Sunday 28 July 2019

Week to Jul 26th

Mixed earnings, ECB less dovish than expected, British PM Johnson hawkish on Brexit

Mon Jul 22
After Friday’s dip markets were back up today on rate cut and earnings hopes. 

Energy stocks were strong following a rise in Oil (and Gold) after Iran seized a British tanker in the Gulf in retaliation for their ship held in Gibraltar.

The mood was shared by USD (DXY +0.22%), as sentiment moved to only a 25bp rather than 50bp cut next week. Currencies were all down, but yields were flat.

Tuesday July 23
Strong earnings from KO and UTX set the mood for another green day on indices and Oil. Similarly USD continued to rise (DXY +0.42%), with EUR falling harder than most, on ECB dovishness expectations, and of course not helped by Brexiteer Boris Johnson being confirmed as Britain’s new Prime Minister. GBP suffered even more with EURGBP down 0.22%. All currencies and Gold were down in line, and yields rose 2bp on stock/bond rotation and dollar strength.

Wednesday July 24
A third day of earnings produced a marked divergence between DJIA and SPX. The former was down 0.3%, caused by disappointing earnings from  CAT and BA, together 12% of the index. SPX however added 0.5% to close at another ATH. In currencies, a ‘Boris bounce’ (or maybe technical support) added 0.38% to GBP. With EUR further declining after the German Manufacturing PMI missed again, the dollar ended flat on the day. Yields and Oil both gave up yesterday’s advance, despite the EIA stock beat at 1430.

Thursday July 25
Equity markets came off today, after disappointing results from TSLA last night, and also AAL, warning of 737Max issues. AAL fell 8.4%, and BA fell a further 4%. The other trigger was the Durable/Capital Goods print (which ironically excludes aviation), which beat estimates. This was seen in a strong USDJPY (+0.44%) and 10-year yields (instant 8bp spike).

The ECB did not detail new stimulus to counter poor growth, and as markets were primed for dovishness, the net result was a spike up, and EUR closed up on the day, enough to trim DXY’s gain to 0.11%. (Note that DAX reacted instantly to this and the US Durables print). Elsewhere the Boris Bounce became a ‘Pfeffel Fade’ (Johnson’s third forename is de Pfeffel) as sterling returned to Tuesday’s level. Other currencies and Gold were also down, and Oil recovered somewhat.

Friday July 26
Strong earnings from GOOGL late Thursday and MCD set the pace for another advance in equities with new all-time highs, helped by the (preliminary) US Q2 GDP beat (2.1% v 1.8%) and PCE Q2 miss (1.8% v 2.0%) at 1230. The Fed’s ‘dual mandate’ for interest rate decisions is jobs and inflation. Growth is not in their mandate and therefore does not, in general, affect rate decisions, however common sense says it is good for stocks.

Also today, White House advisor Larry Kudlow “ruled out” any currency manipulation exercise [ie selling USD], after TreasSec Mnuchin had emphasised dollar stability earlier in the week.

The reaction in the dollar was mild. A PCE miss in theory makes cuts less likely, but the MoM and YoY releases come later (next Tuesday), and in any event are too close to the decision day on Wednesday. DXY was up 0.12% and most of this was due to further 60c collapse in GBP as the new British government vowed to leave the EU ‘by any means necessary’ on Oct 31st (incidentally, the same date that ECB President Draghi leaves office, and the supposed seasonal rotation period in stocks ends. Gold was slightly up, and Oil and Yields were flat.

Earnings produced some index disconnect this week, with NDX the standout performer, up 2.32%, with GOOGL the star. NZD reversed sharply, and was the weakest currency this week. Cryptos were relatively quiet.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. 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)

  • First rate cut for over a decade
  • Non-farm Payrolls
  • UK and Japan rate decisions
  • AAPL Earnings

Monday July 29
Three day China-US trade talks resume today, but there are no major European or American schedule releases. Chinese ‘BAT’ stock BIDU reports after the bell. Markets are closed in Peru and Thailand.

23:50 JPY Japan Retail Sales (Sunday)
22:45 NZD NZ Building Permits s.a. (MoM)
23:30 JPY Japan Unemp/Jobs to Applicants Ratio
23:50 JPY Japan Industrial Production (YoY)

Tuesday July 30
The first and least important rate decision this week is from Japan. DJIA defensive PG reports before the open. AAPL reports after the bell, along with AMD and NDX heavyweight GILD, and MA. Markets are closed in Morocco.

