Sunday, 20 October 2019

Week to Oct 18th

Sterling and Euro up on Brexit hopes, Fairly strong open to earnings season

Mon Oct 14
Trading was quiet on Columbus Day, with bond markets closed. Overall equities were slightly down, retreating from Friday’s euphoria.

USD advanced very slightly against most currencies but not haven assets Gold and JPY which were up.

Tue Oct 15
Earnings season opened with a raft of beats on EPS and revenue, with only GS spoiling the party. SPX added 1% and other indices were also green. A beat on the ZEW Sentiment reports at 0830 had already helped DAX earlier. A risk-on mood was clear, JPY, Gold and bonds fell sharply on the earnings reports (which come in around 1100-1200). Otherwise, currencies were mixed, with EUR and GBP rallying on reports of a new Brexit deal agreed with the EU. CAD was also up but the antipodean pair were down, as was Oil.

Wednesday October 16
With only BAC (of note) before the bell today, the Retail Sales miss at 1230 meant that the US rally did not continue, and after a pullback in early futures, SPX was flat all day, as were NKY futures. DAX did a little better, but FTSE had a second down day on GBP strength. In fact, with the exception of beleaguered NZD, all currencies, Gold and bonds were up. Oil had a brief spike up but settled flat on the day. Surprisingly, CAD was up despite the CPI miss at 1230.

Thursday October 17
Wednesday’s after hours earnings from IBM and NFLX were similar, both managed a beat on EPS, but missed on revenue, and subsidiary metrics were poor. Oddly, NFLX rallied after hours opened 6.3% up (unlike IBM which gapped down 5.5%). Such is the sentiment on growth companies versus long-established ones. However by the end of the day, both were red. Nevertheless a definite Brexit agreement announced by UK PM Johnson and the EU lifted all markets for a while, although some of this came off into the close.

The Brexit deal caused a sharp move up in all currencies (and Gold), obviously GBP, but also a sudden and sustained move in all others, even JPY. This may also have been helped by traders exiting USD on the poor Philly Fed (1230) and Industrial Production (1315) prints, the latter reporting -0.4% vs -0.1% estimated. Unusually Oil spiked up at the end of the day despite the Columbus Day-delayed EIA stock print at 1430. Yields were flat after a brief spike in line with the dollar move.

Friday October 18
The Chinese GDP miss at 0200, and start of some EU tariffs set the tone today, and lacklustre earnings from defensive stalwart KO before the bell didn’t help, and markets slid, with SPX down 0.4%. Some of this may have been OpEx related. DXY which had been failing all week, accelerated, and all currencies, although not Gold, were up. After a further rally, oil pared some on its gains, and yields were flat again.

NKY was this week’s best performing index, closely followed by NIFTY. GBPJPY was the top performing forex pair for a second week, adding another 2.56% to last week’s 3.24% gain. Cryptos were quiet again, and FANGS were relatively muted with only NFLX reporting.

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)

  • ECB Draghi’s swansong
  • Earnings season continues
  • Brexit saga rolls on
  • Trade war still at the fore

Monday October 21
Further talks between US TreasSec Mnuchin and USTR Lighthizer and Chinese Vice-Premier Liu He are planned this week. Also after Saturday’s defeat, further Brexit fireworks are expected in the UK parliament.

23:50 JPY Japan Trade Balance
01:30 CNY PBoC Interest Rate Decision (e4.2% hold)
06:00 EUR Germany PPI
15:00 GBP BoE Haldane speech

Tuesday October 22
Major earnings reports today are PG, TRV and UTX (together making 10% of DJIA). There is a general election in Canada. The Turkish-Kurd ceasefire agreed with the US ends. Markets are closed in Japan for a Bank Holiday. There is a rate decision on HUF, hold expected.

08:00 EUR ECB Bank Lending Survey
12:30 CAD Canada Retail Sales (p0.4%)
14:00 USD US Existing Home Sales (MoM)
14:30 CAD BoC Business Outlook Survey
21:45 NZD NZ Trade Balance
22:20 AUD RBA Kent speech

Wednesday October 23
Earnings are the main focus today with BA and CAT (12% of DJIA combined reporting before the bell, and MSFT and PYPL after hours. MSFT alone is is 11.26% of NDX. Markets are closed in Hungary for Republic Day

09:40 EUR DE10Y Bond Auction
13:00 USD US Housing Price Index (MoM)
22:00 AUD Aus Commonwealth Bank Manuf PMI

Thursday October 24
The main event today is Mario Draghi’s final session as ECB President, he is replaced by Christine Lagarde on Nov 1st. Another important earnings day with MCD and TWTR before the bell, and AMZN, INTC and GILD (together 13% of NDX) and V after hours. VP Mike Pence is due to speak today on US-China relations. There are also rate decisions on SEK, NOK and TRY. Turkey is expected to hike from 16.5% to 17.25%.

08:30 EUR Germany Markit PMIs
09:00 EUR Eurozone Markit PMIs
11:45 EUR ECB Rate Decision/Statement
12:30 EUR ECB Draghi Final Presser
12:30 USD US Jobless Claims
12:30 USD Capital/Durable Goods
13:45 USD US Markit PMIs
14:00 USD New Home Sales (MoM)

Friday October 25
Today sees only sentiment indicators from both Germany and the US. DJIA defensive MMM reports before the bell.

06:00 EUR Germany Gfk Consumer Confidence
08:00 EUR Germany IFO Business Expectations
14:00 USD US Michigan Consumer Sentiment Index

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