Sunday 31 March 2019

Week to Mar 29th

Further Brexit defeats, NZD collapse, Mueller exonerates Trump (for now)

Mon Mar 25
After last Friday’s collapse following the 10-year/3-month bond inversion, markets were subdued today, with SPX flat, although non-US markets showed some recovery. USD was similarly flat, with slight moves down in GBP being matched by slight increases elsewhere.  Oil, Gold and bonds (inverse to yields) were up on the day, with the 10-year yield down 4.4bp. Apple’s product event underwhelmed the market, and the stock dropped 1.5%.

Tuesday March 26
All equity indices were up today as market digested the Mueller report exonerating, which was announced at weekend, but probably took a day to digest. Sometimes they do this on a ‘no news’ day. The dollar was also up as the drop in yields halted. DXY added 0.28% but the picture was mixed. The usual risk-on profile was seen. Gold and JPY were down, but AUD and CAD were up. EUR fell after the Germany Gfk confidence miss at 0700, whereas GBP was slightly up as some Brexiteers softened on the Theresa May deal, not enough however for the vote, which was cancelled. Oil had another good day.

Wednesday March 27
The day started with the RBNZ joining the dovish CB chorus. The kiwi fell sharply, finishing nearly 2% down on the day. Also Trump potential Fed nominee Stephen Moore called for a policy reversal and rate cut. Yields naturally fell again, but surprisingly USD held its own with DXY adding 0.17%, in a mixed day where JPY advanced as rates fell, as did GBP, but others declined. Gold and Oil were down in line with the stronger dollar. The dovishness caused an early rally in SPX futures, but this sold off hard at the open despite the trade balance beat, and did not fully recovery. DAX and FTSE were choppy but ended roughly flat helped by weaker currencies. NKY fell all day. An odd day, where markets behaved counter-intuitively.

Thursday March 28
Markets recovered on Thursday as the US QoQ GDP and PCE beats at 1230 (although the YoY figure missed). Housing and Jobless Claims data was mixed. All indices were up on the day. DXY was up again, only 0.17% but all currencies were down, GBP sharply (over 1%) as British MPs voted down a series of alternatives to the Prime Minister’s deal. Gold was notably down 1.5%. Oil dipped during the session on growth expectations, but ended the day flat.

Friday March 29
A final rally on Friday, fuelled by China trade talks optimism, and another upturn in the Michigan Sentiment Index gave the indices their best quarterly increase since 2010, and the best SPX Q1 since 1998. A flat DXY belied substantial currency movement, in particular an immediate 0.68% move up in CAD after the GDP MoM beat at 1230 (0.3% vs 0.0% best), and a wildly choppy GBP after the third Brexit deal vote was lost, down 1.16% on the day. Yields carried on upwards, and Oil rallied in line with equities.

After last week’s work performance, DAX was the best index this week. Four weeks in a row now for GBPJPY as the biggest mover, like last week a sell. Cryptos had another quiet week.

We have problems with Google Finance data this week, so no table

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
  • RBA Rate Decision
  • More China trade talks
  • Lots of Manufacturing data
  • Non-farm Payrolls

Monday April 01
This week Chinese Premier Liu travels to the US to continue trade talks. One of the busiest Mondays in months has a day packed with Manufacturing PMIs. China’s is very important, as it’s on the cusp on expansion/contraction, and may cause even more of an effect than the US ISM figure later in the day. Note that the UK and Europe are now on DST, but we stick with GMT in our listings. Also of course we start a new month and quarter.

01:00 CNY China Mfr & Non-Mfr PMIs (Sunday)
23:50 JPY Japan Tankan Large Mfr Index/Outlook (Sunday)
00:00 AUD HIA New Home Sales (MoM)
01:45 CNY Caixin Manufacturing PMI Mar (est 49.9 prev 49.9)
07:55 EUR Germany Markit Manufacturing PMI
08:30 GBP UK Markit Manufacturing PMI
09:00 EUR Eurozone CPI (Core est 1%)
12:30 USD US Retail Sales (Feb Control Group best 0.4% prev 1.1%)
13:30 CAD Canada Markit Manufacturing PMI
13:45 USD US Markit Manufacturing PMI
14:00 USD US ISM Manufacturing PMI (est 54.4 prev 54.2)
21:00 NZD NZIER Business Confidence (QoQ)

Tuesday April 02
The big story is the RBA statement, where traders will be looking for a repeat the RBNZ dovish line last week. Fed Bostic (dovish, non-voter) speaks today. Argentina's markets are closed today. There is a rate decision on RON (2.5% hold expected)

00:30 AUD Aus Building Permits (MoM)
03:30 AUD RBA Rate Decision/Statement (est 1.5% hold)
06:30 CHF Switzerland CPI
09:00 EUR Eurozone Unemployment Rate
09:30 GBP UK Markit Construction PMI
12:30 USD US Non-defense Capital Goods (est 0.3% prev 0.8%)
14:00 NZD NZ GDT Milk Index
20:30 WTI API Oil Stock

Wednesday April 03
Unusually quiet for a Wednesday on the data front. Watch for the ADP print, an indicator for Friday’s NFP. Fed Mester (hawk, 2019 voter) speaks today. There is a rate decision on PLN (1.5% hold expected)