01:30 AUD Aus Building Permits (MoM)
02:00 JPY BoJ Rate Decision/Statement (e-0.1% hold)
06:00 JPY BoJ Koruda Presser
06:00 EUR Germany Gfk Consumer Confidence
09:00 EUR Eurozone Business Climate
12:00 EUR Germany CPI (e1.3% p1.5%)
12:30 USD US Core PCE MoM and YoY
13:00 USD US S&P/Case-Shiller Home Price Indices (YoY)
14:00 USD US Consumer Confidence/Pending Home Sales
20:30 WTI API Oil Stock
23:01 GBP UK GfK Consumer Confidence

Wednesday July 31
Today may set the course of the market for months. A 25bp rate cut is expected, but it is the dot-plot, the view on future rate direction that is critical. As you can see from this table, the current views are very mixed. The run-up to this decision has also shown wild swings in expectations as shown here, where the yellow bars are the likelihood of a 50bp cut (as a percentage of the two options 25bp or 50bp)

Appropriately ADP report today, about the same time as their jobs report, as do troubled ex-DJIA company GE. There is also a rate decision on BRL.

01:00 CNY China PMIs
01:30 AUD Australia CPI (QoQ e0.4% p0.3%) 
06:00 EUR Germany Retail Sales
07:55 EUR Germany Unemployment Rate/Change
09:00 EUR Eurozone 19Q2 GDP (YoY e1.0% p1.2%)
09:00 EUR Eurozone Unemployment Rate
09:00 EUR Eurozone CPI (Core YoY e1.0% p1.1%)
09:30 EUR DE10Y Auction
12:15 USD US ADP Employment Change
12:30 CAD Canada GDP
13:45 USD Chicago PMI
14:30 WTI EIA Oil Stock
18:00 USD Fed Rate Decision/Statement (e2.25% p2.50%)
18:30 USD FOMC Powell Presser
22:30 AUD Aus AiG Performance of Mfg Index

Thursday August 01
The first rate decision in the Johnson premiership may produce a BoE reaction to the stronger likelihood of ‘no deal’ Brexit and the current parlous state of the pound. There is also a rate decision on CZK. Markets are closed in Switzerland, Jamaica, Barbados and Bermuda.

01:30 AUD Aus HIA New Home Sales (MoM) (time approx.)
01:45 CNY China Caixin Manufacturing PMI (e.49.6 p49.4)
07:55 EUR Germany Markit Manufacturing PMI
08:30 GBP UK Markit Manufacturing PMI
11:00 GBP BoE Rate Decision/Statement (e0.75% hold)
11:30 GBP BoE Carney speech
12:30 USD US Jobless Claims
13:30 CAD Canada Markit Manufacturing PMI
13:45 USD US Markit Manufacturing PMI
14:00 USD US ISM Manufacturing PMI (e52.0 p51.7)
23:50 JPY BoJ MPC Minutes

Friday August 02
A new month brings NFP, but as always if it’s very early, the Canadian equivalent is not concurrent. Nevertheless, for once Canadian and US Trade Balances _are_ simultaneous, so a USDCAD volatility opportunity awaits.

Oil giants CVX and XOM report before the open. Rockefeller’s Standard Oil was once the largest company in the world, these two remnants are a mere 5% of DJIA today. Markets are closed in Costa Rica, Rwanda, and Bermuda again.

01:30 AUD Aus Retail Sales
06:30 CHF Switzerland CPI
08:30 GBP UK Markit Construction PMI
09:00 EUR Eurozone Retail Sales (YoY)
12:30 USD US NFP/AHE/Unemp (NFP e170k p224k, AHE e3.2% p3.1%)
12:30 USD US Trade Balance
12:30 CAD Canada Trade Balance
14:00 USD US Michigan CSI
14:00 USD US Factory Orders (MoM)

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 TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.

Sunday 21 July 2019

Week to July 19th

Mixed earnings week, Fed dovishness and rebuttal, Oil ignores usual triggers

Mon Jul 15
The Chinese GDP printed in line with expectations, and so offered no direction to the markets in early trading. C opened earnings season with a modest beat. Both C and the US markets in general were flat, although all three US indices still posted marginal new all-time highs.

