Week to May 31st

Markets give up four months gains, Oil eventually collapses, Mexico added to tariff list

Mon May 27

With the US and UK closed today, market movement (ie futures) was light, with SPX closing flat. The success of populist and right-wing parties in the European elections had little effect. Other indices rose gently, but only as their denominated currencies fell, on a slight dollar appreciation. Gold and Oil were flat.

Tuesday May 28

Markets resumed their trade-related slide today after President Trump in Japan said the US was not ready to make a deal with China. As you might expect bonds and JPY were up (10-year yields slid 6.2bp). DXY added a comfortable 0.21% as all other currencies (and, surprisingly, Gold) fell. JPY and bonds are a much more reliable measure of risk-off these days. Oil had a flat day.

Wednesday May 29

Today was very similar to yesterday, equities continued to slide and the dollar strengthened again by a similar amount, but this time, JPY gave up ground as well. The BoC rate hold came and went and made little different to CAD. The US Treasury released their forex report, and did not label China as a currency manipulator. This had no effect on CNY or any other currency. Oil, unusually, had a third flat day and was joined today by Gold.

Bond yields told a starker story. The 10-year yield briefly touched 2.2081%, its lowest since September 2017, and the 3 month/10 year inversion finished at levels not seen since August 2007.

Thursday May 30

Stocks managed a slight rebound today. European trading was thin because of the Ascension Day holiday. There was no particular good news, indeed PCE, Pending Home Sales and Jobless Claims all missed, so it was probably the usual technical adjustment, or in this case, a ‘dead cat bounce’. DXY was almost flat, with a slight move up in CAD balancing a further GBP fade. Oil however finally reacted to the equity sentiment, and fell 4.5% on the day. Yields continued to decline as risk money moved into bond safety.

Friday May 31

The new Trump tariff announcement of 5% on all Mexican imports, and the Michigan Consumer Sentiment miss at 1400 added further gloominess to equities, which fell again. The noticeable difference today was the dollar. DXY fell 0.57%, its worst day since January 25th, and all currencies rose. The uptick in risk-off Gold and JPY was particularly strong. Yields fell in line with the dollar weakness. Oil continued to plummet after the belated EIA miss, losing another 5%, its worst two-day run this year.

WEEKLY PRICE MOVEMENT
Equity losses were fairly consistent, with NKY the worst performer. Inevitably in the current climate it will always be a JPY pair that moves most, and this week CADJPY pipped our regular GBPJPY as the biggest mover (downwards). Cryptos advanced again, with BTC touching $9,000 mid-week, and last week’s lightest mover NFLX was the biggest loser in FANG this week.

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)

• New month
• US and Canada NFP
• ECB and AUD rate decisions
• Trump visit to the UK

Monday June 03

President Trump starts a three day visit to the UK today. Fed Barkin and Bullard speak today. Markets are closed in Colombia, New Zealand and Ireland

22:30 AUD Aus AiG Performance of Mfg Index (Sunday)

01:45 CNY China Caixin Manufacturing PMI (e50.0 p50.2)

07:55 EUR Eurozone Markit Manufacturing PMI

08:30 GBP UK Markit Manufacturing PMI

13:30 CAD Canada Markit Manufacturing PMI

13:45 USD US Markit Manufacturing PMI

14:00 USD ISM Manufacturing PMI (e53.3 p52.8)

23:01 GBP BRC Like-For-Like Retail Sales (YoY)

Tuesday June 04

The RBA didn’t cut last month, to the surprise of some traders. A cut this month is priced in, and it is notably that the both the hold last month and the surprise Coalition election win did nothing to shore up AUD. Fed Williams speaks today, as well as Chair Powell. Markets are close in Turkey until Friday. Ramadan ends tonight.

01:30 AUD Aus Retail Sales s.a. (MoM)

04:30 AUD RBA Rate Decision/Statement (e1.25% p1.50%)

08:30 GBP UK Markit Construction PMI

09:00 EUR Eurozone Unemployment Rate

09:00 EUR Eurozone CPI (Core YoY e1.0% p1.3%)

09:30 AUD RBA Governor Lowe speech

12:00 NZD GDT Milk Index

13:45 USD Fed Chair Powell speech

14:00 USD Factory Orders (MoM)

Wednesday June 05

Fed Bostic and Vice-Chair Clarida speak today. Markets are closed in Turkey, Indonesia, India, Denmark and Singapore. There is a rate decision on PLN.

01:30 AUD Australia 19Q1 GDP (QoQ e0.3% p0.2%)

01:45 CNY China Caixin Services PMI

08:00 EUR Eurozone Markit PMI Composite

08:30 GBP UK Markit Services PMI

09:00 EUR Eurozone Retail Sales (YoY)

12:15 USD US ADP Employment Change

13:45 USD Markit Services/Composite PMIs

14:00 USD ISM Non-Manufacturing PMI (e55.5 p55.5)

Thursday June 06

The ECB rate meeting is the big news today. Traders will be watching for TLTRO 3 (aka QE 2) commentary. Markets are closed in Turkey, Indonesia, South Korea and Sweden. There is a rate decision on INR.

01:30 AUD Aus Imports/Exports/TB

06:00 EUR Germany Factory Orders s.a. (MoM)

09:00 EUR Eurozone 19Q1 GDP (final s.a.) (QoQ e0.2% p0.4%)

11:45 EUR ECB Rate Decision/Statement (0% hold est)

12:30 EUR ECB Draghi Presser

12:30 USD US Trade Balance

12:30 USD US Jobless Claims/Labor Costs/Productivity

12:30 CAD Canada International Merchandise Trade

14:00 CAD Canada Ivey PMI

22:30 AUD Aus AiG Performance of Construction Index

23:30 JPY Japan Overall Household Spending (YoY)

Friday June 07

First Friday, so it’s NFP on both sides of the 49th parallel, so USDCAD volatility is assured. Fed Williams is on again today. Markets are closed in China and Kong Kong for the Dragon Boat Festival. There is a rate decision on CLP. We go in to the weekend G20 Summit where the US/China conflict will be high on the agenda.

01:30 AUD Aus Home Loans

05:00 JPY Japan Leading Economic Index

06:00 EUR Germany Industrial Production/Trade Balance

12:30 USD US NFP/AHE/UnEmp/Participation (NFP e190k p263k)

12:30 CAD Canada NFP/AHE/UnEmp/Participation (UnEmp e5.8% p5.7%)

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