00:30 AUD Aus Retail Sales s.a. (MoM)
00:30 AUD Aus Imports/Exports/TB
01:45 CNY China Caixin Services PMI
08:00 EUR Eurozone Markit PMI Composite
08:30 GBP Markit Services PMI
09:00 EUR Eurozone Retail Sales (YoY)
12:15 USD US ADP Employment Change
13:45 USD US Markit Services/Composite PMI
14:00 USD US ISM Non-Manufacturing PMI (est 58.7 prev 59.7)
14:30 WTI EIA Oil Stock

Thursday April 04
Another slow data day. Fed Bostic is on again today. There is a rate decision on INR (6.25% hold expected)

06:00 EUR Germany Factory Orders s.a. (MoM)
12:30 USD Jobless Claims
14:00 CAD Canada Ivey PMI
21:30 AUD Aus AiG Performance of Construction Index
23:30 JPY Japan Overall Household Spending (YoY)

Friday April 05
US and Canadian NFPs as always almost guarantee USDCAD volatility. After last month’s shocker, traders will be looking to see if there is any further shutdown effect on the March report. It's the end of the UK income tax year today. Hong Kong and China are closed for Ching Ming.

05:00 JPY Japan Leading Economic Index
06:00 EUR Eurozone Industrial Production s.a. (MoM)
12:30 USD US NFP/AHE/Unemp/Participation (est 175k prev 20k)
12:30 CAD Canada NFP/AHE/Unemp/Participation (prev 55.9k)
17:00 WTI Baker Hughes Rig Count

This report is published every week as an email by - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwits or Linkedin (all open in separate windows). Details of how I compile the report are here

Sunday 24 March 2019

Week to Mar 22nd

Fed signal no more hikes in 2019, Still no Brexit resolution, Very bad week in Germany

 Mon Mar 18
US markets continued last week’s rally today, as did FTSE on the back of weaker sterling. The mood did not extend to NKY and DAX, which were flat. The dollar was generally flat (DXY +0.08%). There was none of the usual intermarket correlation. Gold and JPY (and EUR) were slightly up despite SPX gains. AUD was up, CAD was slightly down despite Oil rising, as was GBP. Yields fell slightly despite stronger equities.

Tuesday March 19
An early rally in SPX today fell off sharply on reports that China is pushing back on some US trade demands, with indices flattening off. Only DAX managed to stay green, after upbeat comments on the automotive sector (about 20% of the index) from BAML. The dollar had another flat and directionless day (DXY +0.12%), with a Turnaround Tuesday on most currencies, bonds and Oil. Only Gold and EUR moved in the same direction as Monday. This was despite decisive beats in UK AHE and unemployment (the latter the lowest since 1971) at 0930, and German ZEW Sentiment at 1000. It seems like everyone was waiting for the Fed.

Wednesday March 20
The big story today was the Fed minutes, with a hugely dovish move in the ‘dot-plot’ (the views of individual FOMC members) from two rate hikes in 2019 to zero. The reaction in USD was immediately, an instant 0.5% down, which is where it ended the day. All currencies, Gold and bonds (inverse to yields) were up with the exception of GBP, which was already down 0.75% on Brexit concerns that it still managed to close red on the day. The third parliamentary vote on Brexit was postponed. Oil was up sharply on the EIA beat at 1430.

US equities had been falling all day following a statement by President Trump that the US will most likely leave tariffs in place during negotiations to ensure “China lives by the deal”. They were given a small short-lived boost by the Fed announcement, but all ended red. DAX woes were compounded by a 13% drop in BAYN.DE (BAYRY) following a court judgment that Roundup weedkiller caused cancer, and 5.7% drop in BMW on a profits warning.

Thursday March 21
Stocks slid in the Asian and European markets, as did US futures, but on the cash open there was a classic risk-on surge with SPX adding 1.1% and the riskier NDX was 1.4% higher. It was clear that this was a reaction to the dovish Fed as financials (which benefit from high interest rates as they are lenders when everyone else is borrowers) were the only sector to fall. Other indices followed, except DAX, beleaguered with individual component problems, today it was DBK.DE (DB) and CBK.DE (CRZBY) opening 5% and 4% lower.

DXY recovered most of its Wednesday drop, and all currencies, Gold, Oil and bonds were down. However this was not even. Although EUR exactly retraced (as did AUD), the key instruments of JPY and bond yields only faded a little of the Fed move. It was a large further drop (0.57%) in GBP which evened out the basket. The BoE rate decision did not cause any notable move, selling was fairly even all day.

Friday March 22
In the European session today, DAX and EUR were hit hard by a surprisingly bad miss on the German Manufacturing PMI at 0830 (44.7 v 48.0 est). The German Bund yield went negative for the first time since October 2016.

The Eurozone equivalent print half an hour later was 47.6 vs 49.5 est. FTSE also fell as GBP recovered. Following that, US markets were sapped by the US 3-month bond yield rising above that of the benchmark 10-year note, as the latter hit a 14-month low of 2.418%. This inversion is considered to be a recession indicator and was last seen in August 2007, just before the massive equity pullback. The sell-off was strong, SPX down 1.9%, NDX down 2.5% and RUT losing 3.6%.

