Week to Nov 9th

Monday November 05

The mood was mixed in Monday, as the November upturn resumed to give SPX a 0.6% lift, but NDX turned down, still weighed by AAPL, after reports that production levels were static. The worlds largest company fell 2.84% in addition to its 6.7% drop on Friday. Italian yields rose again as Rome continued to defy Brussels on their budget, so it was no surprise that DAX was down, as was FTSE after the UK Market Services PMI miss at 09:30, and NKY finished flat on a slightly weaker yen.

Oil was particularly interesting. As the US reimposed Iranian sanctions there was a huge move in the Brent/WTI spread. Iranian Oil is priced in BNO and we saw a rare day where BNO rose 0.5% and WTI dropped 0.6%

DXY continued last week’s downtrend, and gave up 0.3%, with EUR, GBP and AUD all advancing. CAD was pulled back by WTI, and JPY and Gold continued their downward trend in line with the SPX gain. Yields were down 1bp in line with the weaker dollar.

Tuesday November 06

Markets diverged today with SPX, NDX and NKY firmly up as the mid-term vote took place, but a different story in Europe. Continued Italian budget concerns resulted BTP yields climbing 8bp, which pushed DAX into the red. Beats on the German, Spanish and Eurozone PMIs had no effect. FTSE was also down, but this was more a reaction to a notably stronger pound (up 0.4%), as nothing went wrong with Brexit today!

DXY had a virtually flat day (down 0.07%), with the GBP gain and a slight uptick in EUR balanced by a fade in JPY (and Gold) in line with the rising SPX. Notably VIX did not drop, suggesting some traders were hedging their bets on the election result. WTI continued to move down, losing 1.45% today, and CAD was down in line. Yields were up 2bp as the new paper auction at 18:00 sold at 3.209% yield.

Wednesday November 07

Markets love certainty, and they also loved the fact that no Democratic protest vote emerged. The midterms came in precisely as expected, and markets rose, with a clear risk-on sentiment. SPX added 2.1%, (riskier) NDX 2.7%, and VIX fell 17.8%. XLV outperformed on the belief that a gridlocked Congress would be unable to legislate way their profits, ie drug price controls.

DXY fell sharply on the results, at one point down 0.61% although it clawed back to close 0.10% down, again anticipating reduced legislation. Gold and JPY were of course down as stocks rose. EUR had a wild day but ended flat. GBP and commodity (risk on) currencies AUD and CAD were up, the latter despite a further fall in Oil after the EIA miss (5.78M vs 2.43M best) at 15:30

This was the seventh red day for Oil, the first time that has happened since January 2016. The fall is also because the US government has issued waivers to many countries to allow them to buy Iranian oil. Remember, like the dollar, the President has continually commented that he wants the Oil price lower. Yields had fallen as well in early trading, but tracked the dollar recovery and ended 1bp up. 

Thursday November 08

It was FOMC business as usual on Thursday, with the gradual rate hike path (and therefore resistance of White House pressure) confirmed again. This helped USD and depressed stocks, which took a breather after Wednesday’s strong performance, and SPX pulled back 0.3%. NDX was only down 0.61%. NKY, DAX and FTSE also registered small losses. 

DXY was up 0.46%, its best day for two weeks, and 0.31% of this came after the FOMC announcement. All currencies were down. Gold and bond prices (inverse to yields) were also down in line. Oil finished the day at 60.75, which is 20.98% from its Oct 3 high if 75.71, and so is now in ‘bear territory’ defined as a drop of over 20%.

Friday November 09

The continuing fall in oil prices, and other commodities, for example copper fell 4.84% this week, its worst since August was bound to eventually affect equities, and SPX fell 0.9% today. NDX, DJIA, NKY and the Oil-heavy FTSE also fell, whereas the resource buying (not selling) DAX managed a modest gain. Oil actually managed to stay flat, but closed the week under $60, the first time since February.

The dollar continued to react to the hawkish Fed, as it often does the day afterwards. DXY added 0.28%, and all currencies and Gold evenly moved down against it. Yields however turned down 4bp, as equity money rotated into bonds.

