX fell 1.7% and NDX, where AMZN and GOOGL reside gave up 2.2% on the day. Another hint that the malaise was earnings and not economic news driven was that DAX and FTSE were positive on the day, despite appreciating currencies. DXY pulled back 0.28% in line with the PCE miss, and all currencies and Gold advanced, except CAD, which finished off the retracement of its Wednesday rate hike spike. Oil was a shade higher but still down on the week.
Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.
A second good week for USD, with DXY adding 0.69%, and gaining everywhere except the yen, reflecting the risk-off mood in equities. Sterling was the weakest currency, the negative sentiment increases as we get closer to no-deal Brexit, and so shorting GBPJPY with its 2.51% bearish engulfing bar would have been the best trade. Indices were sharply down, with NKY giving up most on the stronger yen. Cryptos had their flattest week for years, moving less than 1%, and the FAANGs were badly hit, as NDX dropped 4.11%, its worst week since February, driven by disappointing earnings guidance from AMZN, although NFLX suffered worst.
AUDUSD 0.7093 (-0.38%)
EURGBP 0.8902 (+0.92%)
EURUSD 1.1424 (-0.93%)
GBPUSD 1.2833 (-1.83%)
NZDUSD 0.6512 (-1.24%)
USDCAD 1.3137 (+0.15%)
USDJPY 111.90 (-0.58%)
DAX     11255 (-2.51%)
FTSE     6939 (-1.41%)
NIFTY   10012 (-2.83%)
NKY     21317 (-5.61%)
SPX    2659.0 (-3.80%)
GOLD  1233.08 (+0.61%)
OIL     67.56 (-2.81%)
BTCUSD 6531   (+0.18%)
ETHUSD 205.03 (+0.05%)
FB     145.37 (-5.63%)
AAPL   216.30 (-1.37%)
AMZN  1642.81 (-6.87%)
NFLX   299.83 (-9.87%)
GOOGL 1083.75 (-1.94%)
(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)
NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold). 
Monday October 29
On Sunday the Brazilian elections are expected to confirm right-winger Jair Bolsonaro as President, and we start the week that happens this time of year every year where North America and Europe are one hour less apart. DST in North America starts two weeks earlier than Europe and ends one week later. Fed Evans speaks today at 1345. Today is also the UK’s budget statement, the surprise part of which is mainly tax changes. British stocks can be affected, particularly in regulated industries. The main items are usually revealed around 1200-1300. Like last week, there are no major earnings releases today.
23:50 JPY Japan Retail Sales (Sunday)
00:00 GBP UK Budget Report
09:30 GBP UK Mortgage Approvals
10:00 EUR EC Economic Growth Forecasts
12:30 USD US PCE (YoY est 2% prev 2%)
23:30 JPY Japan Unemployment/Jobs-applicants ratio
Tuesday October 30
We have listed an Italian report for the first time this week (we normally only list Germany among the EU nations), given the current volatility in Italian assets. Of less interest is Eurozone GDP, reported an hour later because as we have said before, the individual countries report beforehand. DJIA components KO and PFE report before the bell, along with V’s competitor MA, beleaguered giant GE, and car maker FCAU. FB is the final FANG to report, its earnings come after the bell, along with fellow tech companies BIDU, IQ and EBAY. The stock has been hammered recently, but as we have seen, an EPS beat on its own may not be enough for relief.
00:30 AUD Australia Building Permits (MoM)
02:10 AUD RBA Assistant Governor Bullock Speech
08:55 EUR Germany Unemployment Rate/Change
09:00 EUR Italy GDP
10:00 EUR Eurozone GDP (YoY est 2.1% prev 2.1%)
10:00 EUR Eurozone Business Climate
13:00 USD US S&P/Case-Shiller Home Price Indices (YoY)
13:00 EUR Germany CPI
20:30 WTI API Stock
21:45 NZD NZ Building Permits s.a. (MoM)
Wednesday October 31
The last day of the month, Hallowe’en is the end of the six-month summer seasonal cycle, where defensives typically outperform risk industries. There is more action than usual in the Asian session. ADP at 12:15 estimates 5k more than NFP. As always a large beat or miss can jump the gun on the ‘official’ result on Friday. GM report before the open. It will be interesting to compare the results with FCAU, and see how much steel and aluminum tariffs are mentioned. Don’t forget EIA stock, now that Oil is reacting to it.
00:30 AUD Australia CPI (YoY est 1.9% prev 2.1%)
01:00 CNY China PMIs
02:00 JPY BoJ Rate Decision/Statement (time approx.) (est -0.1% hold)
04:00 JPY BoJ Press Conference
07:00 EUR Germany Retail Sales (MoM)
10:00 EUR Eurozone Unemployment Rate
10:00 EUR Eurozone CPI (Core est 1.0% prev 0.9%)
12:15 USD US ADP Employment Change (est 195k prev 230k)
12:30 CAD Canada Gross Domestic Product (MoM)
13:45 USD Chicago PMI
14:30 WTI EIA Stock
21:30 AUD AiG Performance of Mfg Index
Thursday November 1
The new month starts today, and is traditionally the start of the winter six month seasonal cycle (risk stocks outperform). Banks are closed in Spain and Italy for All Saints Day, but not their stock markets. There is a rate decision in CZK, a 25bp hike is expected. Today is the pinnacle of the earnings season, with 491 companies reporting, the most of any day in the season, and of course AAPL, the biggest company in the world reports after the bell. It is likely that the AAPL result will set the tone for the whole market. Note that AAPL do not usually release until about 2130.
00:30 AUD Australia Imports/Exports/Trade Balance
01:45 CNY China Caixin Manufacturing PMI
02:00 CNY PBoC Rate Decision (time approx, est 4.35% hold)
12:00 GBP BoE Rate Decision/Statement (est 0.75% hold)

