Saturday 16 November 2019

Week to Nov 15th

RBNZ surprise hold, Powell rules out more cuts for now, Trade war ups and downs

Mon Nov 11
US markets were closed for Veteran’s Day, but US futures fell in sympathy with China and Hong Kong after another weekend of protests, which are now reported as seriously affecting HK business. Also depressing the market were President Trump’s weekend comments pouring cold water on early tariff removal rumors, and the effect of retail money coming out of Asian and other markets to spend on Singles Day in China. In currencies, USD was down against most currencies, although AUD was down and CAD finished flat. Gold and JPY were down, the first quite sharply, suggesting the weekend concerns were short lived. Oil rose and yields fell in line with equities (ie bonds were up)

Tuesday November 12
Turnaround Tuesday saw equities rally today as the US returned and the weekend was forgotten. Surprisingly Gold, JPY and bonds were also up. Otherwise it was a clean sweep for USD, up across the board against currencies. Oil was up in line with equities. An interesting feature of today was that DJIA closed absolutely flat, at 27691, the same figure as Monday. This has not happened for over five years.

Wednesday November 13
Today, President Trump threatened to raise China tariffs if no truce was reached, and the market took that badly, and pulled back, although it made some recovery after the European close, and NDX even finished green. It was a very flat day in currencies, the notable exception being NZD which was up 1.24% on a surprise hold from the RBNZ (a 25bp cut had been expected).

Thursday November 14
In Chair Powells second day of testimony, he indicated that the 75bp cuts this year were enough for now, and this was enough to depress markets slightly in the US and a bit more severely elsewhere as DXY fell on the testimony not being hawkish enough. DAX, FTSE etc fall when their denominated currency rises. Most currencies and Gold rose. Only the antipodean pair faded, AUD on the severe jobs miss (-91k vs +15k) and NZD pulling back after the sharp Wednesday rise. Oil and yields were down in line with equities.

Friday November 15
On Thursday night White House adviser Kudrow said about the China deal that “we are coming down to the short strokes” and today CommerceSec Ross confirmed that the China “Phase One” deal would be made “in all likelihood”. US markets broke out of the weekly range and soared to new highs. The effect was seen in NKY but not in the European indices, but this was largely due to a further leg down in USD after the poor Retail Sales figures. Gold and JPY were of course down, but all other currencies rose, as did Oil in line with the risk-on day.

The top index this week was the DJIA up 1.17% to break the psychological 28000. The top forex trade would have been, unusually, shorting AUDNZD, yielding 1.91%. Another quiet week on cryptos, and FANGs generally outperformed the NDX as a whole, as often happens in strongly risk-on periods.

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)

Monday November 18
Sometime this week, the final USMCA (NAFTA 2) bill could be ratified. Fed Mester (hawk, non-voter) speaks today. There are no significant economic releases

09:00 EUR ECB De Guindos speech
13:05 EUR ECB Lane speech
22:05 AUD RBA Kent speech

Tuesday November 19
The House Intelligence Committee impeachment hearings continue today, but our opinion is that this will not affect markets, as everyone knows a House indictment will result in a Senate acquittal. Fed Williams (voter) speaks today. The final DJIA component HD reports before the bell, as do department store KSS. There is a rate decision on HUF (hold expected)

00:30 AUD RBA Meeting Minutes
13:30 USD US Building Permits/Housing Starts
14:30 NZD NZ GDT Milk Index
18:15 CAD BoC Wilkins speech
23:50 JPY Japan Imports/Exports/TB

Wednesday November 20
The minutes of the 30 October rate cut meeting may well show that 75bp is 'enough' which would be bearish for stocks and bullish for USD, although this is probably priced in from Chair Powell’s testimony last week.

HD competitor LOW reports before the bell, as does general retailer TGT. ECB Lane speaks again today at 1700. Markets are closed in Brazil and Mexico.

01:30 CNY PBoC Interest Rate Decision (e4.2% hold)
07:00 EUR Germany PPI
13:30 CAD Canada CPI (BoC Core YoY e1.9% unchanged)
19:00 USD FOMC Minutes

Thursday November 21
Fed Mester and ECB De Guindos speak again today, as does Fed Kashkari (dove, non-voter) and ECB Mersch. There are rate decisions on ZAR and IDR (holds expected)

12:30 EUR ECB MPC Minutes
13:30 USD Philly Fed Manuf Survey
13:30 USD US Jobless Claims
15:00 USD Existing Home Sales
23:30 JPY Japan National CPI

Friday November 22
Christine Lagarde gives her first important speech today, the keynote to the Frankfurt European Banking Congress. She has spoken before, but this venue will expect some insight into her thoughts on the euro. Markets are closed in Japan for their Thanksgiving.

07:00 EUR Germany 19Q3 final GDP
08:30 EUR ECB President Lagarde speech
08:30 EUR Germany Markit PMIs (Manuf e43.0 p42.1)
09:00 EUR Eurozone Markit PMIs (Composite e50.9 p50.6)
13:00 EUR ECB Weidmann speech
13:30 CAD Canada Retail Sales MoM Sep (e0.0% p-0.1%)
14:45 USD US Markit PMIs
15:00 USD Michigan CSI

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