USD was generally back up again today, although Gold, JPY and bonds rallied in the risk-off conditions, and GBP bounced back from the Thursday low. The Canadian CPI beat
and Retail Sales miss at 1230 cancelled each other out. Oil 
gave up Wednesday’s gains in line with the equity fade.

The collapse of DAX after a string of issues for individual stocks such as Bayer, BMW and Wirecard made in the biggest index mover in a generally flat week for equities. For the third week, the biggest forex mover was GBPJPY, the best short two weeks ago, the best buy last week, and now the best short again. It was a second quiet week for cryptos, and FANGs were mixed, although generally outperforming NDX.

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.

(all times are GMT)

(Calendar High volatility items are in bold)
  • Brexit endgame approaches
  • Large CB speaker roster
  • NZ rate decision
  • Final week of Q1/2019

Weekend News
The latest on Brexit is that the EU have offered to extend Friday’s deadline until May 22 if the deal is passed in Parliament this week, but only until Apr 12 if it isn’t. Weekend reports suggest no progress. In the US, Special Prosecutor Mueller is due to publish his report into Russian election meddling, but has already said there will be no further indictments. 

Monday March 25
USTR Lighthizer and TreasSec Mnuchin return to China this week to resume trade talks. Apple are holding a special product event, widely believed to be a new streaming service. There is another attempt by British MPs to take control of Brexit from the government. Fed Evans (centrist, 2019 voter) speaks today at 0145, followed by Harker (dove, 2020 voter) at 1000. Markets are closed in Greece and Colombia.

09:00 EUR Germany IFO Business Climate/Assessment/Expectations
12:30 USD Chicago Fed National Activity Index
17:00 AAPL Apple Product Event
20:30 AUD RBA Ellis speech
21:45 NZD NZ Imports/Exports/TB

Tuesday March 26
The third and final Brexit deal vote is planned for today, although weekend reports suggested it may be cancelled due to lack of support.

The Boao Forum opens in China today, with Premier Li Keqiang giving the opening remarks. Fed Harker (dove, 2020 voter) speaks at 1200 followed by Rosengren (hawk, 2019 voter). There are rate decisions on HUF (est 0.9% hold) and NGN.

07:00 EUR Germany Gfk Consumer Confidence Survey
12:30 USD US Housing Starts/Building Permits
13:00 USD US S&P/Case-Shiller Home Price Indices (YoY)
14:00 USD US Consumer Confidence
20:30 WTI API Oil Stock

Wednesday March 27
Senate Aviation Committee hearings on the Boeing 737-Max start today. The FAA and NTSB will testify. Traders will be listening to see if the RBNZ joins the dovish chorus. There are plenty of other CB speakers. RBA Asst Gov Kent speaks at 0010, and Fed George (hawk, 2019 voter) is on at 2130. From the ECB we have Chair Draghi (0800), Praet (0845), De Guindos (1045) and Mersch (1330). There is rate decision on KES.

01:00 NZD RBNZ Rate Decision/Statement (1.75% hold est)
09:40 EUR DE10 Bond Auction
12:30 USD US Trade Balance
12:30 CAD Canada International Merchandise Trade
14:30 WTI EIA Oil Stock

Thursday March 28
Today is the most important day in the week for data, with the final US GDP print for Q4, as well as PCE, the Fed’s preferred inflation indicator, and German inflation as well. Fed Quarles (centrist, 2019/2020 voter) speaks at 1115, followed by Williams (hawkish, 2019/2020 voter) at 1325 and Vice-Chair Clarida (centrist 2019/2020 voter) at 1330, and Bullard (dove, 2019 voter) at 2120. SNB Maechler is on at 1700. There are rate decisions, all expected to hold on CZK (1.75%), ZAR (6.75%) and MXN (8.25%).

In the British Parliament, today is the last day to pass the Brexit extension bill (short or long) as the House does not sit this Friday.

08:00 EUR ECB Pres Draghi speaks
10:00 EUR Eurozone Business Climate
12:30 USD US Jobless Claims
12:30 USD US 18Q4 GDP Final (est 2.4% prev 2.6%)
12:30 USD US PCE
13:00 EUR Germany CPI (est 1.6% prev 1.7%)
14:00 USD US Pending Home Sales (MoM)
21:45 NZD NZ Building Permits s.a. (MoM)
23:30 JPY Tokyo CPI (est 1.1% prev 1.1%)
23:30 JPY Japan Unemployment Rate
23:50 JPY Japan Retail Sales

Friday March 29
Today is the end of the week, month and quarter. In the UK, it is Brexit Day, unless an extension is granted and passed by Parliament, which seems almost certain. Taxi firm LYFT makes their IPO on the Nasdaq. Fed Quarles speaks again at 1645. A Moodys rating review is due in South Africa. There is a rate decision on CLP.