USD was up (DXY+0.21%), which allowed the non-US indices to post gains (as their denominated currencies fell)), in particular FTSE, reacting to GBP fading 0.5% on Brexit no-deal concerns in the run up to the Prime Ministerial change. AUD and NZD were outliers, up 0.27% and 0.43% respectively. Gold was flat, and Oil and yields faded slightly in line with the dollar.

Tuesday July 16
JPM, JNJ and GS all beat earnings and revenue forecasts. However the market is a record highs, so this was priced in. Against this, the Retail Sales beat at 1230 was viewed as possibly giving the Fed room to delay or reduce rate cuts. US equities drifted downwards and DXY added 0.47%. Gold, Oil, all currencies and bonds (inverse to yields) were down in line, and once again DAX and FTSE posted green candles on account of the currency moves.

Wednesday July 17
The downward trend accelerated today with SPX’s worst day in three weeks, down 0.65% after an earnings and guidance miss from rail operator CSX (it dropped over 10%) which is part of DJT, and traditionally is supposed to lead DJIA. Also President Trump dampened hopes of an early deal with China. All other indices and Oil (transport-linked) fell, the latter despite the EIA stock beat at 1430. NFLX reported reduced growth after the close and also fell 10% after hours.

The dollar also pulled back (DXY -0.20%) with all currencies rising. Yields were down on both the weaker dollar and stock-bond rotation.

Thursday July 18
As always, interest rate policy trumps everything, even earnings. Today Fed Williams said that “it’s better to take preventative measures than to wait for disaster to unfold”, and Vice-Chair Clarida echoed similar sentiments to Fox News. This was enough to fully restore Wednesday’s pullback in equities, (helped by the strong Philly Manufacturing Survey at 1230 which printed 21.8 vs est 5.0) and had an equally strong effect on DXY, coming off 0.52%. in short order. All currencies and Gold moved down, as did yields of course.

Oil was strange, falling despite the equity ramp, the falling dollar and news of an Iranian drone being shot down by the US, all normally factors which would make it rise. This may be to do with the August contract expiry next Monday.

Friday July 19
Today Iran seized a British tanker in the Gulf, but more importantly, the NY Fed (where Williams is President) issued a very unusual press release saying his speech was “not about potential policy actions at the upcoming meeting”.  SPX, the dollar (DXY -0.41%) did a straight reversal of Thursday’s moves, as did yields to a lesser extent. Equities were not helped by the Michigan CSI miss at 1400. There are no more Fed speeches before the rate decision. Other equity markets followed, except FTSE which managed to close flat (as did Oil, despite Iran). 

The worst week since May saw NDX move the most, influenced of course by the massive 15% fade in NFLX.  NZD was the strongest for a second week, with GBPNZD falling 1.59%. Cryptos pulled back fairly strongly.

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)
  • Big week in earnings
  • How dovish will the ECB be?
  • New British Prime Minister
  • Fed Blackout period starts

Monday July 22
There may be some reaction to the Japanese election at weekend. We are now in the ‘blackout’ period for Fed announcements before the crucial rate decision on the 31st. We may also see the completion of the USTR on $300Bn of Chinese imports.

12:30 USD Chicago Fed National Activity Index 
15:00 JPY BoJ Governor Kuroda speech
22:30 AUD RBA Kent speech

Tuesday July 23
The British ruling Conservative party announce their new Prime Minister today, which can only be Boris Johnson. Sterling is of course at multi-year lows already, so any surprises from the new PM can only be to the upside. Lots of earnings action as four DJIA companies report There is a rate decision on HUF. Markets are closed in Egypt and Oman.

08:00 EUR ECB Bank Lending Survey
08:30 GBP BoE FPC Meeting Minutes
10:55 KO, UTX, TRV Earnings 
12:15 GBP BoE Haldane speech
13:00 USD US Housing Prices/Existing Home Sales
20:05 V Earnings
20:30 WTI API Oil Stock
22:45 NZD NZ Imports/Exports/TB

Wednesday July 24
The tone of the day will probably be set by BA earnings before the bell. The largest component of DJIA has of course been hit by the 737 Max problems. NDX giant FB reports after the bell.

An interesting one at that time is troubled German bank DB, who report after a wholesale restructuring last week. Their stock is currently valued at 20% of balance sheet (although note that most banks have P/B<1, eg BARC 39%, RBS 57%, SAN.ES 57%, LLOY.L 77% even the mighty GS 86% and C 91%).

