Sunday 16 June 2019

Week to June 14th

Mexico boost fades for a flat week, US CPI miss reduces rate cut likelihood

Mon Jun 10
As we said last weekend, markets were bound to rise on the cancellation, or at least postponement of Mexican tariffs. SPX and FTSE were up, although NKY faded after the cash close to end flat. DAX was not open and also was flat. The dollar was also up (DXY +0.22%) against all currencies except JPY. Gold and Oil were down in line, as were bonds (inverse to yields) as money flowed into equities.

Tuesday June 11
Tuesday’s price/action was similar to Monday, a ramp during Asia and Europe that was sold off in the US session. SPX was slightly down whereas non-US indices (which close earlier) were up. This is a common pattern, the index future trading being less than the cash stocks volume. DXY hardly moved with losses in JPY and CAD balancing an advance in GBP after the AHE beat at 0830. Oil, Gold and yields were also flat.

Wednesday June 12
Markets were down slightly today after the US CPI slight miss at 1230, falling to 1.8% (e1.9%), below the Fed ideal rate of 2%, and so reducing the chance of a rate cut next week, which in turn rallied USD. DXY was up 0.25% against all currencies except JPY which was flat (the risk off and stronger dollar balancing each other). Bonds were up in a reverse of Monday. Oil fell on the stronger dollar and the EIA miss at 1530. So every asset reacted as you would expect.

Thursday June 13
After the tanker incident in Oman, Oil shot up today, adding 0.7% in 10 minutes on the news. Markets were up, led by energy reacting to the Oil price, and otherwise defensives such as Consumer Staples (XLP) and Utilities (XLU). World markets followed suit. The dollar did not react, another flat day with DXY moving 0.08% up. A slight move up in CAD (on Oil) balanced fades elsewhere. Gold and Bonds continued to rise.

Friday June 14
Markets retreated on Friday as the mood was sourced by the Michigan CSI miss at 1500 and also AVGO cutting guidance (a profit warning) blaming the trade war. Their stock fell 5.6%, but cast a shadow over the sector (SOXX down 2.4%), index (NDX down 0.8%), and market (SPX down 0.2%). A textbook exercise in sentiment contagion.

We have seen over the last year how the trade war is bad for stocks, but good for the dollar (or if you like, bad for non-US economies), and today saw a sharp move up in DXY of 0.43%, evenly across all currencies. Gold fell in line, and for once yields followed the dollar rather than bonds taking equity money, although to be fair they had been falling since Tuesday. Oil had an inside day, but was slightly up.

A flat week after last week’s rally saw only NKY break the 1% barrier to make it the strongest index of the week. The dollar advanced everywhere, with NZDUSD, down 2.61%, the biggest mover. NFLX bucked the FANG trend and fell on concerns that DIS will eat into their market. Cryptos resumed their upward climb.

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)
  • Will the Fed cut rates
  • UK and Japan rate decisions
  • USTR hearings on tariffs
  • UK and Canadian inflation

Monday June 17
The USTR public hearings on China tariffs are scheduled for today. Markets are closed in Greece, Cyprus, Romania, Ukraine, Iceland, South Africa, and Argentina.

09:00 EUR Eurozone Labour Cost Q1
18:30 CAD BoC Schembri speech
21:00 NZD NZ Westpac Consumer Survey

Tuesday June 18
The economic sentiment part of the three ZEW surveys in Germany will be watched closely for some recovery in the beleaguered Eurozone leader, otherwise one of the quieter days this week.

01:30 AUD Aus House Price Index (QoQ)
01:30 AUD RBA Meeting Minutes
06:00 EUR Germany PPI (MoM)
09:00 EUR Eurozone CPI (Core MoM e0.4% p0.0%)
09:00 EUR Germany ZEW Economic Sentiment (e0.5, p-2.1) 
12:30 USD US Building Permits/Housing Starts (MoM)
14:00 NZD GDT Milk Index
20:30 WTI API Oil Stock
23:50 JPY Japan Imports/Exports/TB

Wednesday June 19
The CME Fedwatch predicts a surprisingly high 23% likelihood of a cut, which means a hold may boost the dollar. This is after important inflation prints from the UK and Canada. President Trump launches his re-election campaign in Florida today. Markets are closed in Hungary.

08:30 GBP UK RPI/PPI/CPI (CPI YoY e2.2% p2.1%)
12:30 CAD Canada CPI (BoC Core YoY e1.2% p1.5%)
14:30 WTI EIA Oil Stock
18:00 USD FOMC Rate Decision/Statement (e2.5% hold)
18:30 USD FOMC Press Conference
22:45 NZD NZ 19Q1 GDP (QoQ e0.7% p0.6%)

Thursday June 20
Two more major rate set meetings today, although of more importance will be any Brexit remarks from BoE Gov Carney. There are also rate decisions on NOK (25bp hike expected) and IDR. Markets are closed in Brazil, Austria, Poland, Croatia, Portugal and Argentina.

01:15 AUD RBA Governor Lowe speech
01:30 AUD RBA Bulletin
02:00 JPY BoJ Rate Decision/Statement
04:30 JPY BoJ Press Conference
08:00 EUR Eurozone Economic Bulletin
08:30 GBP UK Retail Sales (ex-Fuel MoM e-0.5% p-0.2%)
11:00 GBP BoE Rate Decision/Statement (e0.75% hold)
12:30 USD US Jobless Claims
12:30 USD Philly Fed Manufacturing Survey
23:50 JPY Japan National CPI 

Friday June 21
The longest day of the Northern Hemisphere year and start of summer is also OpEx day. Expect heightened volatility. Fed Daly (non-voter) speaks today. Markets are closed in Sweden and Finland.

07:30 EUR Germany Markit PMIs (Manuf e44.5 p44.3)
08:00 EUR Eurozone Markit PMIs (Composite e51.7 p51.8)
12:30 CAD Canada Retail Sales (MoM e1.0% p1.1%)
13:45 USD US Markit PMIs
14:00 USD US Existing Home Sales (MoM)

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