00:00 GBP Brexit Day - UK Initial Departure Day
00:01 GBP UK GfK Consumer Confidence
07:00 EUR Germany Retail Sales
08:55 EUR Germany Unemployment Rate/Change
09:30 GBP UK 18Q4 GDP Final
12:30 USD US Personal Income (MoM)
12:30 CAD Canada GDP Jan (MoM)
13:45 USD Chicago PMI
14:00 USD Michigan CS Index
14:00 USD US New Home Sales (MoM)
17:00 WTI Baker Hughes Rig Count

This report is published every week as an email by - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwits or Linkedin (all open in separate windows). Details of how I compile the report are here

Saturday 16 March 2019

Week to Mar 15th

Brexit deadlock: UK seeks extension, Trade talks postponed, SPX NDX and Oil hit new 2019 highs

Mon Mar 11

Equities sharply reversed last week’s decline today as the mood changed, driven by M&A enthusiasm as NVDA announced the acquisition of MLNX, and the merger of DB and CBK.DE moved closed. All four stocks shot up. SPX added 1.5% and NDX was up 2%. DJIA opened much lower as its largest component BA gapped down 10% after the 737-Max disaster in Ethiopia, but recovered during the day to close 1.2% up. DAX and NKY followed the US, but FTSE was in the red due to the strong pound. As explained many times in the past, the FTSE has an large number of companies whose revenue is in USD, and so their GBP-quoted stock price moves up when GBP moves down.

DXY was down 0.42% mainly because of a 1.4% surge in GBP, after reports that the weekend had led to something new from the EU side for the Brexit deal vote on Tuesday. The other instruments were as you would expect on a risk-on day. AUD, CAD, Oil and US 10-year yields were up, JPY and Gold were down.

Tuesday March 12
US indices took a breather today and closed only marginally up. DJIA was marginally down, as BA fell again as countries around the world started grounding the 737-Max. DAX was down as DB and CBK gave up some of Monday’s gains, as did NKY. Only FTSE benefited for the same reason it bucked the prevailing trend yesterday.

The high hopes that today, embattled British PM May was finally going to get her Brexit deal passed by Parliament crashed and burned at 1100, when AG Cox confirmed the legal position on the backstop had not changed. GBP instantly fell 1.5%. As expected, the vote later in the day failed.

The US CPI miss at 1230 weighed on USD which fell against most currencies, which when added to the GBP crash resulted in a flat dollar basket for the day. Yields fell sharply by 4.1bp on the CPI news to under 2.6%, a two-month low. Gold rose in line with the dollar move, and Oil was flat.

Wednesday March 13
Enthusiasm returned today, and stocks took another leg up, with SPX and NDX adding 0.7%. The US joined other countries in grounding BA airplanes, but after an initial 3.2% dip, the stock closed 0.5% up. Global indices were up in line. NKY, which had fallen sharply at the open on weak Japanese machinery data recovered in futures to join the others. Yields pulled back 2bp in line.

The dollar was firmly down (DXY -0.53%) across the board (even against JPY) after a miss on PPI at 1230 added to yesterday’s poor CPI print, and GBP soared again, after UK MPs voted to reject a no-deal exit from the EU. Gold and Oil were up in line, the latter reaching a four-month high after the EIA beat at 1430.

Thursday March 14
Just as Wednesday was like Monday, today was like Tuesday, and US indices were flat (this time SPX and NDX were a shade down and DJIA a little up, after strong day for AAPL and V). Misses on Jobless Claims and New Home Sales, and reports of a postponement to April in the US/China talks did not help. It was a similar picture in non-US indices, except for FTSE, buoyed by the no-deal rejection and a pullback in GBP.

USD recovered some of yesterday’s losses and was up against all currencies and Gold. The fall in Gold and AUD was particularly sharp and both may be linked to Copper giving up 1.75% on the day. Yields climbed slightly in line with the dollar. Oil made a small advance. The rise all week has been built on supply cut hopes, and the US sanctions on Venezuela.

Friday March 15
There was another step up today, although slightly weaker as SPX added 0.5% to make a total of 2.9% for the week, the best this year, and together with NDX, a 2019 high. This is all driven by US/China hopes and a ‘patient’ Fed. Today’s rally was largely driven by the JOLTS Jobs beat and the Michigan Consumer Sentiment beat (97.8 vs 95.3) both at 1400. The MCS estimate had already been revised above the 93.0 we published last week, but the print was read as a reversal of the recent decline.

Different prints affect different assets, and the NY Manufacturing Index and Industrial Product and Capacity Utilisation misses at 1230 had little effect on index futures, but precipitated move down in USDJPY and 10-year yields, the latter dropping 5bp in two hours. The decline in both was arrested by the MCS print, but they did not recover. Overall DXY was down 0.24% today, with only CAD weakening as it followed Oil which pulled back slightly after four days of gains. There was nothing surprising from the BoJ rate hold meeting, and despite a brief 30 pip wobble, the yen remained flat during the Asian session.

NDX was the standout performer this week, reflecting a return to risk-on mood, with its biggest component AAPL the star performer. In currencies the wild GBP swings. DXY fell 0.89%, giving up last week’s gains, with only yen declining, also reflecting risk-on. Therefore last week’s top short GBPJPY is this weeks best buy, up 2.42% to pretty much exactly where it was two weeks ago. BTC and ETH had a second quiet week. It was unthinkable even a year ago that crypto would be less volatile than currencies and indices, never mind individual stocks. The CBOE closed its Bitcoin futures contracts this week, citing lack of interest, although the rival CME continues to offer the product.