12:30 USD US Nonfarm Productivity/Unit Labor Costs
13:30 CAD Canada Markit Manufacturing PMI
14:00 USD ISM Manufacturing PMI/Prices Paid
Friday November 2
It’s the first Friday of the month so it must be NFP day in the US and Canada, so as always, USDCAD volatility is assured. The US estimate is 190k again, the ‘default’ estimate, well above last month, whereas the Canadian estimate is modest after last month’s blowout result. Remember how USDCAD works, one piece of news often retraces the price move from a previous one. We have the two NFPs and US Trade Balance at 1230, and the Canadian trade balance an hour later. BABA is the second BAT (Baidu-Alibaba-Tencent) stock to report this week,, before the bell.
00:30 AUD Australia Retail Sales s.a. (MoM)
08:55 EUR Germany Markit Manufacturing PMI
09:30 GBP UK Construction PMI
12:30 USD NFP/AHE/Unemp/Participation (NFP est 190k prev 134k)
12:30 CAD Canada NFP/Unemp
/Participation (NFP est 25k prev 63.3k)
12:30 USD US Trade Balance
13:30 CAD Canada Trade Balance
17:00 WTI Baker Hughes US Oil Rig Count
22:45 NZD NZ Building Permits s.a. (MoM)

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Sunday 21 October 2018

Week to Oct 19th

Monday October 15
US and Asian equities continued last week’s slide today, starting with the Chinese CSI300 dropping 1.3%. SPX and NKY ended down on the day, not helped by the big miss (-0.1% vs +0.3% est) on US Retail Sales at 12:30. Saudi Arabian tensions over the Khashoggi affair weighted, and the US sell-off came after the European markets closed, leaving DAX and FTSE positive on the day, in fact DAX added 0.8%, perhaps because Italian bond yields stabilised. Saudi worries also affected DXY which was down 0.32%, with all currencies advancing, even GBP, which fell in the early session on Brexit deal problems. Gold and Oil were also up in line with the weaker dollar, the former hitting an 11-week high of $1,233 at one point. Yields were up 2bp.

Tuesday October 16
Earnings beats from major DJIA components GS (up 3%), JNJ and UNH  (up 4.6%) gave SPX its best day since March. SPX and DJIA added 2.2% and NDX added 2.9%. NKY, DAX and FTSE also advanced strongly. GS and MS earnings helped lift the entire banking sector, and UNH the entire healthcare sector. Italy submitted its budget to the EU on time, and MIB rallied over 2% and the two-year BTP yield fell 16bp.

Despite the Italian news, EUR was flat. There was a pullback in JPY on the risk on mood, coupled with a rise in GBP on the strong, and above inflation average earnings print (3.1% vs 2.8% est) at 08:30 resulted in a flat DXY. CAD and AUD were up slightly, as was Oil. Gold gave back some of Monday’s gains as did US 10-year yields.

Wednesday October 17
The Fed minutes often strongly lift USD and yields and today was no exception. The hawkish message was that the rate hike plan is to continue, despite noises from the White House. DXY added 0.59% and all currencies pulled back sharply against USD. JPY had been advancing earlier in the day, but joined the part after the minutes were released at 18:00. GBP had been falling all day on further Brexit woes, despite the Core CPI beat at 08:30. Yields rose 4bp to 3.21, only 6bp away from last week’s seven-year high. Oil fell sharply, down nearly 3% on the day after the EIA stock miss, and of course on the stronger dollar. Gold was flat on the day.

