Sunday 5 May 2019

Week to May 3rd

Fed ‘no rate cut’, Strong NFP but weak AHE, AAPL up GOOGL down on earnings
Mon Apr 29
Markets were subdued today, although SPX made a new intraday high before closing at 2943. The best US Consumer Spending print (1230) since August 2009 was subdued by a miss on PCE, the inflation metric used by the Fed at the same time. DAX and FTSE were also slightly up but NKY futures (Japan was closed all week) were down. USD was flat (DXY -0.05%) with slight advances in most currencies being matched by a pullback in JPY and Gold. Oil and yields were slightly up. GOOGL missed on earnings after the bell and the stock dropped 5%.

Tuesday April 30
After a sharp pullback at the open, SPX rallied into the close to make a new all-time closing high of 2945.83. NDX was less fortunate as the GOOGL loss extended to 7.5% trimming 0.7% from the index. Similar patterns were seen on other markets, although FTSE only managed to end flat due to GBP strength. The AAPL beat at 2030 kept SPX futures rallying.

There was a definitely trend down in the dollar (DXY -0.20%), as EUR rose firmly on a string of strong data from Europe, German (0755) and Eurozone (0900) unemployment, European GDP (0900) and German inflation (1200) all beat estimates, whereas the US Home Price Indices (1300) and Chicago PMI (1345) missed. Other currencies (and Gold) advanced, especially GBP breaking back through $1.30 for the first time in three weeks. Only AUD was weighed by the China PMI miss (0100) and was flat on the day. Oil advanced slightly, and yields were flat after an earlier rally.

Wednesday May 01
The new month opened with PMI misses at 1345 and 1400, and markets began to fade. The Fed at 1900 did not mention rate cuts in the minutes and would not discuss them at the presser. Together with the PMIs, “Sell in May” sentiment, and of course all-time high resistance, SPX fell 0.8%, its worst day since March 22. Other world markets behaved similarly, although notably they had started falling earlier. The ADP jobs beat had little effect.

USD of course spiked up on the dismissal of cuts although it had already been falling all day. DXY ended up 0.1% up. GBP and JPY ended flat, but other currencies were slightly down. Yields were also flat, the Fed spike recovering earlier losses, as was Oil, after a wobble at the EIA miss at 1430.

Thursday May 02
We often remind you that the Fed effect continues into the next day, and so it was today, with DXY adding 0.22%, yields advancing again and SPX falling further. The German Manufacturing PMI at 0755 missed and slipped further to a new low of 44.4, although this was countered by the weaker EUR and DAX ended up on the day. FTSE and NKY rallied by were both dragged down by SPX in the US session.

All currencies and Gold moved down against the ’no rate cut’ dollar, although GBP’s move was more muted after a hawkish BoE. Oil gave up 3.4% in line with the two-day equity pullback.

Friday May 03
After two days of pullback, the blowout NFP at 1330 (263k vs 190k) changed the mood completely, and SPX added 1%, and risk-on NDX 1.6%. World equities joined in the party. The AHE print missed, and this is bad for USD (workers need wage inflation to afford higher interest rates), as did the ISM Services PMI at 1400. USD declined sharply, with DXY shedding 0.36%, and all currencies and Gold up, with a particularly strong showing from GBP, with cable adding 175 pips from 1100 onwards. Yields were down in line with the dollar, and Oil recovered some of Thursday’s collapse.

DAX was the winner this week, as US indices reacted to the Fed, and GBPJPY up 2.41% was the standout forex pair. Crypto rallied again, and the big FANG moves were on earnings, AAPL up and GOOGL down substantially.

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)
  • Rate decisions in AUD and NZD
  • Trade Talks resume
  • US and China Trade Balances and inflation
  • Earnings season largely over
Monday May 06
Markets are closed in the UK, Ireland and Japan, and there is no US news, and earnings season is largely over. Expect a quiet Monday, with the China PMI setting the tone.

01:45 CNY China Caixin Services PMI
08:00 EUR Eurozone Markit PMI Composite
09:00 EUR Eurozone Retail Sales (YoY)
13:30 USD Fed Harker speech
17:45 CAD BoC Governor Poloz speech
22:30 AUD Aus AiG Performance of Construction Index

Tuesday May 07
After earlier Australian releases, the RBA official consensus is a hold, but some commentators are predicting a 25bp cut. Uncertainty predicts a material move in AUD. Another day with no US (or European) news of note.

01:30 AUD Aus Retail Sales s.a. (MoM)
01:30 AUD Aus Imports/Exports/TB
04:30 AUD RBA Rate Decision/Statement (e 1.5% hold)
14:00 NZD NZ GDT Milk Index
14:00 CAD Canada Ivey PMIs
20:30 WTI API Oil Stock
23:01 GBP UK BRC Retail Sales
23:50 JPY BoJ MPC Minutes

Le jour de gloire est arrivé
Wednesday May 08
Amazingly, a third day without US major releases, so we turn to Asia. A 25bp cut in the NZD rate is priced in at 70%, so like Australia, uncertain enough to cause a move either way. Trade talks are back on the agenda, with Chinese vice-PM Liu visiting Washington. There are rate decisions on BRL (6.5% hold expected), and THB. South Africa holds a general election. Markets are closed in France for VE Day, oddly not celebrated in the UK. The only significant earnings release of the week is DIS, after the close. Guidance should include their new Disney Plus streaming service projections.

02:00 CNY Imports/Exports/TB
02:00 NZD RBNZ Rate Decision/Statement (e 1.50% p 1.75%)
03:00 NZD RBNZ Press Conference
06:00 EUR Germany Industrial Production
14:30 WTI EIA Oil Stock
20:05 DIS Earnings

Thursday May 09
The third major print from China this week is inflation, and may set the initial tone in the absence of European releases, although the US Trade Balance will be watched closely, being topical. There are rate decisions on NOK, CLP and PHP. Russian markets are closed for Victory Day.

01:30 CNY China CPI (YoY e 2.5% p 2.3%)
12:30 USD US PPI
12:30 USD US TB
12:30 USD US Jobless Claims
12:30 CAD Canada Imports/Export/TB
13:45 USD Fed Bostic speech
21:30 NZD NZ Business NZ PMI
22:45 NZD NZ Retail Sales
23:30 JPY Japan Overall Household Spending (YoY)

Friday May 10
Today is the most important news day this week, with the key US CPI release, estimated to improve despite last week’s PCE miss. Canada’s NFP comes a week later than the US this month. It would normally be a chance to see CAD reaction in isolation, but the US CPI print is simultaneous, so USDCAD could go either way. Plenty of Fed speakers today, with Bostic, Evans, Brainard and last but not least Chair Powell on the roster.

01:30 AUD Aus Home Loans
01:30 AUD RBA MPC Statement
06:00 EUR Germany TB
08:30 GBP UK 19Q1 Prelim GDP (QoQ e 0.2% p 0.2%)
08:30 GBP UK Manuf/Industrial Production
12:30 USD US CPI (Core YoY e 2.1% p 2.0%)
12:30 CAD Canada NFP/UnEmp/AHE/Participation (NFP est 1k p -7.2k)
13:05 USD Fed Bostic speech
17:00 WTI Baker Hughes Rig Count
18:00 USD US Monthly Budget Statement

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