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). 

WEEKLY PRICE MOVEMENT

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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