Equities took a breather, and SPX and NKY were flat on the day. DAX was down as the 10-year BTP yield rose again, and on a report of reduced car sales (DAX is 20% automotive), and FTSE fell in line with the Oil pullback.

Thursday October 18
We have said before many times that equities and yields react quickly and currencies react slowly. The hawkish Fed minutes late yesterday weighed today on stocks, as did Saudi Arabia as TreasSec Mnuchin pulled out of the ‘Davos in the Desert’ conference because of the Khashoggi murder. SPX gave up 1.4%, most of Tuesday’s gains, and NDX shedded 2.1%. Japan and Europe fell in line as they often do on global sentiment issues. Saudi Arabia is a big customer for many US and European quoted companies, and the worry is that the Saudi actions in Turkey may well produce restrictions on business. NDX component ISRG beat on EPS and revenue after the bell, shares rose in the AH market by 2.4%

The dollar on the other hand was still basking in the glow of the Fed minutes and added another 0.34%. But what happens when equities are down, ie risk off. The yen (and Gold) rises but all the other currencies fall, particularly CAD and AUD, and this is what happened today. Yields reacted in line with equities, and were down 2bp (half of the Wednesday gain)

Friday October 19
After well-received earnings on Tuesday, the only major report today was from PG, who beat on EPS (0.94 vs 0.90) but missed on revenue (16.50B vs 16.54B). Despite the imperfect result the stock rallied 8.8%. After the miss on US Existing Home Sales at 14:00, this led to lacklustre day with a early rally in SPX fading back to flat. DJI managed a small gain on the PG rise, although the stock is only 2.12% of the index. NKY and the European indices did better, with small gains, particularly for NKY as JPY pulled back, and for DAX on surprisingly conciliatory comments from EU Commissioner Moscovici on Italy’s budget, which led BTP yields—which had earlier in the day hit a four year high of 3.85%—pull back 33bp from there to close at 3.51%. The late sell-off may have also been linked to monthly OpEx day.

After two good days, DXY pulled back 0.32% today, largely because of the positive response by EUR to the Italian news. GBP and AUD were also up, but CAD was down after the CPI miss (1.5% vs 1.8% est) at 12:30 as was JPY as risk-off faded. Gold and Oil were up in line with the weaker dollar, the latter also being bolstered by the Saudi situation (If the US ever imposed Oil sanctions on Saudi, Oil, or at least the BNO/WTI spread would rocket in price).

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


DXY pulled up again this week, but only by 0.31%, and lost ground against non-DXY currencies AUD and NZD. The best forex trade was shorting GBPNZD, down 1.91%. Weak GBP made FTSE the only index winner this week, and the strongest mover, in a generally flatter equities week. Cryptos staged a small recovery, although volatility continues to fade. FANGs continued to fall in line with the general mood, although FB managed to stay flat.

AUDUSD 0.7120 (+0.08%)
EURGBP 0.8821 (+0.24%)
EURUSD 1.1531 (-0.38%)
GBPUSD 1.3072 (-0.62%)
NZDUSD 0.6594 (+1.35%)
USDCAD 1.3117 (+0.58%)
USDJPY 112.55 (+0.30%)
DAX     11545 (-0.20%)
FTSE     7038 (+0.57%)
NIFTY   10304 (-0.52%)
NKY     22583 (-0.47%)
SPX    2764.1 (-0.17%)
GOLD  1225.60 (+0.74%)
OIL     69.51 (-2.77%)
BTCUSD   6519 (+3.61%)
ETHUSD 204.93 (+4.01%)
FB     154.05 (+0.20%)
AAPL   219.31 (-1.26%)
AMZN  1764.03 (-1.37%)
NFLX   332.67 (-2.03%)
GOOGL 1105.18 (-1.37%)

(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)

NEXT WEEK (High volatility items are in bold)

Monday October 22
The first full week of earnings season opens quietly, with little news. All eyes will probably be on the reaction by the US and Europe to the Khashoggi murder now that the Saudis have admitted killing him. Areas to watch are defence stocks and the BNO/WTI spread (Saudi oil is priced in BNO). New Zealand markets are closed for Labor Day. This may have an effect on the start time for the Sunday afternoon/evening forex quotes in the US and Europe.

04:30 JPY Japan All Industry Activity Index (MoM)
12:30 USD Chicago Fed National Activity Index 

Tuesday October 23
A big day for earnings with VZ, CAT, MCD, MMM and UTX all reporting before the bell. Their combined weight is 18.18% of DJIA. Some pre-market DJIA/SPX futures divergence is distinctly possible. There are no economic releases (which affect the major currencies) at all today, the first time we can remember, and certainly for over a year. FOMC Kashkari (the most dovish and not a voter, so not very important) speaks at 13:30. BoE Chief Economist Haldane speaks in Paris at 10:30. There are rate decisions in troubled EM countries Argentina (hold expected) and Indonesia (25bp hike expected).

