Week to Feb 1st

Mon Jan 28

The rally on Friday was retraced today in equities, as the market started on a sombre note with guidance cuts from CAT and NVDA, and Apple supplier Japan Display (6740.TO) warning that the trade war would affect them “harshly”. SPX fell 0.8% and NDX 1.3%. Non-US indices were likewise down. DXY had a flat day, with slight upward movement in EUR after ECB President Draghi spoke at 1400, and of course JPY (and Gold) being balance by softening elsewhere, particularly in GBP. Oil followed equities down, and US 10-year yields were 1bp lower. A textbook risk-off day.

Tuesday January 29

A second weak day in the markets, although not as bad as Monday saw most indices flat with a little softening. NDX however fell considerably, as tech traders worried about AAPL, which reported after the bell. The big story of the day was another Brexit session in the UK parliament. The defeat of a motion to extend the exit deadline caused a sharp 0.85% drop in GBP, which benefited FTSE. The British index was up 1.29%. Other than sterling, the dollar hardly moved all day, although surprisingly Gold was up $8 to a seven-month high of $1,311. Oil was also sharply up, putting on nearly 3% in an hour in early US trading, as the US imposed sanctions on Venezuela. Yields were down 3bp.

Wednesday January 30

The mood changed on Wednesday. Markets were buoyed initially by AAPL EPS of $4.18, a beat, and a record level, and then, after a dovish statement from the Fed at 1900, markets accelerated further. Oil was up in line with the mood. The clear Fed signal of a pause in the rate hike cycle caused an instant sharp drop in USD and yields. All currencies and Gold were well up on the day, particularly commodity currencies AUD and CAD which had already been rising on the risk-on mood. FB reported a beat after the bell and the stock rose 11% in AH trading. MSFT also beat, but fell 2%, Given their net weights, that was only barely positive for NDX.

Thursday January 31

The buoyant mood continued today after the Fed statement and the FB beat. SPX and NDX were up, although DJIA was flat. DAX had a very unusual and independent day, driven for once by the German finance sector. After an early morning rally, worries about the proposed DB/Commerzbank merger sent both stocks down sharply, and then competitor Wirecard fell 25% on reports of fraud in their operations. The German index recovered after the cash close, but still ended down on the day.  FTSE was up as GBP fell again.

The poor Eurozone preliminary Q4 GDP figure sent EUR down, retracing most of its Wednesday gains, although other currencies were fairly static, as was Gold. However as EUR is the largest component of DXY, the basket advanced by 0.16%. Yields continued to fall in line with the Fed policy. Oil was flat on the day. AMZN reported record EPS and revenue, but reduced forward guidance caused the stock to drop 5% overnight.

Friday February 01

Another outstanding NFP (304k vs 168k) at 1330 had surprisingly little effect on the market, but this was partly due to a sharp (222k vs 312k reported) downward revision of the December print, a miss on unemployment, and general defocusing on the result because of the shutdown. The ISM PMI beat at 1500 also failed to register. There was a brief rally on reports that Robert Lighthizer and TreasSec Mnuchin were considering another trip to China, but other than FTSE (up on weak GBP), indices ended the day flat.

JPY followed EUR on Thursday in retracing its Fed gains. Yields similarly turned up to erase their Thursday losses. A decline in CAD and EUR matched the JPY move, and DXY ended the day flat, as did Gold. Oil was up again to close 3.5% up on the week.

WEEKLY PRICE MOVEMENT

The FTSE was by far the strongest index this week as GBP fell after the latest Brexit failure. The weakest currency was Brexit-plagued GBP and the strongest was CAD. Selling this pair would have made you 1.72% on the week.  Cryptos fell again, about twice as much as last week. FANGs were mixed, with FB outperforming.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on UUP. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold). 

Monday February 04

Chinese markets are closed all week for the lunar New Year, as is Vietnam. South Korea is closed for three days. Malaysia and Singapore close early. NDX giant GOOGL reports after the bell.

01:45 CNY China Caixin Services PMI (Sunday)

21:45 NZD Building Permits (Sunday)

00:30 AUD Aus Building Permits

09:30 GBP UK PMI Construction

15:00 USD US Factory Orders (MoM)

Tuesday February 05

The calendar is mostly PMIs but we have the hawkish FOMC George (voter) at 0030. DIS (3.01% of DJIA) and SNAP report after the bell. China  and Taiwan for closed for the rest of the week. Malaysia, Singapore and South Korea are closed until Thursday. Hong Kong is closed until Friday.

00:01 GBP UK BRC Like-For-Like Retail Sales

00:30 AUD Aus Retail Sales

00:30 USD FOMC Member Mester speech

00:30 AUD Aus Imports/Exports/Trade Balance

03:30 AUD RBA Rate Decision/Statement (est 1.5% hold)

08:55 EUR Germany Markit Services PMI

09:00 EUR Eurozone Markit Services/Composite PMIs

09:30 GBP UK Markit Services PMI

14:45 USD US Markit Services/Composite PMIs

15:00 USD US ISM Non-Manufacturing PMI

21:30 WTI API Stock

Wednesday February 06

President Trump will be giving his State of the Union address after markets close on Tuesday. You never know what this president might say, but commentators are looking for something on North Korea.  There are rate decisions on THB, BRL, PLN and ISK. New Zealand is closed for Waitingi Day.

01:30 AUD RBA Governor Lowe Speech

02:00 USD President Trump State of the Union address

13:30 USD US Trade Balance

13:30 USD US Nonfarm Productivity/Unit Labor Costs

13:35 CAD BoC Gov Council Member Lane Speech

14:00 NZD NZ GDT Milk Index

15:00 CAD Canada Ivey PMI

15:30 WTI EIA Stock

21:45 NZD NZ NFP/Unemp/Participation Rate/Labor Cost (est 0.5% prev 1.1%)

23:30 AUD Aus AiG Performance of Construction Index

Thursday February 07

The BoE are expected to hold rates today, but any new comments by the Bank on Brexit will interest traders. TWTR reports before the bell. There are rate decisions on INR, MXN, PHP, RON and RSD. South Korea, Singapore and Malaysia reopen.

05:00 JPY Leading Economic Index

07:00 EUR Germany Industrial Production

09:00 EUR Eurozone Economic Bulletin

12:00 GBP BoE Rate Decision/Statement (est 0.75% hold)

13:30 USD US Jobless Claims

20:00 USD US Consumer Credit Change

23:30 JPY Japan Overall Household Spending (YoY)

Friday February 08

The Canadian jobs reports comes one week after the US. There is a rate decision on RUB. Hong Kong reopens. Taiwan and China remain closed.

00:30 AUD RBA MPC Statement

07:00 EUR Germany Trade Balance

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

13:30 CAD NFP/Unemp/Participation

18:00 WTI Baker Hughes US Oil Rig Count

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