Week to Dec 13th

UK Conservative landslide, UK assets sharply up, Phase 1 China deal announced

Mon Dec 09

Concerns about the Dec 15 tariffs, and an inevitable pullback from Friday’s NFP ramp meant indices were down today, with haven assets bonds, JPY and Gold up, although the latter’s move was slight. The dollar was down in line with the risk-off mood, and all currencies were up except for the antipodean duo. Oil was flat on the day.

Tuesday December 10

A sudden decline (to 3120 support, the pre-NFP level) at the US open on trade concerns was alleviated by a WSJ report around 1530 that the Dec 15 tariffs could be delayed irrespective of the Phase 1 deal being completed. Nevertheless indices were slightly down on the day, although only DAX and FTSE were materially down, on currency strength. GBP fell sharply at the very end of the day after indices had closed, on yet another election poll.

DXY was down again, although this was mainly on Euro strength. CAD managed a slight advance, but other currencies slid. Gold tracked the equity dip, and finished up, in line with equities. However bonds and JPY were down reflecting the recovery.

Wednesday December 11

Today the Fed left rates unchanged as expected, The statement was interpreted by traders as dovish, and SPX rose, and the dollar fell after the release. All currencies rose against the dollar, with the move much more muted against JPY as you would expect. Gold and bonds were up, reflecting the weaker dollar rather than the equity position. Oil was down sharply on the EIA miss at 1530, although it recovered somewhat by the close.

Thursday December 12

A big day, with two events that moved markets. Carefully timed just after the opening bell, President Trump tweeted that a “BIG DEAL” [on China] was very close. The reaction was immediate and classic, Indices all shot up, and the haven trio collapsed. Oil and the dollar also rose in line, and the session ended with the dollar up across the board except for AUD.

However, the unexpectedly strong result for the British incumbent Conservative party, after many years of small majorities/hung parliaments, GBP shot up 3% (4c) in a matter of minutes, and EUR rallied 0.61% in sympathy. This had the effect of DXY moving from +0.44% to -0.52% in short order. There was also a boost to indices but this appeared the next day.

Friday December 13

The UK feel-good rally carried through the European session, but pulled back when the US opened, New York being more concerned about nothing concrete appearing to back up Trump’s tweet. Confirmation came finally towards the end of the session, confirming that a Phase 1 deal with China had been agreed, which caused an end-of-day boost and the US indices closed flat, a example of the highly logical but rare ‘buy the rumor, fade, then recover to the rumour level on the news’. European indices did better and closed up on the UK result.

Inevitably a 3% move creates an overbought situation, and GBP gave back about a third of its election euphoria gains, and EUR all of the, meaning a strong day for DXY across the board. The early failure of US indices meant JPY, Gold and Bonds were all positive on the day. Oil was up after choppy moves during the day.

WEEKLY PRICE MOVEMENT

A strong week depressed JPY and so NKY was the strongest index, although FTSE expressed in USD would have risen 3.09%. Unsurprisingly therefore GBPJPY was the strongest pair, adding 2.21%. Bitcoin and Ether slept for a second week, and there was some notable reversion to value mean, as high PE FANGs fell, and moderate ones rose.

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)

• Phase 1 China Deal
• Six major/minor rate decisions
• Six inflation or proxy reports
• Lots of GDP and PMI as well

Monday December 16

There was little reaction on Friday to the Phase 1 China deal announcement, and delay in the December tariffs, so there may be a boost today. On the other hand, there is also the next stage of impeachment. Meantime today is PMI day, the key one being whether Germany has indeed turned a corner.

02:00 CNY NBS Press Conference

02:00 CNY Industrial Production/Retail Sales

08:30 EUR Germany Markit Manuf PMI (e44.5 p44.1)

09:00 EUR Eurozone Markit Composite PMI (e50.9 p50.6)

09:30 GBP UK Markit Services PMI (e49.6 p49.3)

14:45 USD US Markit PMIs

17:00 GBP UK Bank Stress Test Results

Tuesday December 17

Next to look for in the indeterminate calendar is the USMCA, which may be ratified in the House this week, but Senate confirmation will not come until January.

Fed Kaplan, Rosengren and Williams speak today.  There is a rate decision on HUF.

00:30 AUD RBA Meeting Minutes

09:30 GBP UK Claimant Count/UnEmp/AHE (UnEmp e3.9% p 3.8%)

13:30 USD US Housing Starts/Building Permits

14:15 USD US Industrial Production

14:30 NZD GDT Milk Index (time approx)

17:30 USD Fed Rosengren speech

23:50 JPY Japan Imports/Exports/Trade Balance

Wednesday December 18

If Monday was PMIs, today is inflation with three CPIs and German PPI. Fed Brainard and Evans speak today. There are rate decisions on CZK and THB.

07:00 EUR Germany PPI

08:30 EUR ECB President Lagarde speech

09:00 EUR Germany IFO Sentiment Indicators

09:30 GBP UK CPI (YoY e1.5% p1.5%)

10:00 EUR Eurozone CPI

10:15 USD Fed Brainard speech

13:30 CAD Canada CPI (Core YoY e1.9% p1.9%)

21:45 NZD NZ 19Q3 Final GDP (QoQ e0.4% p0.5%)

Thursday, December 19

And today is rate decisions. As well as majors JPY and GBP, there are also decisions on minors SEK, NOK and MXN, and elsewhere IDR and TWD. Holds are expected on all. The Jan 20 Oil contract CLF20 expires today.

00:30 AUD Aus Jobs/UnEmp (Jobs e14k p-19k)

03:00 JPY BoJ Rate Decision/Statement (e-0.1% hold)

06:00 JPY BoJ Press Conference

09:30 GBP UK Retail Sales

12:00 GBP BoE Rate Decision/Statement (e0.75% hold)

13:30 USD Philly Fed Manuf Survey

13:30 USD US Jobless Claims

15:00 USD US Existing Home Sales

23:30 JPY Japan National CPI

Friday, December 20

The final day before Christmas week, when many traders finish, and perhaps want to position themselves for the ‘core’ Santa Rally (the Christmas-New Year gap) is also OpEx day, so expect heightened volatility. There is also a rate decision on COP.

01:30 CNY PBoC Interest Rate Decision (e4.15% hold)

07:00 EUR Germany Gfk Consumer Confidence Survey (Jan)

09:30 GBP UK 19Q3 Final GDP (QoQ e0.3% p0.3%)

11:00 GBP BoE Haskel speech

13:30 USD US PCE (QoQ)

13:30 USD US 19Q3 Final GDP (QoQ e2.1% p2.1%)

13:30 CAD Canada Retail Sales (MoM e0.1% p-0.1%)

15:00 USD US Core PCE (MoM and YoY)

15:00 USD US Michigan CSI

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