13:30 USD FOMC Kashkari Speech
20:30 WTI API Stock

Wednesday October 24
Less stocks today but heavier weights. BA is the largest component (9.49%) of DJIA and reports before the opening bell. After the closing bell, the most important companies reporting are MSFT (10.17% of NDX) and V (3.73% of DJIA). Also reporting after the bell are once-great but now troubled giants F and T, and gold miner (and gold proxy) ABX. The most important economic release today is the Canadian rate decision where a 25bp hike is expected (97% priced in), despite weak Canadian data. September CPI missed estimates but is still above the BoC target, which like the US is 2%. There are four Fed speakers today: George (the most hawkish, 2019 voter) at 0000 in Sydney, Bostic (dovish, 2018 voter) and Mester (hawk, 2018 voter) both at 1700, and Brainard (was a dove, now only dovish, makes her more interesting, as it proves she can be swayed by evidence, 2018/2019 voter) at 2300. The Riksbank are expected to hold the SEK rate. 

05:00 JPY Japan Coincident/Leading Economic Indices
07:30 EUR Germany Markit PMIs
08:00 EUR Eurozone Markit PMIs
10:00 EUR Germany DE10 Bond Auction
13:00 USD US Housing Price Index (MoM)
13:45 USD US Markit Composite/Services PMIs
14:00 USD US New Home Sales (MoM)
14:00 CAD BoC Rate Decision/MPC Report (1.75% est 1.50% prev)
14:30 WTI EIA Stock
15:15 CAD BoC Presser
18:00 USD Fed Beige Book
21:45 NZD NZ Imports/Exports/TB

Thursday October 25
Probably the biggest day for NDX of the whole earnings season, as AMZN, GOOGL, and INTC report after the bell, along with 372 other stocks today, the most in one day so far this quarter. NDX stocks CELG, WYNN and AAL report before the open but they are only 1.05% of NDX combined. However, the after-bell reports total 24.23% of the tech index. If you can’t trade these stocks after hours, you can still trade NQ_F, the NDX futures instrument. For Europe-watchers, troubled DB report after the European bell. On the schedule, the most important news is the Euro rate decision and conference.

Of particular interest today is the new Fed Vice Chairman Richard Clarida, who will be speaking at 16:15 for the time in this role since his appointment in September. He is an economics professor and former director at Pimco, so we know he will have a strong feel for bonds! It remains to be seen how hawkish he is. There are rate decisions on TRY, NOK and UAH.

06:00 EUR Germany Gfk Consumer Confidence Survey
08:00 EUR Germany IFO Sentiment Indicators
11:45 EUR ECB Rate Decision (0% hold est)
12:30 EUR ECB Statement and Presser
12:30 USD US Durable Goods
14:00 USD Pending Home Sales (MoM)
23:30 JPY Tokyo Core CPI (0.9% est 1.0% prev)

Friday October 26
No significant earnings today, so the important news is US GDP at 12:30. As usual the report comes with the quarterly PCE (inflation proxy) figure. There is a RUB rate decision, hold expected. Looking forward into the weekend, the presidential election in Brazil is expected to confirm right-winger Bolsonaro, and regional elections in Germany are expected to cause losses for the ruling CDU. Also, daylight savings time ends in Europe but not in North America or Australia. For two weeks, European traders will see US markets open and close an hour earlier than usual. It also means that the UK will move to exact GMT time.

12:30 USD US GDP (est 3.3% prev 4.2%)
12:30 USD US PCE QoQ (Core est 2.0% prev 2.1%)
15:00 EUR ECB President Draghi speaks
17:00 WTI Baker Hughes US Oil Rig Count

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Sunday 14 October 2018

Week to Oct 12th

Monday October 08
The US stock market was open on Columbus Day, when concerns about the China trade war and Italian politics continued the downward slide in markets seen last week. The Chinese CSI300 had its worst day since February, and MIB fell 2.4% after the EC warned that Italy’s budget plans would break EU rules. All indices fell slightly, but with the US bond market closed, there was no direction for USD. DXY advanced very slightly (0.09%) with downward movements from Gold and all currencies except AUD and JPY, the latter reflecting risk-off mood. Oil was slightly up on the day.