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)
  • Brexit saga continues with two weeks to go
  • Fed Rate Decision week
  • UK inflation, jobs, and rate decision
  • Bumper PMI day Friday

Monday March 18
Another quiet Monday, unless some black swan flies in over the weekend. There is no European or US news today. Markets are closed in Mexico for Benito Juarez' birthday.

23:50 JPY Japan Imports/Export/TVB (Sunday)
04:30 JPY Japan Industrial Production (YoY)
20:00 NZD NZ Westpac Consumer Survey
22:00 AUD RBA Kent speech

Tuesday March 19
The German sentiment index is likely to be balanced with a continuing strong equity index being offset by continual weak data and Brexit concerns. Any move in GBP from the UK earnings and unemployment results is likely to be overshadowed by Brexit.

00:30 AUD Aus House Price Index (QoQ)
00:30 AUD RBA Meeting Minutes
09:30 GBP UK AHE/Unempl/Claimant Count (AHE est 3.4% prev 3.4%)
10:00 EUR Eurozone Labour Cost
10:00 EUR Germany ZEW Sentiment (est -11.3 prev -13.4)
14:00 USD US Factory Orders (MoM)
14:00 NZD NZ GDT Milk Index
20:30 WTI API Oil Stock
23:50 JPY BoJ MPC Minutes

Wednesday March 20
The CME FedWatch tool has a 98.7% priced-in hold at today’s Fed meeting. With the recent weak jobs and inflation data, yet strong ISM prints, it will be interesting to see which way the Fed jumps in their rhetoric. Note the press conference is 30 minutes later, allowing for some wild moves in the short intervening period. Also scheduled today is yet another UK Parliamentary vote. on Brexit. This could be ‘the one’ with only nine days to go before the scheduled leaving date. This thing is changing every day, so keep watching the press. UK inflation, normally important is overshadowed by Brexit developments. There is a rate decision on BRL (1700)

00:00 AUD RBA Bullock speech
05:00 JPY Japan Leading Economic Index
07:00 EUR Germany PPI
09:30 GBP UK CPI/RPI/PPI (est 1.8% prev 1.8%)
14:30 WTI EIA Oil Stock
18:00 USD Fed Rate Decision/Statement (est 2.5% hold)
18:30 USD Fed Presser
19:00 GBP UK Parliamentary Vote on Brexit
21:45 NZD NZ 18Q4 GDP (est 0.6% prev 0.3%)

Thursday March 21
The UK rate statement allows Gov Carney to give his view on the Brexit situation. It may be hard to determine the general dovish/hawkish view through this. The European Council meets today to discuss China and the US-EU trade deal. Markets in Japan and India are closed for Vernal Equinox Day and Holiday respectively. There are also rate decisions on CHF, NOK, IDR, PHP, and TWD.

00:00 EUR European Council Meeting (all day)
00:30 AUD Aus NFP/Unemployment (est 15k prev 39.1k)
00:30 AUD RBA Bulletin
08:30 CHF SNB Rate Decision/Statement (est -0.75% hold)
09:00 EUR Eurozone Economic Bulletin
09:30 GBP UK Retail Sales
12:00 GBP BoE Rate Decision/Statement (est 0.75% hold)
12:30 USD US Jobless Claims
12:30 USD Philly Manufacturing Survey
23:30 JPY Japan National CPI

Friday March 22
Mostly PMIs today, the full Markit sets (Manufacturing, Services, Composite) are published for Germany, the UK and the US. The main volatility today will probably be in CAD with the Retail Sales and CPI simultaneous prints. Fed Bostic (dovish, non-voter) speaks at 0130 Saturday. There are rate decisions on RUB (1030) and COP (2000).

08:30 EUR Germany Markit PMIs
09:00 EUR Eurozone Markit PMIs
12:30 CAD Canada Retail Sales
12:30 CAD Canada CPI (Core est 1.2% prev 1.5%)
13:45 USD US Markit PMIs
14:00 USD Existing Home Sales (MoM)
17:00 WTI Baker Hughes Rig Count
18:00 USD Monthly Budget Statement

This report is published every week as an email by - you can sign up to receive it here. This blog is supported solely by advertising, so if any of them interest you, please click the links. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwits or Linkedin (all open in separate windows). Details of how I compile the report are here

Sunday 10 March 2019

Week to Mar 7th

Growth forecast cuts in China, Europe and Canada, Worst US TB since 2008

Mon Mar 04
Despite encouraging remarks from President Trump at the weekend, and another call for a weaker dollar, a rally in China during the Asian session did not prevent optimism from fading in the US markets and SPX close down 0.4%. DAX and NKY followed suit although FTSE advanced as GBP faded some its Brexit hopes gains. Yields fells on stock-bond rotation.
President Trump also called for a weaker dollar again, but this had no effect, with all currencies except JPY declining slightly, in line with the equity softening. Gold fell in line, although Oil managed to move up after Friday’s sharp fall.

Tuesday March 05
Mixed US data left equities directionless today. The situation was better in Europe after UK, German and Eurozone PMI beats at 0855, and DAX and FTSE were both up slightly. The dollar benefited from continuing EUR weakness ahead of the ECB meeting, with DXY advancing 0.24%, and CAD and JPY also fell slightly, and GBP was flat, as was Gold. Oil was choppy but ended slightly up, whereas yields fell for a second day. AUD hardly moved after the rate hold.

