Saturday 9 November 2019

Week to Nov 8th

All-time highs in US markets, Trade optimism grows, USD rises smoothly all week

This week, renewed optimism that the China trade deal may be close, a slight upside on earnings versus estimates, a beat on the ISM Services PMI and of course the usual fall season sentiment propelled equities to new highs, and revitalised the dollar which had its best week since August.

Next week will no doubt be dominated by further trade news, but Chair Powell’s testimony to Congress, and the inflation print on Wednesday will be watched closely. Outside the UK, the RBNZ is expected to make a 25bp cut in rates, and plenty of UK data, plus general election rhetoric and polling suggest another lively week for sterling.

Mon Nov 04
On Sunday CommerceSec Wilbur Ross said he was “quite optimistic” about the US-China negotiations. Friday’s rally continued and all equity markets were up, and oil was in line, which is probably why the only currency not to fall against a dollar which gapped up and reversed from last week’s decline. The risk-off trio, Gold JPY and bonds all fell. The day set a general trend for the week.

Tuesday November 05
Today’s important ISM Services print beat, all three US indices made new all-time highs again, whereas DAX, FTSE and NKY were not only flat on the day, but exhibited very low volatility. Other markets repeated Monday’s moves if not more so. Oil was up again, and USD advanced even more, against all currencies (except AUD) and Gold. Bonds were down again.

Wednesday November 06
The “phase 1” deal to be signed by Presidents Trump and Xi, scheduled for this month may now be put back to December, it was announced, and US indices had a flat day, although some advances were seen in Europe and Japan. Oil retreated, and the haven trio all rose, as did currencies generally. A pullback in CAD after the Ivey PMI left DXY flat on the day as well.

Thursday November 7
The positive mood remained today, and markets made another ATH on reports from the Chinese commerce ministry that the US and China have agreed in principle “to remove some of the additional tariffs in phases”. Just like Tuesday, Oil rallied, and Gold, JPY and bonds fell, an even stronger fade. CAD and AUD were again the odd ones out, as they advanced slightly, the latter helped by the Australian Trade Balance beat at 0030. GBP had been fading all week anyway, but spiked down sharply after the surprise 7-2 (9-0 estimate) vote for a rate hold. Two BoC members voting for a cut is clearly a dovish sign. Marvel film producer DIS beat on earnings and revenue and shares gapped up 5.35% on Friday.

Friday November 8
Today Trump dismissed the Thursday Chinese reports, and along with the Michigan CSI miss, markets fell leaving the European indices, which close earlier, in the red. However, a final rally meant SPX still closed up, although not as high as Thursday’s peak. In general, currencies and Gold fell against USD, as did bonds. In particular CAD fell suddenly on the NFP jobs miss. However, Michigan CSI miss at 1500 caused a spike up in JPY which left yen as the only currency up against the dollar on the day.

A strong week for all indices, and as you would expect in a risk-on week, NDX was the winner. All currencies fell against USD, with NZD the weakest, although the mighty EUR came close. Another quiet crypto week, with ETH not moving at all. FANGs took the general NDX trend, although the individual performance was patchy.

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)

  • RBNZ rate decision
  • Powell at Congress
  • Trade war progress expected
  • Lots of UK data

Monday November 11
Markets are closed in the US, Canada and France for Veterans Day (the end of World War I). With little data elsewhere, expect things to be quiet. Fed Rosengren speaks today. The UK data today, and for the next month is important in the run-in to the General Election, and in light of the surprise minority BoE votes for a cut last week.

09:30 GBP UK Manuf/Industr Production
09:30 GBP UK GDP 19Q3 Prelim (e0.3% p-0.2%)

Tuesday November 12
Markets are expecting something positive and concrete on the trade deal this week, although not necessarily today. However, any suspensions or postponements will be welcomed. Fed Harker and Kashkari speak today, as does ECB Coeuré.

09:30 GBP UK Claimant Count/AHE/UnEmp (AHE e3.8%)
10:00 EUR Germany ZEW Economic Sentiment (e-17.9 p-22.8)
10:30 USD Fed Clarida speech

Wednesday November 13
This is the most important day of the week with the US inflation print, and Chair Powell’s testimony to Congress. In addition, the Federal Retirement Thrift Investment Board meets today and may discuss the idea of restricting Chinese ADRs on Wall Street. Also a decision is expected on auto tariffs, which would affect DAX. Also today are the first Trump impeachment hearings, although our view is that the market thinks this is a horse that won’t run. Fed Kashkari (again) speaks today. NDX heavyweight CSCO reports after the bell.

01:00 NZD RBNZ Rate Decision/Statement (e0.75% p1.0%)
02:00 NZD RBNZ Presser
07:00 EUR Germany CPI (e0.9% p0.9%)
09:30 GBP UK CPI (e1.7% p1.7%)
10:00 EUR Eurozone Industrial Production
10:30 EUR DE10Y Bond Auction
13:30 USD US CPI (Core MoM e0.2% p0.1%)
16:00 USD Fed Chair Powell testifies
19:00 USD US Monthly Budget Statement
22:50 AUD RBA Bullock speech
23:50 JPY Japan 19Q3 GDP Prelim (e0.2% p0.3%)

Thursday November 14
In addition to Chair Powell’s second day of testimony, we have speeches from vice-chair Clarida, and FOMC members Evans, Bullard, Williams and Daly. Six Fed speakers in one day, and ECB Knot is also on. DJIA retail giant WMT reports before the open, and chip-maker NVDA after the bell. There are rate decisions on PHP (hold expected) and MXN (25bp cut expected).

00:30 AUD Australia Jobs/UnEmp (Jobs e15.0k p14.7k)
02:00 CNY China NBS Presser
02:00 CNY China Industrial Production/Retail Sales
07:00 EUR Germany 19Q3 GDP Prelim (e-0.1% p-0.1%)
09:30 GBP UK Retail Sales
10:00 EUR Eurozone 19Q3 GDP Prelim (e0.2% p0.2%)
10:30 USD Fed Quarles speech
13:30 USD US PPI
13:30 USD US Jobless Claims
14:10 USD Fed Clarida speech
15:00 USD Fed Chair Powell testifies

Friday November 15
Today is OpEx day, so expected additional volatility. Retail Sales is important, especially if it contradicts Wednesday’s CPI print. ECB Mersch speaks to today.

01:30 AUD RBA Debelle speech
02:45 CAD BoC Governor Poloz speech
10:00 EUR Eurozone CPI
13:30 USD US Retail Sales (Control Group Oct e0.3% p0.0%)
13:30 CAD BoC Lane Speech
14:15 USD US Industrial Production

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