Tuesday October 09
Unusually today, the worries switched back to the US. Italy’s bonds and stocks recovered, with MIB recovering 1.1%, leaving DAX flat on the day. FTSE and NKY were down slightly due to currency strength. The bond market re-opened and yields briefly touched a new seven-year high, SPX fell again, but was only down by 0.1% at the close after bonds finished 2bp down. Similarly, currency movements were muted with DXY flat (down 0.08%) on the day, and with no variations, every currency was very slightly up, as was Gold and Oil.

Wednesday October 10
The constant pressure from bond yields (Monday’s high was 3.248%) which are now nearly double the dividend yield of SPX (currently 1.89%) meant something had to give, and today indices fell hard. SPX fell 4%, in a near-marubozu red candle, and other indices followed suit. DAX was down 3.21%, FTSE a relatively mild 1.27% and NKY 3.46%. VIX rose 43%. USD also fell against EUR and GBP, the latter despite the GDP miss at 08:30. JPY was particularly strong, as would be expected, leaving DXY 0.23% down. However risk currencies AUD and CAD fell hard, as did Oil. As we pointed out a few weeks ago, Oil often falls in line with stocks, indicating reduced growth. Yields pulled back, but ended the day flat.

Thursday October 11
As often happens after sharp falls, there is a follow through day, and this is what happened today. All indices were down again, with SPX giving up  and falling below its 200-day moving average for only the second time since June 2016. The inflation miss at 12:30 did not help. Further downside was probably mitigated by a sharp pullback in yields, down 8bp on the day. Oil was down following the EIA stock miss at 15:30 and in line with stocks.

The follow-through happened with USD as well. DXY was down 0.45%, with all currencies advancing, particularly AUD, after Gold, somewhat late to the risk-off party, put in its best day in two years, adding 2.5% or $28.

Friday October 12
Earnings season starts in earnest today, and JPM, C and WFC reported before the bell. The first two beat on EPS but all three missed on revenue. Nevertheless, sentiment shifted and US indices recovered part of the previous two days losses. Foreign indices were still slightly down on the day (NKY was flat).It was still the worst week for indices since February, and in the case of RUT, the worst since Jan 2016.

DXY was quieter, adding 0.2%, gaining against all currencies except CAD, which advanced slightly, to be usual the least volatile, and the only currency to beat the dollar this week. The release of the US pastor in Turkey had a surprisingly muted effect on TRY, up only 0.73%. Oil was slightly up, and Gold gave $6 back of the previous day’s huge move.

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


DXY retreated 0.4% this week, with all currencies except CAD advancing. JPY was the strongest, in the risk-off environment, so a CADJPY short would have been the best forex trade. Indices of course fell heavily (except NIFTY, which did it last week). Note that the foreign indices fell more than the US but if you take into account the currency movements (ie a DAX short is placed in euros), SPX was the best short. Cryptos resumed their downward trend, and again ETH suffered more than BTC. FAANG performance was uneven, with AAPL holding up well, and AMZN being the best short.

AUDUSD 0.7114 (+0.92%)
EURGBP 0.8800 (+0.22%)
EURUSD 1.1575 (+0.49%)
GBPUSD 1.3154 (+0.32%)
NZDUSD 0.6506 (+1.09%)
USDCAD 1.3041 (+0.80%)
USDJPY 112.21 (-1.31%)
DAX     11568 (-4.52%)
FTSE     6998 (-4.37%)
NIFTY   10358 (+0.41%)
NKY     22689 (-4.63%)
SPX    2768.8 (-4.22%)
GOLD  1216.60 (+1.11%)
OIL     71.49 (-3.70%)
BTCUSD   6292 (-5.24%)
ETHUSD 197.02 (-13.79%)
FB     153.74 (-2.28%)
AAPL   222.11 (-0.97%)
AMZN  1788.61 (-5.35%)
NFLX   339.56 (-3.36%)
GOOGL 1120.54 (-4.05%)

(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)

NEXT WEEK (High volatility items are in bold)

Monday October 15
A US Treasury report is due today, the key takeaway of which is whether China will be branded a currency manipulator. Commentators don’t think it will happen, but if it does, expect Chinese stocks and CNY volatility. Also the Italian budget is presented to the EU, who are expected to reject it as incompatible with deficit rules. The bank earnings continue with BAC reporting before the bell, and of course we have US Retail Sales. The Bavarian election result is due, with a possible CSU loss of majority.

02:15 CNY China FDI (time approx)
12:30 USD US Retail Sales (Ex-autos est 0.3% prev 0.3%)
14:30 CAD BoC Business Outlook Survey
18:00 USD US Monthly Budget Statement (time approx)
21:45 NZD NZ CPI

Tuesday October 16
A big day of earnings with GS, JNJ and UNH (together 16.25% of DJIA) reporting before the bell, along with MS, and NFLX (1.8% of NDX) and IBM (3.77% of DJIA) reporting after the close. UK earnings are the big news release of the day. There is also a rate decision on HUF, hold expected.

