Sunday 26 May 2019

Week to May 24th

Google/Huawei trade war intensification, USD hits two-year high, UK PM May resigns

Mon May 20
The trade dispute decline carried on today, as Google announced the termination of Android operating system supply to Huawei. SPX was down 0.7% and NDX shedded double that. A similar story was seen in DAX, FTSE and NKY. Australian and Indian markets were up sharply, in both cases following the surprise Conservative election wins.

The dollar, however, was flat against most currencies and Gold, with only AUD making a sharp move up. Oil and Bonds (inverse to yields) were slightly down.

Tuesday May 21
A moderate Turnaround Tuesday on equities saw most indices recover their Monday losses, triggered by a a three-month reprieve for Huawei.

The dollar was up again, but only by 0.1%. Most currencies were sluggish, but GBP spiked sharply on news that PM May was offering a second Brexit referendum to MPs, if they would vote for her deal. It quickly retreated when it was clear they would not. Similarly AUD gave up all its election gains in short order after the RBA Minutes and Governor’s speech. Gold was down in line with equity reversal, and Oil and Bonds declined slightly again.

Wednesday May 22
Tuesday’s rally was short-lived and stocks continued their trade war inspired downward path again today, with all markets giving up ground. For once the effect was strongest in the US, with only slight moves down in Europe.

DXY added 0.1% against most currencies to briefly touch a two-year high of 98.37.  Brexit-troubled GBP was notably down, but balanced by an appreciation in safe haven JPY. Bonds were also up in line, although Gold was flat. Oil followed equities down after the EIA miss at 1430. The FOMC minutes offered no surprises and markets hardly moved at the 1900 release.

Thursday May 23
Maybe the failure of the Fed to give rate cut encouragement, or just technical downward momentum, but today saw a sharper fall in equities, with SPX down 1.2% and NDX 1.6%. The mood was the same in Europe and Japan, with all indices registering declines of over 1%. The further decline of the German Manufacturing PMI to a new low of 44.3 at 0730 did not help. A clear risk-off mood saw Bonds, Gold and JPY sharply up, with 10-year yields up 8.1bp on the day, and a near 5% drop in Oil.

There was a sharp turn up in EUR, after it briefly hit a two-year low, following the ECB MPC Minutes  are 1230, and disappointing US Market PMIs, but as the move was seen across most currencies, it was probably a reaction to the previous day’s DXY high. All currencies were up (GBP barely so), and DXY lost 0.24%.

Friday May 24
Friday saw the resignation of UK PM May, and both GBP and FTSE rose. Markets may hate Brexit, but they hate uncertainty more (although the strong UK Retail Sales beat at 0830 may have helped)

The key US print of the day, Durable Goods/Non-Defence Capital Goods at 1230 missed, but SPX also rose. But overall markets recovered less than half of Thursday’s fade so it was probably only a technical move into the long Memorial Day weekend. Oil’s move was similar.

The dollar continued to retreat from its high, with DXY down 0.25% and all currencies up, and a particularly strong AUD, which returned to Monday’s election high. Gold and yields were flat.

The standout equity performer was the Indian NIFTY after the surprise BJP (Modi) win. Otherwise the biggest mover would have been risk barometer NDX. For the fourth week in a row, GBPJPY was the biggest mover, although only down 0.74% this week. Cryptos continued their advance, with BTC closing about $8000 for the first time since July 2018. As last week, AAPL underperformed the other FANGs.

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)
  • Four day week
  • Plenty of CB speakers
  • Currency manipulation report due
  • Canada in focus

Monday May 27
Markets in the US and UK are closed today, for Memorial Day and Spring Bank Holiday respectively. KHC report earnings. The results of the European Parliamentary Elections will be announced, with a large UK vote (largely seen as a ‘second Brexit referendum proxy’) expected to go to the Brexit Party, but by how much may affect markets. President Trump is in Japan today and tomorrow.

11:45 EUR ECB Lautenschläger speech (Sunday)
03:00 JPY BoJ Governor Kuroda speech
05:00 JPY Japan Leading Economic Index

Tuesday May 28
The US Commerce department ‘currency manipulation’ study is due to be published today. There is a rate decision on HUF.

05:45 CHF Switzerland 19Q1 GDP
06:00 EUR Germany Gfk Consumer Confidence Survey
09:00 EUR Eurozone Business Climate
13:00 USD US S&P/Case-Shiller Home Price Indices (YoY)
14:00 USD US Consumer Confidence
20:00 NZD RBNZ Financial Stability Report

Wednesday May 29
The BoC is expected to hold, although unlike the US, the risks are to the hawkish side, although Canadian data has been poor of late.

00:00 JPY BoJ Governor Kuroda speech
01:00 NZD RBNZ Governor Orr speech
01:00 AUD Aus HIA New Home Sales (time approx)
07:55 EUR Germany Unemployment Rate/Change
14:00 CAD BoC Rate Decision/Statement (e1.75% hold)
22:45 NZD NZ Building Permits s.a. (MoM)

Thursday May 30
Markets are closed today in Germany and much of Europe (although not the UK) for Ascension Day. US VP Pence meets with Canadian PM Trudeau to discuss USMCA ratification in the Canadian parliament. There are rate decisions on KRW, TRY and COP.

01:30 AUD Aus Building Permits (MoM)
12:30 CAD Canada Current Account
12:30 USD US Jobless Claims
12:30 USD US 19Q1 GDP/PCE QoQ (prelim)(GDP e3.1% p3.2%)
14:00 USD US Pending Home Sales
15:00 WTI EIA Oil Stock
16:00 USD Fed Vice Chair Clarida speech
18:15 CAD BoC Wilkins speech
21:30 WTI API Oil Stock
23:01 GBP UK GfK Consumer Confidence
23:30 JPY Japan Jobs/Applicants, Unemployment
23:50 JPY Tokyo CPI (e1.2% p1.3%)
23:50 JPY Japan Industrial Production (YoY)
23:50 JPY Japan Retail Sales

Friday May 31
The final day of the month may see some rebalancing volatility. The Canadian GDP print is final, not preliminary. There is a rate decision on BGN.

01:00 CNY China NBS PMIs
06:00 EUR Germany Retail Sales (MoM)
08:30 GBP UK Consumer Credit/Mortgage Approvals
12:00 EUR Germany CPI (e1.5% p2.1%)
12:30 USD Personal Spending/PCE YoY & MoM
12:30 CAD Canada GDP (QoQ e1.2% p0.4%)
13:45 USD Chicago PMI
14:00 USD Michigan CSI (e100.00 p102.4)

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