Week to Jan 4th

Mon Dec 31

On this final day of 2018, equity markets were a bi directionless as you would expect before a holiday. After a flat Asia and Europe, with FTSE closing completely flat at 1230, we saw a 1% dip at the SPX open which was quickly recovered, and the day ended a modest 0.32% up. DAX followed suit, although NKY was down after a strong (up 0.58%) performance from JPY. The dollar was down 0.38%, mainly due to the strong yen performance, although EUR and GBP also rallied. The JPY rally indicates negative sentiment, and commodity currencies AUD and CAD, and 10-year yields (rotation into bond) were down, and Gold was up, all in line with this. However, Oil posted a modest gain on the day.

Tuesday January 01

The first day of 2019 saw all markets closed, even forex and futures. Although forex trading opens at 2100 and equity futures at 2300, as they do on Sundays, we count that as being the following day’s session.

Wednesday January 02

The first significant data release of 2019 was the China Caixin Manufacturing PMI at 0145, which missed (49.7 vs 50.1), but more importantly crossed the line (50) from expansion to contraction. This spooked the thin Asian markets (Japan was still closed), and ES (SPX futures) which had opened well and was 0.46% up, promptly fell 2.69% in Asia, and it took all the European and US day to reduce that loss to 0.75%. As usual DAX, FTSE and NKY followed, the latter again hurt by further JPY appreciation. Only FTSE clawed back the losses by the end of the day, helped by a weaker GBP.

There was a 0.6% recovery in USD today, although it was not uniform. EUR gave up 0.89%, and after the holidays produced no helpful Brexit news, GBP fell by 1.06%. Big moves on thin trading days. AUD was also down, but surprisingly, CAD bucked the trend and rose sharply in line with Oil, which briefly shot up 7% after tanker-tracking showed a big drop in Saudi exports in December. JPY, Gold and bond prices were up again, in line with the risk-off mood.

USDJPY Low Volume Crash

Thursday January 03

The big news today was a cascade of events which happened after the close on Wednesday. It was started by the first-ever profit warning from AAPL, who reduced guidance based on poor China sales. The stock fell 7% after hours. Japan was closed for a third day, and it is thought that ‘Mrs Watanabe’ (the nickname for Japanese retail forex traders, the largest such group in the world) decided to go all out yen buying. This was in the ‘twilight zone’, the name given to the one hour (from 2200, 1700EDT) each day that futures markets close, the end of US activity, but before Asia opens, where volume is entirely from retail traders.
USDJPY fell 3.35% in four minutes, on tiny volume. AUDJPY fell 6.68%, and TRYJPY 10.98%.

The additional move in AUD meant of course that AUDUSD also spiked down. USDJPY recovered over half the spike immediately but still ended up down 1.2% (ie JPY up) on the day, whereas the selloff appeared to be a turning point for AUD, (possibly triggering sell stops or even limit buys) which actually ended up on the day. GBP was also sold heavily so a spike down appeared there, but EUR, CAD and CHF suffered no more than USD, so the primary pairs were unaffected. After all this, the general result for the day was a 0.46% softening in DXY, with all currencies, Gold, and Oil up.

The AAPL report weighed heavily on equities, and SPX finished 1.61% down, and NDX gave up 1.52%. AAPL was 9.96% down. This is interesting as AAPL is 9% of NDX but only 3.1% of SPX. This means that 0.9% (two thirds) of the NDX loss is directly attributable to AAPL, but only 0.05% (1/32) is. Such is sentiment. Non-US indices also fell (even though of course they don’t contain AAPL).

Friday January 04

And on a dime, it turned again, as we have seen so often in these volatile weeks. SPX had already started to turn up after the China Caixin Services PMI beat at 0145 (as contrasted to the manufacturing miss earlier in the week), but then the NFP figure came in at 1330 as a blowout 312k vs 178k estimate, it was reported that US-China trade talks would start next week, and to top it all Fed Chair Powell, speaking at 1515 said the Fed would be ‘patient’ with rate hikes. Markets soared, with SPX adding 3.2% on the day, its second best day since Feb 2016 (Dec 26 was better). All other indices were up, and Oil joined in the rally, despite the small EIA miss at 1530.

Gold, JPY and bond prices fell sharply with the risk on mood. However a rally in GBP after its sharp fall, and a CAD advance after the Canadian NFP beat, plus a flat Euro (it briefly dipped at NFP but recovered) left the dollar basket flat overall. AUD also accelerated on the China hopes.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day. Currency moves are stated in relation to the US dollar. Dollar moves are referenced from the DXY basket.

WEEKLY PRICE MOVEMENT

A very strong week for yen, including the flash spike, and for commodity currencies AUD and CAD, whereas the others were virtually flat. Shorting EURCAD for 2.25% would have been the best trade. Indices swung wildly up and down, with all the gains on late Friday. DAX was the best performer. The outstanding FANG performer was NFLX, up 16.2% after a GS upgrade. ETH continued to outperform static bitcoin for a second week, up an amazing 90% in three weeks.