Wednesday March 06
Markets faltered again today on the US trade balance miss at 1330, the worst deficit since 2008, together with the ADP miss at the same time, and all indices were down, even FTSE. Yields were down 3.2bp, and JPY was up in line with the risk off mood. DXY was flat (as was Gold), with small recoveries (after two days decline) in EUR and GBP balancing a sharp drop in CAD (only 9.1% of the basket) after gloomy growth forecasts from the BoC at 1500 and mixed Ivey PMIs at the same time. AUD dropped sharply by nearly 1% on the Australian Q4 GDP miss. Oil ended slightly up, with the usual choppiness around the EIA print at 1530. The headline missed, but the Gasoline estimate beat.

Thursday March 07
Another day, another problem. Following the record US trade deficit and the BoC forecast, today the ECB downgraded growth forecasts for the giant Eurozone, and more significantly reversed policy from tightening (the end of bond buying in December) back to easing by a new TLTRO program. The forecast was expected, the TLTROs were not, and EUR fell 1.27% during the next six hours. US, Japanese (futures), and UK equities accelerated their fall. DAX had a short currency related spike up and then joined them.

DXY had its best day since June 2018, and rose 0.75%. As you would expect EURJPY moved even more (down 1.18%). Other currencies moved down, although notably, CAD did not suffer from its usual risk aversion, having softened the day before. Gold was flat. Oil was up slightly again, staying in the 56.50-57.50 range it has held all week. Yield were down again, following the rotation principle rather than the stronger dollar. This is showing that the dollar was not really stronger, it is just EUR that is weaker, as evidenced by the move down in USDJPY.

Friday March 08
The February NFP miss (20k vs 180k) at 1330 gave us three bad days in a row. Small misses sometime push equities up on the theory that they will delay rate hikes, but this was the third-worst print since 2011, following a stellar (311k) January. No tweet from Trump today! Markets all slid down further, although there was a small rally in the last hour. Notably China fell 4% in Asia well before the NFP release.

DXY was down 0.26%, giving back a third of its Thursday gains, with all currencies up, in particular big moves up in JPY and Gold, and down in Oil in line with the equity fade, although the latter recovered somewhat into the close. The Canadian NFP beat had a surprisingly modest effect, with USDCAD only down 0.28%, no more than DXY as a whole. Yields were down 5bp on rotation or dollar tracking.

Despite the stronger yen, NKY was the biggest index decline this week. The strong yen also made shorting GBPJPY (down 2.35%) the best forex trade of the week. Cryptos went to sleep again after a brief burst of activity last week. Another mixed week for FANGs with a surprisingly strong performance from FB.

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.

(all times are GMT)
(Calendar High volatility items are in bold)
  • Yet another Brexit ‘high noon’
  • BoJ Rate Decision
  • US Inflation release
  • US/Europe DST disconnect

Monday March 11
Today is the first day of the bi-annual one-hour disconnect between the start of daylight saving (summer) time in North America and Europe. The first effect is the Retail Sales print, an hour earlier for European traders, coming after the worst figure since 2001 last month. Our times remain on GMT, as they will when Europe enters DST.

21:45 NZD NZ Electronic Card Retail Sales (Sunday)
00:00 EUR Eurogroup meeting (all day)
07:00 EUR Germany Industrial Production/Trade Balance
12:30 USD US Retail Sales Jan (Control Group est 0.6% prev -1.7%)
13:00 GBP BoE Haskel speech

Tuesday March 12
Today, we have another attempt by embattled UK PM Theresa May to get her Brexit deal through the British Parliament. The vote seems likely to fail again, at which point the saga moves to later votes in the week. US inflation (one leg of the Fed’s dual mandate) will inevitiably affect USD if it is well off estimates. Fed Chair Powell is due to speak at some time today (unconfirmed).

00:00 EUR EcoFin Meeting (all day)
02:15 CNY China FDI
06:30 AUD RBA Debelle speech
09:30 GBP UK Industrial/Manufacturing Production
09:30 GBP UK GDP MoM
12:30 USD US CPI (Core YoY est 2.1% prev 2.2%)
13:45 USD Fed Brainard speech
19:00 GBP UK Parliamentary vote on Brexit (time approx)
20:30 WTI API Oil Stock

Wednesday March 13
Provided the Tuesday vote fails (as expected), a (free) vote by UK MPs is expected to on whether it is acceptable to exit on Mar 29 without a deal. This is designed to be rejected, and almost certainly will be.  In the middle of this, the UK Spring Statement (Budget) is announced, with possible tax changes. A new US report, the unwieldy-titled Nondefense Capital Goods Orders ex Aircraft has been marked by commentators as important, more so that the normal Durable Goods release at the same time.