01:30 AUD RBA Meeting's Minutes
01:30 CNY China CPI/PPI
08:30 GBP UK Average Earnings/Unemp/Claimant Change (Ex-bonus est 2.8% prev 2.9%)
09:00 EUR Germany Economic Sentiment/Current Situation
13:15 USD US Industrial Production/Capacity Utilisation
14:00 NZD NZ GDT Milk Index
20:30 WTI API Stock

Wednesday October 17
The EU Brexit summit today is focused on the Northern Ireland border issue, which has become the main sticking point in negotiations. Remember that the ruling Conservatives are only in power with the support of the Northern Irish DUP, who strongly oppose a hard border. Staying with the UK, yesterday’s earnings figure is followed by the inflation print. GBP could have a volatile day. The monthly FOMC minutes are of course important. The market current expects another 25bp in December, and is divided on March 2019. Trader will be looking for any language which varies this view.

00:00 EUR EU Brexit Summit (all day)
08:30 GBP UK CPI (Core est 1.8% prev 2.1%)
09:00 EUR Eurozone CPI (Core est 1.0% prev 0.9%)
12:30 USD US Housing Starts/Building Permits
18:00 USD FOMC Minutes
15:30 WTI EIA Stock
23:50 JPY Japan Imports/Exports/TB

Thursday October 18
Another day, another GBP print, but Retail Sales is less important, coming after CPI as the former is, in the end, a proxy for the latter. The Australian jobs report is important. The estimate is modest, and a beat may well add to the shaky recovery of AUD. ISRG (0.74% of NDX) report after the bell. There are rate decisions in CLP (hold expected) and KRW (25bp hike expected).

00:00 EUR EU Brexit Summit (all day)
00:30 AUD NAB Business Confidence (QoQ)
00:30 AUD NFP/Unemp/Participation Rate (NPF est 15k prev 44k)
08:30 GBP UK Retail Sales
12:30 USD Philly Fed Manufacturing Survey
13:00 USD Fed Bullard speech
23:30 JPY National CPI

Friday October 19
Attention turns to Canada today with the simultaneous inflation and Retail Sales reports. Now that NAFTA is concluded, these reports may start to have more significance. PG (2.12% of DJIA) reports before the bell. Today is OpEx day, so expect additional volatility.

02:00 CNY China Retail Sales/Industrial Production
02:00 CNY China GDP (YoY est 6.6% prev 6.7%)
04:30 JPY All Industry Activity Index (MoM)
06:35 JPY BoJ Kuroda Speech
12:30 CAD Canada CPI/Retail Sales (Core CPI est 1.8% prev 1.7%)
13:00 USD FOMC Kaplan Speech
14:00 USD Existing Home Sales (MoM)
17:00 WTI Baker Hughes Rig Count

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Saturday 6 October 2018

Week to Oct 5th

Monday Oct 01
A new week, month and quarter, and a successful NAFTA deal. Also, after Friday’s sharp rise, Oil was up again. It added 3.3% today, to touch a new four-year high, based on continuing tensions between the US and Iran. Both factors contributed to CAD adding 0.74%, making a two-day move of 1.76% (despite a PMI miss at 13:30). Energy stocks were of course up, and together with buying for the new quarter, most indices were up. FTSE was down 0.21% (despite a flat GBP) after a profit warning from RM.L which fell 18%, and oil-insensitive NDX was down 0.36%.

In forex only CAD advanced, as stated, and GBP was flat as upbeat Conservative party conference sentiment balanced a generally stronger dollar (DXY up 0.18%, and up against all other currencies and Gold). EUR was hit by Italian 10-year bond concerns. The BTP yield rose by 15bp. US yields were up 2bp in line with the stronger dollar.

Tuesday October 02
Not really a Turnaround Tuesday this week, as US indices continued to move as Monday (SPX slightly up NDX down, DJIA slightly up to a new record close). BTP yields added another 15bp, their highest level in four years, which kept DAX in the red (as did negative sentiment about the Paris Motor Show), and FTSE was also down again, today’s casualty being TSCO.L, down 8.6% on an earnings miss. NKY fell on a stronger yen.

One noticeable reaction to Italy was Gold which added 1.2%, its best day in six weeks. This is unusual, as Gold has not been a strong risk-off indicator for a couple of years now. However, that was the message as JPY was up today, with all other currencies down, as DXY added 0.19%. Surprisingly yields were down 1.4bp, giving up Monday’s gain. Oil slipped slightly.