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

AUDUSD 0.7122 (+1.11%)

EURGBP 0.8952 (-0.54%)

EURUSD 1.1396 (-0.37%)

GBPUSD 1.2730 (+0.17%)

NZDUSD 0.6737 (+0.46%)

USDCAD 1.3375 (-1.93%)

USDJPY 108.53 (-1.59%)

DAX     10802 (+2.07%)

FTSE     6837 (+1.53%)

NIFTY   10727 (-1.22%)

NKY     20150 (+0.85%)

SPX    2528.6 (+1.70%)

GOLD  1284.74 (+0.31%)

OIL     48.24 (+7.10%)

BTCUSD   3955 (-2.03%)

ETHUSD 164.88 (+16.01%)

FB     137.95 (+3.57%)

AAPL   148.26 (-5.10%)

AMZN  1575.39 (+6.59%)

NFLX   297.57 (+16.20%)

GOOGL 1078.07 (+3.00%)

DXY     96.20 (-0.49%)

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold). 

Monday January 07

Colombian and Russian stock markets are closed today, the latter observing Christmas Day in the Julian calendar. There is a rate decision on ILS. Fed Bostic (hawk, now non-voter) speaks in Atlanta.

21:30 AUD Aus AiG Performance of Mfg Index (Sunday)

15:00 USD US ISM Non-Manufacturing PMI/Factory Orders

15:00 CAD Canada Ivey PMI

17:40 USD FOMC Member Bostic speech

Tuesday January 08

At some point this week, the first round of fresh US-China trade talks starts. The JOLTS jobs openings figure is published at 1500, and the trade balances of both the US and Canada are published simultaneously, another USDCAD volatility opportunity.

10:00 EUR Eurozone Business Climate

13:30 USD US Trade Balance

13:30 CAD Canada International Merchandise Trade

20:00 USD US Consumer Credit Change

21:30 WTI API Stock

Wednesday January 09

Potentially, the most volatile day of the week for CAD and GBP. Around 1230 today, the UK parliament begins debating the Brexit withdrawal bill, which will continue until the crucial vote scheduled for next week. We stay with the UK for BoE Governor Carney’s speech, but before that, there is the Canadian rate decision. A hold is expected, so the commentary will be the key thing. It is of course FOMC minutes day as well. We have heard a lot from Chair Powell recently, so don’t expect any surprises. These are of course the minutes for December which resulted in the infamous rate hike.

07:00 EUR Germany Imports/Exports/TB/Current Account

08:00 EUR ECB Non-MPC minutes

10:00 EUR Eurozone Unemployment Rate

13:15 CAD Canada Housing Starts s.a (YoY)

13:20 USD FOMC Member Bostic speech

15:00 CAD BoC Rate Decision (1.75% hold est)

15:30 GBP BoE's Governor Carney speech

15:30 WTI EIA Stock

16:30 USD Fed Rosengren Speech

18:00 USD US10-Year Note Auction

19:00 USD FOMC Minutes

Thursday January 10

Normally the ECB minutes would be the main event today, but a speech by Chair Powell, and one from Vice Chair Clarida (a bit more hawkish than Powell, voter 2019 and 2020) will probably steal the show. There is a rate decision on PEN.

00:01 GBP UK BRC Like-For-Like Retail Sales (YoY)

01:30 CNY China CPI/PPI

05:00 JPY Japan Leading Economic/Coincident Indices

09:30 GBP BoE Credit Conditions Survey

12:30 EUR ECB MPC minutes

13:30 USD Jobless Claims

13:30 CAD Canada New Housing Price Index

17:00 USD Fed Chair Powell Speech

21:30 AUD Aus AiG Performance of Construction Index

21:45 NZD NZ Building Permits s.a. (MoM)

22:30 USD FOMC Member Clarida speech

23:30 JPY Japan Overall Household Spending (YoY)

Friday January 11

US inflation is the important print today, with an expected tick down in the core (ex food and energy) figure from last month to 2.1%. The GBP data may be interesting depending on how the Brexit debate has been going on. This is the last day before earnings season starts properly with Citibank reporting on Monday before the bell.

00:30 AUD Aus Retail Sales s.a. (MoM)

07:00 GBP UK Manufacturing Production

09:30 GBP UK Trade Balance

09:30 GBP UK GDP MoM Nov (est 0.1% prev 0.1%)

10:00 EUR Germany ZEW Sentiment Surveys

13:30 USD US CPI (Core est 2.1% prev 2.2%)

18:00 WTI Baker Hughes US Oil Rig Count

19:00 USD Monthly Budget Statement

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