The important German Manufacturing PMI is expected to recover. Failure to do so will surely hurt DAX. Today is also the first deadline for results of Mexico’s compliance with US illegal border crossing suppression demands. Markets are closed in Venezuela.

07:30 EUR Germany Markit PMIs (Manuf e45.1 p45.0)
08:00 EUR Eurozone Markit PMIs (Composite e52.0 p52.2)
11:30 BA, CAT Earnings
13:45 USD US Markit PMIs
14:00 USD US New Home Sales
14:30 WTI EIA Oil Stock
20:05 FB Earnings
20:15 TSLA, PYPL Earnings

Thursday July 25
A big day with ECB expected to outline further TRLTO (QE 2) moves. The EUR risk is therefore to the upside (ie if Draghi surprises and doesn’t mention them). Earnings continue with MMM and DOW before the bell (together 5.6% of DJIA), and more importantly the AMZN and GOOGL reports after the bell (the four companies listed are 22.3% of NDX). There is also a rate decision in Turkey. Markets are closed in Costa Rica and Tunisia.

03:05 AUD RBA Governor Lowe speech
08:00 EUR Germany IFO Business Sentiment
10:30 MMM,DOW Earnings
11:45 EUR ECB Rate Decision/Statement (e0% hold)
12:30 USD US Jobless Claims
12:30 EUR ECB President Draghi Presser
12:30 USD US Durable/Capital Goods (CG Jun e0.1% p0.5%)
20:00 AMZN, GOOGL, INTC Earnings
20:05 SBUX Earnings
23:30 JPY Tokyo CPI (Core Jul e0.8% p0.5%)

Friday July 26
DJIA stalwart MCD (5.37% of the index) reports before the bell, followed shortly by the important first preliminary print of US Q2 GDP, severely cut back from the Q1 figure. There are rate decisions on RUB and COP.

12:00 MCD Earnings
12:30 USD US Prelim 19Q2 GDP (e1.9% p3.1%)
12:30 USD US PCE QoQ

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Saturday 13 July 2019

Week to Jul 12th

Dovish Fed stimulates market, Dollar back down again, GBP bounces off two-year low

Mon Jul 08
In the absence of concrete news, Friday’s slide continued on Monday, first in Asia and then in DAX and SPX which fell 0.48%, as traders waited for the Powell testimony. FTSE did slightly better ending the day flat. The dollar momentum continued on concerns that a cut may not happen. DXY added 0.2% and all currencies were down. Gold, Oil and Bonds all fell in line.

Tuesday July 09
Another day of waiting for the Fed meant a directionless day for equities. SPX recovered the previous day’s drop. However NKY down after a sharp move up in JPY (anticipating rate cuts). DAX fell after a profit warning from BASF. FTSE was down less due to sterling weakness.

In forex, GBP fell again, below the psychological $1.25 to a two-year closing low, fuelled by the tone of the ruling Conservative Party leadership contest, increasing the no-deal Brexit risk. Other currencies also slipped as DXY added 0.14%. However Gold and Oil held their own, adding slightly. Yields continued to rise, adding 3bp.

Wednesday July 10
At today’s semi-annual Humphrey-Hawkins testimony, Chair Powell said that uncertainties in the US economy “have increased in recent months”. Coupled with the FOMC minutes mentioning a “near term” cut, equities rallied sharply and the dollar and yields fell equally quickly. The mood was not shared in DAX and FTSE struggling against their currencies, to post red candles.

All currencies and Gold rallied as DXY close 0.43% softer on the day. FTSE only managed to close flat as GBPUSD rallied both from the Fed report and finding bottom support. CAD was unusual, it rallied an instant 60 pips on the rate hold, and then immediately gave it back after the dovish press conference 15 minutes later. Such a quick move is rarely seen.

Thursday July 11
Todays US inflation print at 1230 was a firm beat, with the YoY Core figure at 2.1% vs 2.0% estimate. This cause a brief wobble in the equity rally and dollar slide (strong inflation negates the need for a rate cut), but this quickly disappeared on the second day of Powell testimony to produce another green day across the board in US equities, with DJIA closing above 27000, and SPX also making a new high one tick shy of 3000. The rally was shared by NKY but not DAX or FTSE, both down on currency strength.

USD had been falling prior to the release, but reversed for the rest of the day, closing down a mere 0.02%, with most currencies flat, and AUD advancing slightly. Oil came off very slightly, whereas Gold gave about half the previous day’s rally. Bond yields did not stop rising at the CPI print, and rallied all day adding 7.2bp to its highest level since June 11, on bond-stock rotation.