Wednesday October 03
The big story today was US bond yields, which soared 11.8bp, the largest one-day rise since the day after the Trump election nearly two years ago. This has of course been the trend, but the trigger was attributed to a strong beat, and 20-year record (61.6 vs 58 est, prev 58.5) in the ISM Services PMI at 14:00. This is not normally a very important indicator, but a large and record beat is another matter, as we have often said about PMIs.

Clearly this was going to have an effect on USD, with DXY adding 0.56%, its best day of the week. Notably USDJPY added 0.81%, its best day since Jul 11th. The effect was also seen in sharp falls in EUR, AUD and NZD. CAD retreated to a lesser extent, buoyed by Oil adding 1.5% to a new high on Iran fears, despite the EIA miss at 14:30. Also GBP’s fade was modest, after a well-received speech by UK PM May to close the party conference. She came on to Abba’s “Dancing Queen”, although commentators immediately pointed to the Swedish group’s first hit “Waterloo”. Gold also gave up some of the previous day’s gains, and INR hit a new all-time low, and IDR a 20-year low.

SPX was down on the day, as was DJIA, although the latter hit an intraday record high of 26,950. before pulling back. DAX was closed for a public holiday, although you can see in our chart that the futures market rallied then ended flat. FTSE was slightly up after two days of underperforming and NKY inevitably advanced on the yen fade. Note that the normal risk-off indicators were overwhelmed by the strong dollar following yields.

Thursday October 04
Bond yields did not pull back after the exceptional move on Wednesday. Although they only added 0.4bp, today saw contagion, with UK 10-year gilts adding 9.2bp (its highest level in 29 months), German Bunds adding 5.6bp, Australian 10-year 6.8bp, NZ 5bp, and JGB adding 1.8bp to 0.159%. (BTPs were surprisingly stable). The fact that yesterday’s US leap was not a flash in the pan caused a much stronger move down in equities, with SPX and DJIA each giving up 0.8% and NDX 1.8%, their worst days in over two months. FTSE and STOXX also fell over 1%, with DAXs losses surprisingly light at 0.4%, due perhaps to the stable BTP. NIFTY was also sharply down. Big bank stocks, of course, love increased interest rates, and XLF was up 0.72%. Notably RUT, of which 17.2% is smaller financial institutions was down 1.44%

As foreign yields rose and US yields didn’t it stands to reason that USD would give up ground to other currencies, and this is what happened, with the leading currencies; EUR, GBP and JPY were all sharply up. Canadian yields were not affected, they fell 1.4bp, and CAD duly followed down, possibly also affected by the Ivey PMI miss at 14:00. Despite their yield increases, the Antipodean pair could not overcome the risk-off sentiment, and both fell to new 32-month lows. Gold was up in line with the weaker dollar. On no further news about Iran, Oil gave up Wednesday’s gains and was down 2.7%, maybe also a delayed reaction to the EIA miss—we have seen that before.

Friday October 05
After Thursday’s pause, yields rose again today by 4bp, to close the worst week for bond prices since the mini-crash in February. UK and German yields rose by a similar amount. More pain in indices, which were all down over 1% again at the European close, although SPX clawed back half of that before the final bell, a Friday pattern we have seen many times. The only green was seen in China, where the CSI300 added 1%, opening after the four-day holiday. The FTSE EM index lost 1.1%, making a 4.3% decline for the week. Of course all this was not helped by the large NFP miss (134k vs 185k), which commentators attribute to Hurricane Florence. FTSE was hit particularly hard by a very strong showing from GBP (on positive Brexit sentiment), which put on 0.7% on the day, taking EURGBP to a three-month low.

In any event, when yields are rising everywhere, their effect is lessened. DXY gave up 0.18% today, with EUR, GBP and JPY advancing. As Oil faded, so did CAD, despite beating on NFP when the US missed, and beat on Trade Balance, all at 12:30. Canadian bonds hardly sold off at all. AUD and NZD fell to new lows, not gaining any confidence from either China or the possible bottom in Gold prices.

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


Another strong week for DXY, which was up 0.51%. We are starting to see fading at the periphery. AUD and NZD were sharply down, and shorting NZDCAD was the week’s best forex trade. The same thing in indices, with NIFTY giving up 5.62%, its worst week for 32 months. Shorting this was the week’s best index trade. Cryptos had their flattest week for months. NDX was only down 0.52% on the week. The performance of superstars AMZN and NFLX shows the FANG magic is fading.