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

WEEKLY PRICE MOVEMENT

DXY added 0.42% this week, despite being down 0.85% at one point. The only currency that outperformed the greenback was NZD, after months in the doldrums. With CAD being depressed by Oil, buying NZDCAD would have been this week’s best forex trade, netting 2.39%. SPX benefited from the midterms and was the top index this week (DJIA did even better at 2.88%. NDX underperformed and as you can see FAANG performance was mixed. Once crazy in price swings, BTC and ETH continued for another week to show even less volatility than traditional instruments.

AUDUSD 0.7228 (+0.07%)

EURGBP 0.8737 (-0.41%)

EURUSD 1.1337 (-0.46%)

GBPUSD 1.2975 (-0.05%)

NZDUSD 0.6744 (+1.31%)

USDCAD 1.3213 (+0.70%)

USDJPY 113.83 (+0.55%)

DAX     11532 (-0.19%)

FTSE     7130 (+0.24%)

NIFTY   10585 (+0.30%)

NKY     22194 (+0.58%)

SPX    2776.0 (+2.09%)

GOLD  1209.27 (-1.93%)

OIL     59.75 (-4.86%)

BTCUSD   6416 (-0.17%)

ETHUSD 210.57 (+4.13%)

FB     144.96 (-3.58%)

AAPL   204.47 (-1.45%)

AMZN  1712.43 (+2.82%)

NFLX   303.47 (-1.82%)

GOOGL 1077.02 (+0.52%)

(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 November 12

It is Veterans Day in the US and Canada. Markets are not closed, but volume may be reduced, as also there are no release of note in either Europe or the US. Colombia markets are closed. Riksbank Sep Gov Flodén speaks at 1100 (SEK is 4.2% of DXY).

02:15 CNY China Foreign Direct Investment (YTD)(YoY)

Tuesday November 13

Today is the deadline for Italy’s response to the rejection of its budget by the EU. Expect further defiance, and thus EU retaliation. Any pragmatism on Italy’s part would be unexpected and be positive for EUR and BTP prices.

07:00 EUR Germany CPI

09:30 GBP Average Earnings/Unemployment/Claimant Change

10:00 EUR Germany ZEW Economic Sentiment/Current Situation

19:00 USD US Monthly Budget Statement

23:30 AUD Australian Westpac Consumer Confidence

23:50 JPY Japan GDP

Wednesday November 14

Today is the main release day of the week with inflation reports from both the UK and the US. Inflation is of course one of the Fed’s dual mandate items (the other being jobs), and unofficially, it is in the UK as well, so expect GBPUSD volatility. Although earnings season is largely over, IT giant CSCO, seventh-largest NDX component (2.7%) reports after the bell. Fed Quarles gives House Testimony at 1400. Fed Chair Powell and Fed Kaplan speak at 2305. There are rate decisions in Thailand and Israel.

00:00 EUR EcoFin Meeting (all day)

01:30 AUD Wage Price Index (QoQ)

02:00 CNY China Retail Sales/Industrial Production

07:00 EUR Germany GDP

09:30 GBP UK CPI (Core CPI prev 1.9%)

10:00 EUR Eurozone GDP (est 1.7% prev 1.7%)

10:00 EUR Eurozone Industrial Production s.a. (MoM)

13:30 USD US CPI (Core YoY est 2.2% prev 2.2%)

15:30 WTI EIA Stock

Thursday November 15

DJIA straggler WMT (2.7% of the index) reports before the bell today, and troubled giant NVDA (make of crypto-mining hardware, and 12th largest component of NDX at 1.7%) reports afterwards. Fed Quarles speaks again at 1500, and Fed uber-dove Kashkari is on at 2000. There is a rate decision in Mexico, and markets are closed in Brazil. 

00:30 AUD Australia NFP/Unemp/Participation (prev 5.6k)

01:00 AUD Australia Consumer Inflation Expectation

09:30 GBP UK Retail Sales (Control Group est 0.4% prev 0.1%)

13:30 USD Philadelphia Fed Manufacturing Survey

21:30 NZD Business NZ PMI

Friday November 16

A quiet day to finish the week. As we have said before, Eurozone CPI rarely moves EUR, as it rarely surprises as the individual 27 countries have already reported. Fed Evans speaks at 1630.

10:00 EUR Eurozone CPI

14:15 USD Industrial Production/Capacity Utilization

18:00 WTI Baker Hughes Rig Count

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