10:00 EUR Eurozone Industrial Production s.a. (MoM)
12:30 USD US Core PPI
12:30 USD US Durable Goods
12:30 USD US ND Capital Goods (est 0.1% prev -1%)
12:30 GBP UK Budget Report (time approx)
14:30 WTI EIA Oil Stock

Thursday March 14
If the two previous votes are rejected, today’s British Parliament vote is crucial. This will be to extend the exit date (probably to May 23). There may be amendments for a longer delay, or even a second referendum (polls suggest a new people’s vote would cancel Brexit). This is the least certain and therefore potentially the most volatile for GBP. China’s Industrial Production figures are important, given reactions to recent Chinese data. There is a rate decision on UAH (0.5% cut expected)

00:00 AUD Aus Consumer Inflation Expectations
02:00 CNY China Retail Sales/Industrial Production (YoY)
07:00 EUR Germany CPI (est 1.% prev 1.7%)
12:30 USD US Jobless Claims
14:00 USD US New Home Sales (MoM)
21:30 NZD Business NZ PMI
22:50 CAD BoC Wilkins speech

Friday March 15
After growth downgrades elsewhere last week, traders will be listening carefully for any similar views from the BoJ, so for once, this normally unimportant rate decision and statement may cause some JPY volatility. The Michigan Sentiment Index is estimated to fall further. The miss two weeks ago caused a sharp fall in SPX, and another could do the same.

02:00 JPY BoJ Rate Decision/Statement (est -0.1% hold)
10:00 EUR Eurozone CPI
13:15 USD US Industrial Production (MoM)
14:00 USD Michigan Consumer Sentiment Index (est 93.0 prev 93.8)
18:00 WTI Baker Hughes Rig Count

This report is published every week as an email by - you can sign up to receive it here. This blog is supported solely by advertising, so if any of them interest you, please click the links. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwits or Linkedin (all open in separate windows). Details of how I compile the report are here

Sunday 3 March 2019

Week to Mar 1st

Brexit softening of position helps GBP, Tariff delay confirmed, Trump/Kim summit fails

Mon Feb 25
President Trump announced today that as there had been “substantial progress” in the US/China trade talks, he would be postponing the 15% increase in tariffs on $200Bn of Chinese imports. Although Chinese markets soared over 6%, the results were only modest in the US, Japan and Europe, which registered slight gains. DAX even retreated after the cash close. DXY had a flat day (as did Gold), with modest moves up in EUR, AUD and GBP being balanced by slight softening of CAD and JPY. Yields 

We have highlighted before the effect of President Trump’s tweets on his two favorite market subjects, the value of the dollar and the price of oil. Today he tweeted again that oil was too high, and  called on OPEC to “relax” Brent crude. The prices of both BNO and WTI quick dropped 3.2%.

Tuesday February 26
The big story of the day was UK PM May giving ground on Brexit, saying that if a vote for a deal could not be reached in time for the Mar 29 deadline, she would seek an extension. Sterling added over 1% on the news, which inevitably caused FTSE to fall (71% of the revenue of FTSE companies is from outside the UK). NKY moved down sharply in the cash session but recovered in futures to end the day flat, as did a volatile SPX. DAX continued to move independently and ended up.

The miss on US Housing Starts and Home Prices led to a weaker dollar, with DXY down 0.39%. Although not as strong as GBP, all currencies and Gold were up. Oil recovered 1% after the tweet crash. Yields were down in line with the weaker dollar. The Powell Humphrey-Hawkins testimony (summary: ‘patient’) did not add anything to what we already know.

Wednesday February 27
Another down day in equities as USTR Lighthizer testified to the House that a China trade deal was not yet certain, and would be a “long process”. Although not directly market-related, it didn’t help that Pakistan shot down two Indian military jets in Kashmir. Also the US Trade Balance (1330), Capital Goods, and Factory Orders (both 1500) reports were all down on the previous figure. World markets followed suit, although NKY managed to close flat in futures helped by the weaker yen.

The Brexit softening by PM May was accompanied by softening from both the hardline (want out, don’t care about a deal) ERG group in her party, and also the opposition Labour Party. Sterling continues to rise to its highest level in nearly eight months. Further oil recovery on the strong EIA beat at 1530 helped CAD, which despite a miss on annualised CPI, improved core monthly to 0.3% from -0.2% previously. Other currencies and Gold fell, resulting in a flat dollar basket. Yields were unusually up 4bp today, following USDJPY on part two of the Powell testimony.

Thursday February 28
Another down day after the failure of the Trump/Kim summit, where no progress was achieved. Also the long-awaited US Q4 GDP print at 1330, which beat estimates (YoY 2.6% vs 2.3% est, but was still well down on Q3 (3.4%). US Jobless Claims also missed. The markets are also working off an overbought condition after the strong 10-week bull run. Only DAX managed to post a small gain. The GDP print gave DXY a small boost (up 0.11%) with all currencies (even GBP) and Gold softening. Yields were up again. Oil continued its post Trump tweet recovery.

Friday March 01
Markets recovered again today, buoyed initially by the Chinese Manufacturing PMI beat at 0145, and German (0855) and Eurozone (1000) unemployment beats. The mood continued into the US Open, but was sharply halted by the double whammy of misses on the Michigan Consumer Sentiment (93.8 vs 95.7) and ISM Manufacturing PMI/Prices Paid at 1500. SPX dropped 0.73% in the two hours after the print. However, it then went on to fully recover into the close.