AUDUSD 0.7049 (-2.41%)
EURGBP 0.8781 (-1.37%)
EURUSD 1.1519 (-0.72%)
GBPUSD 1.3112 (+0.64%)
NZDUSD 0.6436 (-2.71%)
USDCAD 1.2938 (+0.23%)
USDJPY 113.70 (+0.02%)
DAX     12115 (-0.95%)
FTSE     7318 (-2.39%)
NIFTY   10316 (-5.62%)
NKY     23791 (-2.16%)
SPX    2890.7 (-0.91%)
GOLD  1203.29 (+1.08%)
OIL     74.24 (+1.02%)
BTCUSD   6640 (+0.08%)
ETHUSD 228.53 (+2.98%)
FB     157.33 (-4.34%)
AAPL   224.29 (-0.64%)
AMZN  1889.65 (-5.66%)
NFLX   351.35 (-6.09%)
GOOGL 1167.83 (-3.25%)

(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)

NEXT WEEK (High volatility items are in bold)

Monday October 08
It is Columbus Day in the US. Bond markets  and some banks are closed but stock markets are open. Markets are closed in Canada for their Thanksgiving, and in Japan for Sports-Health Day. Expect reduced volatility. The Chinese markets open properly after the week’s holidays. SecState Pompeo is in North Korea for talks. The first round of presidential election is held in Brazil. There is a rate decision in Israel.

01:45 CNY Caixin China Services PMI
06:00 EUR Germany Industrial Production (YoY)
23:01 GBP UK BRC Like-For-Like Retail Sales (YoY)

Tuesday October 09
There is a possibility of further restrictions and investigations into Chinese trade practices this week. The US NFIB Small Business Optimism index is released at 10:00, very early in the day, otherwise there is very little news today.

06:00 EUR Germany Imports/Exports/Trade Balance
12:15 CAD Canada Housing Starts s.a (YoY)
23:30 AUD Australia Westpac Consumer Confidence

Wednesday October 10
Two Fed speakers today, Williams (centrist, 2018 and 2019 voter) speaks twice, and is followed by Atlanta Fed chief Bostic (centrist, 2018-only voter). The Core PPI print is the only important US release, otherwise the main even is UK GDP at 08:30.

07:00 EUR ECB Non-MPC Minutes
08:30 GBP Manufacturing/Industrial Production
08:30 GBP UK GDP (MoM)(prev 0.3%)
10:00 EUR Germany 10-y Bond Auction (time approx.)
12:30 USD US Core PPI
13:15 USD FOMC Member Williams speech
14:35 USD FOMC Member Williams speech
20:30 WTI API Stock
22:00 USD FOMC Member Bostic speech
22:30 AUD RBA Assistant Governor Ellis Speech

Thursday October 11
The all-important CPI release is the most important news item this week. The estimate is the same as last month, but we are comfortably above the Fed 2% target. Note how the NFP miss last week did not dampen the bond market (a proxy for rate hike expectations). As long as CPI stays above 2%, it is difficult to see a serious change. Nevertheless this print is part of the Fed’s (jobs/inflation) dual mandate, so USD volatility can be expected. Note also that this release is the one used to determine US social security inflation-linked payments (ie old age pensions). BoJ board member Mokoto Sakurai (not the Japan First politician of the same name) will meet with business leaders in Akita today. The EIA stock print is one day late because of Columbus Day. There is a rate decision in Peru.

01:00 AUD Australia Consumer Inflation Expectation
08:30 GBP BoE Credit Conditions Survey
11:30 EUR ECB MPC Minutes
12:30 USD US CPI (Core est 2.3% prev 2.3%)
12:30 CAD Canada New Housing Price Index
14:30 WTI EIA Stock
21:30 NZD Business NZ PMI

Friday October 12
The first major stock Q3 earnings are today, with three banks JPM, WFC and C all reporting. Next week sees much more earnings activity including NFLX on Tuesday. The trial of Pastor Brunson is held in Turkey. If he is released, expect TRY to soar, and by extension, relieve some EM pressure. The IMF begin their meeting in Bali. Note that there are elections on Oct 14 in Bavaria, where any rise in the far-right (anti-immigrant anti-EU) vote will be unwelcome by markets.

00:00 EUR IMF Meeting (all day, and Saturday)
00:30 AUD Australia Investment Lending for Homes/Home Loans
02:00 CNY China Imports/Exports/Trade Balance (time approx.)
02:15 CNY China FDI (time approx.)
06:00 EUR Germany CPI
09:00 EUR Eurozone Industrial Production
14:00 USD Michigan Consumer Sentiment Index (est 98.5 prev 100.1)
17:00 USD FOMC Member Bostic speech
18:00 WTI Baker Hughes US Oil Rig Count
18:00 USD US Monthly Budget Statement

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