Friday July 12
A fourth green day for SPX which closed above 3000 for the first time. NDX and DJIA also closed at record highs, as markets continued to anticipate a rate cut in three weeks. Once, again though, as the dollar fell for the same reason (DXY down 0.35%), the currency pressure forced DAX and FTSE further down, and the chart shows a very unusual period of SPX and the European indices moving in different directions all week. All currencies and Gold moved upwards. Like yesterday, Oil gave up a little more of Wednesday’s gains, and yields ended flat after briefly touching a new July high of 2.14%

There were new all time highs in the US, with DJIA coming out top, but the fade in NIFTY was the biggest index move. (INR only fell 0.13%). The dollar was down everywhere, with NZDUSD the strongest, up 1%. Cryptos slowed down after a few hectic weeks, with BTC and ETH going in different directions. Whereas the shine has come off FANGs, AMZN and particularly FB outperformed.

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)
  • Earnings season starts
  • Four inflation reports
  • China GDP
  • OpEx week

Monday July 15
China GDP may set the initial mood, but US earnings season kicks off today, as always with the banks, the first being C, reporting before the bell. Markets are closed in Japan and Turkey.

02:00 CNY China Retail Sales/Industrial Production (YoY)
02:00 CNY China 19Q2 GDP (YoY e6.2% p6.4%)
22:45 NZD NZ CPI (YoY e1.7% p1.5%)

Tuesday July 16
Earnings before the bell today from DJIA components GS, JNJ and JPM, together 11.62% of DJIA. If, for example, all three moved, say, 3% in the same direction that would equate to 93 points on the index. The EU votes today on Ursula von Leyen’s nomination to head the EU Commission. Markets are closed in Chile and Thailand.

01:30 AUD RBA Meeting Minutes
08:30 GBP UK AHE/Claimant Count Change
09:00 EUR Germany ZEW Economic Sentiment (e-5.9 p-21.1)
12:15 USD Fed Bostic speech
12:30 USD US Retail Sales (Control Group Jun e0.4% p0.4%)
13:15 USD US Industrial Production (MoM)
14:00 NZD GDT Milk Index
17:00 USD Fed Powell Speech
20:30 WTI API Oil Stock

Wednesday July 17
Today BAC report before the open, and IBM (3.55% of DJIA) and NFLX (1.96% of NDX) come in after the close. Elsewhere watch UK inflation, given the beleaguered state of sterling.

08:30 GBP UK CPI (YoY e2.0% p2.0%)
09:00 EUR Eurozone CPI
12:30 USD US Housing Starts/Building Permits
12:30 CAD Canada CPI (Core YoY p2.1%)
14:30 WTI EIA Oil Stock
23:50 JPY Japan Imports/Exports/TB

Thursday July 18
After nothing remarkable during the day, the big earnings report is from MSFT, now the top NDX component at 11.2%. This is after the bell.

00:30 AUD Aus NFP/UnEmp (NFP p42.3k)
08:30 GBP UK Retail Sales
12:30 USD US Jobless Claims
12:30 USD Philly Fed Manufacturing Survey
22:45 NZD NZ Credit Card Spending (YoY)
23:30 JPY Japan National CPI

Friday July 19
Today is July option expiration (OpEx) day, so expect additional volatility. AXP (3.2% of DJIA) reports before the bell. Senate elections are held in Japan this weekend.

06:00 EUR Germany PPI
14:00 USD Michigan CSI (p98.2)
15:05 USD Fed Bullard Speech
20:30 USD Fed Rosengren Speech

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 TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.

Saturday 6 July 2019

Week to Jul 5th

Week of two halves, Initial G20 euphoria, NFP beat threatens rate cut

Mon Jul 01
A new week, month, quarter and half year. The weekend ‘truce’ between Presidents Trump and Xi at the G20 Summit, where Trump said he would not impose any further tariffs whilst negotiations were ongoing was enough to produce a strong gap up in markets, and a new all-time high for SPX, closing up 0.8% at 2964.33. The critical ISM Manufacturing PMI beat at 1400 also helped.

A similar story was seen in non-US markets, although all pulled back from intraday peaks into the close. It was a similar story with USD, which added 0.58%, its best day for nearly four months (since Mar 7), with all currencies down on the stronger dollar.

