Saturday 21 September 2019

Week to Sep 20th

Oil soars on Saudi attack, Fed rate cut as expected, Trade war setback

Mon Sep 16
The week opened to the news that Saudi oilfields had been attacked, affecting 50% of output. Oil opened up well over 10%. Gold, JPY and bond futures also gapped up, and indices fell. Only FTSE which is an oil proxy managed to close flat by the end of the day. The news gave a strong boost to USD, with DXY up 0.80%, its best day for over a year. All currencies were down and only JPY managed to close flat. Yields were relatively unaffected, but did turn down after last week’s rally.

Tuesday September 17
Saudi Arabia confirmed their production would be quickly back online today, and the shortfall could be covered by reserves. Oil gave up half its panic gains (as did DXY and Gold), and it was generally Turnaround Tuesday across the board. Indices recovered, except for FTSE which was depressed by a GBP and EUR ramp. CAD (Oil) and JPY (safe haven) were flat having recovered largely the previous day. However, yields continued to retreat, showing that the day was a recovery from an overreaction, rather than truly risk-on.

Wednesday September 18
The Fed duly cut rates by 25bp today, Indices had been fading. The release produced a spike down and then a strong rally in SPX, which ended the day up, as did other indices. The rhetoric surrounding the print was seen as hawkish, and DXY rallied 0.35%, with all currencies, and particularly Gold sharply down. Yields were in line with stocks, ie falling at first, and then spiking up to close flat. Oil was much flatter, only slightly down on the day.

Thursday September 19
After a wild day up and down, to be expected after the rate decision, SPX closed flat by the bell, with pressure upwards from the US rate cut, being balanced by downward pressure from the dovish messages from the central banks for GBP, CHF, JPY and NOK. A sharp drop in GBP after the BoE statement reversed a rallying FTSE. DXY was down 0.21% with all currencies, Gold and Oil up. Only AUD, weak for weeks, fell today. Yields were slightly down.

Friday September 20
Equities were doing moderately well on Friday until the afternoon session when it was revealed that a Chinese delegation to midwest farming communities had been cancelled. It was like a switch being flicked. SPX dropped 0.82% immediately, a very strong reaction which was seen in other indices, currencies. The usual risk off reaction occurred, a strong spike up in Gold, JPY and bonds, and a sharp fall in EUR and GBP. Oil was surprisingly flat, and DXY ended 0.12% up overall. It is possible some reaction was the expiry of quarterly SPX options, but they close with the bell.

With the uncertainty of the week, it was always going to be JPY pair that moved most, and this week, an NZDJPY short would have been the top trade. Top index move was the NIFTY which soared over 5% on Friday, its best day in a decade, as India announced a surprise cut in corporation taxes. ETH surged ahead of Bitcoin again. In FANG, a huge drop by NFLX after bad figures from ROKU.

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)

  • Japan and EU in trade focus
  • Kiwi rate decision
  • German Manufacturing PMI
  • Large Fed Roster

Monday September 23
Markets are closed in Japan for the autumnal equinox, the end of summer. This week a USTR ruling on Airbus subsidies is expected. Fed Bullard and Williams are due to speak today. There is a rate decision on COP.

07:30 EUR German Prelim Markit PMIs (Manuf e44.0 p43.5, Comp e51.4 p51.7)
08:00 EUR Eurozone Markit PMIs (Comp e51.4 p51.7)
12:30 USD Chicago Fed National Activity Index 
13:45 USD US Markit PMIs (e51.9 unch.)

Tuesday September 24
Other than CB speeches, the German IFO Survey, which has been falling for 12 months, is expected to rise slightly (e94.5 p94.3). There are rate decisions on HUF and NGN.

05:35 JPY BoJ Governor Kuroda speech
08:00 EUR Germany IFO Business Sentiment
09:55 AUD RBA Governor Lowe speech
13:00 USD US Homes/Housing Price Index
14:00 USD US Consumer Confidence
22:45 NZD NZ Imports/Exports/TB
23:50 JPY BoJ MPC Minutes

Wednesday September 25
President Trump is expected to sign a limited trade deal with Japan at the UN General Assembly meeting today, but this will not include auto tariffs. Fed Evans is due to speak. There are rate decisions on CZK and THB, holds expected.

01:30 JPY BoJ Masai speech
02:00 NZD RBNZ Rate Decision/Statement (e1.00% hold)
09:40 EUR DE10Y Auction
14:00 USD US New Home Sales

Thursday September 26
The final US Q2 GDP is published, in line with the second reading on Aug 29. Fed Kashkari is due to speak today. There are a rate decisions on MXN (25bp cut expected), also on PHP and EGP.

06:00 EUR Germany Gfk Consumer Confidence
08:00 EUR Eurozone Economic Bulletin
12:30 USD US Jobless Claims
12:30 USD US GDP 19Q2 Final (Annualised e2.00% p2.00%)
12:30 USD US Core PCE QoQ
14:00 USD US Pending Home Sales
23:30 JPY Tokyo CPI ex Food Energy (YoY e0.5% p0.7%)

Friday September 27
The increasingly important Durable and Non-Defence Capital Goods ex Aircraft print is expected to rise substantially. Fed Harker is due to speak today. The month and quarter ends on Monday, but some volatility may be seen today because of this.

07:00 GBP BoE Saunders speech
09:00 EUR Eurozone Business Climate
12:30 USD US Core PCE MoM & YoY
12:30 USD US Personal Income (MoM)
12:30 USD US Durable and ND Capital Goods (ND Aug e1.0% p0.2%)
14:00 USD Michigan CSI

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