The GDP feelgood factor continued today with DXY up 0.22%, and all currencies and Gold down. However over half of the move was a plummet by CAD after the severe Q4 YoY GDP miss (0.4% vs 1.2%). The loonie is 9.1% of DXY, and fell 1.32% after the print, meaning if it had gone the other way, DXY would have been flat. The CAD move was accentuated by a 2.5% drop in Oil, fuelling by the ISM PMI miss.

A strong recovery from DAX this week, as it beat US indices and was the best performer. For the first time this year, we have a strong divergence in forex, with GBPCAD easily the biggest mover, up 2.26%. Last week’s crypto rally was short-lived, with BTC and ETH down again. A mixed week for FANGs, which were more volatile than the underlying NDX.

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.

  • Rate decisions in EUR, CAD and AUD
  • Non-farm payrolls in US and Canada
  • Australian and Eurozone Q4 GDP
  • China’s main political conference

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)

Monday March 04
A quiet start to a busy week, with limited scheduled news, so as usual, the trade war and Brexit will dominate. Brazil and Argentina are closed for two days for Carnival. India is also closed for Mahasivarathri Day.

00:30 AUD Aus Building Permits (MoM)
09:30 GBP UK Markit Construction PM

Tuesday March 05
The 13th National People’s Congress in China is expected to produce economic growth targets going forward, and review intellectual property and technology transfers, key areas in the trade dispute. The key scheduled event is the RBA rate decision. Fed Rosengren (hawk, 2019 voter) speaks at 1230, followed two hours later by Kashkari (dove, 2020 voter). Barkin (hawk, non-voter) is also on. Brazil and Argentina remain closed.

01:45 CNY China Caixin Services PMI
03:30 AUD RBA Rate Decision/Statement
07:00 EUR Germany Retail Sales (MoM)
09:00 EUR Eurozone Markit PMI Composite
09:30 GBP UK Markit Services PMI
10:00 EUR Eurozone Retail Sales (YoY)
14:00 NZD NZ GDT Milk Index
14:45 USD US Markit Services/Composite PMI
15:00 USD US ISM Non-Manufacturing PMI
15:00 USD US New Home Sales (MoM)
19:00 USD US Monthly Budget Statement
21:30 WTI API Oil Stock
23:01 GBP UK BRC Like-For-Like Retail Sales (YoY)

Wednesday March 06
The Canadian rate decision is expected to be a hold, but watch out for Gov Poloz remarks. It’s Australia’s turn to report Q4 GDP, which we have seen has moved markets in other countries. The ADP ‘sneak preview’ jobs estimate is 190k, 10k more than the NFP estimate for Friday. Fed Williams (hawkish, 2019 voter) and Mester (hawk, 2019 voter) both speak at 1700. There are also rate decisions on TRY and PLN. Brazil and Argentina reopen.

00:00 CNY China PPI
00:30 AUD Aus GDP Q4
12:15 GBP BoE Cunliffe speech
13:15 USD US ADP Employment Change
13:30 USD US Trade Balance
15:00 USD US Factory Orders (MoM)
15:00 USD US New Home Sales (MoM)
15:00 CAD BoC Rate Decision/Statement
15:00 CAD Canada Ivey PMI
15:30 WTI EIA Oil Stock
19:00 USD Fed Beige Book
21:30 AUD Aus AiG Performance of Construction Index

Thursday March 07
Another day, another rate decision, this time the key Eurozone figure. A hold is virtually certain, but as always it’s the report and press conference 45 minutes later which will be examined. The third day of Fed speeches as well, this time Brainard (was dovish, now centrist, 2019 and 2020 voter) is on at 1715. BoE Tenreyro speaks at 0930.

00:30 AUD Aus Retail Sales s.a. (MoM)
00:30 AUD Aus Imports/Exports/Trade Balance
05:00 JPY Japan Leading Economic Index
09:30 GBP BoE's Tenreyro speech
10:00 EUR Eurozone GDP Q4
12:30 USD US Jobless Claims
12:45 EUR ECB Rate Decision/Statement
13:30 USD US Trade Balance
13:30 USD US Nonfarm Productivity/Unit Labor Costs
13:30 EUR ECB Draghi Presser
13:30 CAD Canada International Merchandise Trade
23:30 JPY Japan Overall Household Spending (YoY)

Friday March 08
Simultaneous US and Canadian NFPs offer strong volatility for USDCAD today. As usual, the AHE figure may be more important than the jobs print itself. This is the final day before the US/Europe summer time disconnect. For the next three weeks, for Europeans, US markets will appear to open an hour earlier (1330 GMT), and for Americans, Europe will appear to run an hour later, closing at 1230 EDT. ECB Mersch (hawkish) speaks at 1630. Fed Chair Powell may also speak.

02:00 CNY China Imports/Exports/TB
09:30 GBP Industrial Production (MoM)
13:30 USD US NFP/AHE/UE/Participation/Productivity
13:30 CAD Canada NFP/UE/AHE/Participation
18:00 WTI Baker Hughes Rig Count

This report is published every week as an email by - you can sign up to receive it here. This blog is supported solely by advertising, so if any of them interest you, please click the links. If you want notification when the blog is updated, please follow me on TwitterFacebookStocktwits or Linkedin (all open in separate windows). Details of how I compile the report are here