Yields were of course up and Gold down on both the risk-on mood and the stronger dollar. Oil was up 1.74%, which would have been more save the dollar move, following both equities and the OPEC/Russia weekend agreement to continue production cuts.

Tuesday July 02
Today US 10-year bond yields fell 5.6bp (to close below 2% for the first time in a year and half), Italian yields went negative for the first time in a year, JPY and Gold added 0.5% and 1.2% respectively, and Oil gave up 4.8%, as the USTR announced proposed new EU tariffs, particularly on aviation. A risk-off day, no?

Surprisingly, that was not the story in equities. AIR.P only fell 0.3%, SPX added 0.3% to make another ATH, DAX and FTSE also rose (NKY was red in line with the JPY move). Clearly China matters more than Europe for now (despite the fact that China’s exports are 20% of its GDP, with Germany it’s nearly 50%).

The yen strength was matched by sterling weakness, and so with a flat euro (despite the big news of IMF President Christine Lagarde getting ECB President Draghi's job), the dollar basket hardly moved (DXY -0.08%). The Canadian Manufacturing PMI beat at 1330 meant CAD outperformed (despite Oil), as did AUD (despite Gold) after the priced in and expected cut was nevertheless accompanied by an optimistic report from RBA Gov Lowe. A day of contradictions indeed.

Wednesday July 03
Yesterday’s conflicting intermarket action was resolved by the ADP miss (102k vs 150k) at 1230. We are clearly in a ‘bad news is good news’ scenario, a rate cut on Jul 31st is not just a cut, it’s a policy change, and poor jobs data makes a cut more likely. DAX had already been moving after the Eurozone PMI beat at 0800, but the momentum continued with SPX rallying 0.8%, closing at its highs, only five points off the psychological 3000 level when the US market closed early at 1700. Clearly, as we said last week, positioning for NFP.

Other assets were much more muted, with a totally flat dollar and hardly any currency movement. Gold and Oil reversed slightly. The only notable move was in US10Y which touched a new Trump-era low of 1.938%, and closed 2bp lower.

Thursday July 04
All US markets were closed as the republic celebrated its 243rd birthday, and as you would expect markets were flat everywhere, even in currencies which are traded globally. The very thin markets did however produce two notable highs, with the September futures contracts for ES (SPX) and YM (DJIA) briefly touching 3000 and 27000 respectively. Otherwise a 9 pip gain after a 42 pip range in CAD was about the most action of the day.

Friday July 05
Everyone was expecting and positioned for an NFP miss, ready to blow through the psychological SPX 3k barrier, and then the unexpected result came in at 224k (versus the 158k estimate, and 102k ADP print). Bad news is good, and good news is bad when markets have already priced in a rate cut. Yields immediately soared, at one point 13bp up, and ending up 9.1bp on the day. (the bond down 0.61%), the most since Jan 4th, the blowout NFP and Powell ‘patient’ day. The CME Fedwatch tool moved its likelihood of a 50bp cut down from 25% to 5%.

Similarly DXY had its best day since April 24th, and at one point was 0.76% up, a move not seen since the Sep 2018 rate hike. All currencies and Gold moved south in short order. Of course the move was bad for equities, although certainly not a disaster, and after an opening selloff, SPX closed a modest 0.2% down, and in fact the NFP fade was wholly recovered before a final slide in the last hour. VIX was only up 2.15%, and still down 12% on the week.

Oil, unusually, spiked up over 2% on the jobs report, which was very odd as not only should it move with equities or inversely to the dollar, but also CAD fell sharply on the simultaneous miss in the Canadian NFP. This can probably be put down to the recovery from an over-reaction on Tuesday, and the normal inter market relationship returned later in the day. Note that only CAD recovered from the NFP spike.

Unusual to see all the US indices down and the non-US ones up. The weakest was NDX, a marker for risk. It’s a while since we’ve seen a move over 2.5% in a currency pair, but that’s what happened with NZDJPY (+2.51%) this week. Another strong rally in BTC saw it  add 22% on Wednesday alone, and even after pullback book another strong gain. We seem to be getting a pattern on FAANG where one stock has much more volatility than the rest. This week it was GOOGL’s turn.

Last week was a V, this week an initial push then a lambda (inverted-V).The end result was that the markets generally retained their G20 push, and quite rightly discarded the ADP push when it was invalidated by the NFP print. NDX outperformed as the best index of the week. DXY added 0.96%, only giving ground to CAD. The moves on NZD, GBP and EUR were nearly identical, but shorting NZDCAD would have been the best trade yielding 1.41%. The crypto rally faltered after an impressive run, and all FANGs except FB outperformed the index. All very bullish overall.

