Sunday 3 November 2019

Week to Nov 2nd

Fed Rate Cut boosts stocks, NFP pushes them higher, Sterling rallies on UK election

Mon Oct 28
Friday’s rally continued and equities were up today on continued hopes of a resolution to the China trade war and Brexit. The haven trio JPY, Gold and Bonds were down in line, but otherwise all currencies gained against USD which reversed direction from last week (and continued down for the whole week). Oil similarly reversed last week’s direction and fell (and again for most of the week).

Tuesday October 29
Indices generally took a breather today, and pulled back slightly. FTSE was particularly hard hit as, after some two-way volatility, GBP rallied on news of a general election to break the Brexit impasse. Oil was down, and bonds and JPY were up in line, although surprisingly, not Gold, which carried on falling. USD was down generally, although NZD and CAD were flat if not a little further down.

Wednesday October 30
The widely expected 25bp rate cut happened today. As we have said elsewhere, the economy did not really need this cut, and so as you might expect, delivering it anyway produced a sharp index rally, and of course a drop in Gold and Bonds. After a spike down on the release, JPY surprisingly fully recovered and went on to end the day flat. This may have had something to do with the blowout Japan Retail Sales figures the night before.

The USD picture was as expected, the cut was largely but not 100% priced in, so inevitably the dollar fell. The only exception was CAD, down 0.57% against USD after the BoC held rates as expected, but cut their global and domestic growth forecast. Gov Poloz said that heightened uncertainty about future trade policies were impacting business investment, but that an accommodative policy was not needed at this time to address downside risks. CAD was also hit by a miss on the EIA oil stocks print. Oil also fell 1% on this news.

Thursday October 31
A report today from China that they will not move on their key priorities, and that they are concerned about President Trump’s decision-making was enough to erase the rate cut euphoria, which was probably overdone anyway. All indices gave up Wednesdays’ gains and then some, and the haven trio were sharply up. Only NDX managed to salvage some of the previous day’s gains due to strong earnings beat performance from FB and AAPL. Oil and the commodity duo AUD and CAD were down in line. GBP carried on rising on election fever, but EUR was more or less flat after mixed European data.

Friday November 01
The NFP beat (128k vs 89k) coupled with the strong upward revision for September was just what the market wanted as SPX, NDX made new ATHs and DAX hit a 16-month high. Bonds and JPY of course fell but again, Gold didn’t, reacting instead to the weaker dollar which was down across the board, excepting JPY. 

NIFTY managed to beat NDX in this risk-on week. For once CAD was the weakest currency, and unusually buying AUDCAD would have been the best forex trade, up 2.01%. Cryptos slowed down with (for them) only moderate volatility, and FANGs overall did particularly well, easily beating NDX as a whole.

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)

  • New and traditionally strong month
  • Aus and UK Rate Decisions
  • Large Fed speaker roster
  • Earnings season continues

Monday November 04
Warren Buffett’s BRK.B, the largest company in SPX that is not in DJIA or NDX reports before the bell. Markets are closed in Japan.

08:55 EUR Germany Markit Manufacturing PMI (e41.9 p41.9)
09:30 GBP UK Markit Construction PMI
15:00 USD US Factory Orders

Tuesday November 05
Three Fed speakers today, Barkin (hawkish) at 1300, Kaplan (centrist) at 1740, and Kashkari (dove) at 2300. All are non-voters in 2019, although the latter two join the voting group next year (which is only nine weeks away). There are rate decisions on PLN (hold expected) and MYR (25bp cut expected)

01:45 CNY China Caixin Services PMI
03:30 AUD RBA Rate Decision/Statement (e0.75% hold)
09:30 GBP UK Markit Services PMI
13:30 USD US Trade Balance
13:30 CAD Canada Trade Balance
14:30 NZD NZ GDT Milk Index
14:45 USD US Markit Services/Composite PMI
15:00 USD US ISM Non-Manufacturing PMI (e53.2 p52.6)
21:45 NZD NZ Jobs/UnEmp/Labour Cost Q3 (Jobs e0.3% p0.8%)
23:50 JPY BoJ Monetary Policy Meeting Minutes

Wednesday November 06
Another three Fed speakers today, Evan (dovish, voter 2019) at 1300, Williams (dovish, voter 2019 and 2020) at 1430 and Harker (voter 2020, hawkish) at 2015. Chinese ‘BAT’ stock BIDU reports after the bell. There is a rate decision on THB (25bp cut expected)

07:00 EUR Germany Factory Orders
08:55 EUR Germany Markit PMI Composite
09:00 EUR Eurozone Markit PMI Composite
10:00 EUR Eurozone Retail Sales
13:30 USD US Nonfarm Productivity/Unit Labor Costs
15:00 CAD Canada Ivey PMI

Thursday November 7
Two of the four women on the FOMC speak today, Daly (non-voter) at 1645 and Brainard (voter 2019 and 2020) at 0130 Friday. DJIA stalwart DIS reports after the bell. There is a rate decision on CZK (hold expected).

00:30 AUD Aus Imports/Exports/Trade Balance
07:00 EUR Germany Industrial Production
12:00 GBP BoE Rate Decision/Statement (e0.75% hold)
13:30 USD US Jobless Claims

Friday November 8
The main event of the day is the Michigan Consumer Sentiment Index, a further fall has bee estimated. The Canadian NFP is today, this month a week later than the US equivalent.

01:30 AUD RBA Monetary Policy Statement
07:00 EUR Germany Trade Balance
07:00 CNY China Imports/Exports/Trade Balance
13:30 CAD Canada NFP/AHE/Unemp (UnEmp e 5.7% p5.5%)
15:00 USD Michigan CSI (e94.7 p95.5)

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