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)

  • Powell Humphrey-Hawkins testimony
  • Chinese, German & US inflation
  • CAD Rate Decision
  • FOMC Minutes

Monday July 08
The only news today is from Germany, and a quiet day is expected, probably driven by the US bond market. The 9.1bp move on Friday was exceptional and may well continue, as it did after the Jan 4th NFP, a similar circumstance. There is a rate decision on ILS. Markets are closed in Kazakhstan and Argentina. Note also that SPX touched the psychologically vital 3000 (and DJIA touched 27000) last week but only in the futures market.

06:00 EUR Germany Industrial Production s.a. (MoM)
06:00 EUR Germany Trade Balance s.a.

Tuesday July 09
Three Fed speakers today, including Chair Powell at a Stress Testing conference in Boston. Here is a table from ITC Markets on where each FOMC member stands, although it’s a little out of date, and Reuters for example have Quarles as more hawkish than Mester. Bullard is however, the lone voting dove now that Lael Brainard has moved to the centre. Not much economic news today, but somewhat ahead of the pack, as earnings season traditionally opens next week, consumer staple PEP (rival of KO and unusually, an NDX component) reports before the bell. There is a rate decision on MYR.

12:45 USD Fed Chair Powell speech
14:10 USD Fed Bullard speech
18:00 USD Fed Quarles speech
18:00 USD Fed Bostic speech
20:30 WTI API Oil Stock
21:00 NZD RBNZ Governor Orr speech

Wednesday July 10
Fed Chair Powell gives the first day of his twice-yearly Humphrey-Hawkins testimony today to the House Financial Services Committee. Market hopes of a rate cut were strongly tempered by last week’s strong NFP report, and the hopes of a 50bp cut on Jul 31 have already moved from 25% last week to 5%. Any hint of a hold would hit equities hard, even before earnings season starts. The Chinese inflation report is also important, the FOMC minutes less so coming after Powell’s ‘live’ opinion. Watch out for UK GDP, which may be affected by Brexit stockpile unwinding.

01:10 AUD RBA Debelle speech
01:30 CNY China CPI (YoY e2.7% p2.7%)
07:00 EUR ECB Non-MPC Meeting
08:30 GBP UK GDP (MoM)
09:40 EUR DE10Y Bond Auction (time approx)
14:00 USD Fed Chair Powell testifies
14:00 CAD BoC Rate Decision/Statement (e1.75% hold)
14:15 CAD BoC Press Conference
14:30 WTI EIA Oil Stock
17:10 GBP BoE Tenreyro speech
18:00 USD FOMC Minutes
22:45 NZD NZ Retail Sales

Thursday July 11
Today is the last piece in the jigsaw for the July 31st rate decision, with the inflation print, and the final day of Powell’s testimony, this time to the Senate Banking Committee. There are no more significant releases this month. Remember the Fed’s dual mandate is jobs and inflation, not GDP (Q2 preliminary), which is any event in on Jul 26, too late to affect their decision. There’s another raft of Fed speakers today, but their effect will be muted after their boss has spoken. There is a rate decision on EGP. Markets are closed in Mongolia.

00:00 AUD Aus Consumer Inflation Expectations
06:00 EUR Germany CPI (e1.3% p1.3%)
09:30 GBP UK Financial Stability Report
12:30 USD US Jobless Claims
12:30 USD US CPI (Core MoM e0.2% p0.1%)
14:00 USD Fed Chair Powell testifies
15:10 USD Fed Williams speech
16:15 USD Fed Bostic speech
18:00 USD US Monthly Budget Statement
21:00 USD Fed Kashkari speech
22:30 NZD NZ Business NZ PMI

Friday July 12
After two important days, Friday is quieter, and the mood will probably be set by the June Chinese trade figures. Traders will be looking for the impact of the extra tariffs on $200Bn of exports, which will be factored into this release. There is a rate decision on PEN. Look out next week for the start of earnings season, started as always by the banks. C report on Monday, followed by JPM, GS and WFC on Tuesday. 

02:00 CNY China Imports/Exports/TB
12:30 USD US PPI
14:00 USD Fed Evans speech
17:00 WTI Baker Hughes Rig Count

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