Week to July 3rd

New month, quarter, half year foreshortened for Independence Day, Risk-on all week

MY CALL THIS WEEK : BUY EURGBP

This week, markets ignored the clear second wave in US COVID-19 cases, and instead concentrated on the ADP and all-time record positive NFP, and perhaps some end of quarter and half-year rebalancing, and rose steadily during the four-day week, only pausing slightly in futures on Friday. Yields and Oil moves in line with markets, but haven assets JPY and Gold spent the week consolidating.

There is little news of note next week, and COVID cases, re-opening reversals, and vaccine news may dominate, in a market that seems to have lost a lot of its volatility.

• New month, quarter, half year
• Foreshortened for Independence Day
• Risk-on all week
• Fairly flat dollar

Mon Jun 29

Markets ignored COVID-19 and were cheered by news that certification flights for Boeing’s 737 Max began. BA itself rose 14.4% meaning DJIA outperformed SPX and NDX. World equity markets and Oil followed suit. The dollar had a down day, except for GBP and of course JPY, although the other haven assets (Gold and Bonds) were flat.

Tuesday June 30

With further advances today, DJIA closed its best quarter since 1987, and SPX since 1998 and NDX since 1999, all up more than 17% since Mar 31. However, all instruments other than Gold and NDX had inside months. Only FTSE turned red today after a sharp move up in GBP. The dollar was down with the exception of a flat euro, and of course JPY was down again, along with bonds. Gold bucked the trend and was up again, as did Oil, down 0.74% despite the equity rally.

Wednesday July 1

The new quarter started with mixed results today, with DJIA down 0.3% whereas SPX was up 0.5%, following an early sell-off which left European indices in the red. This was despite the latest vaccine hope drug (BNT162b1) trials added 3.2% to PFE, not enough to offset a similar drop in the heavier-weighted BA. European indices closed down. Oil managed a small advance. The haven trio were all up, suggesting risk-off mood generally, and this was against a sharply falling dollar. 

Thursday July 2

The final day of the trading week saw a fourth day of gains after the all-time record NFP report with 4.8 million new jobs, a substantial beat on the 3M estimate. All equity markets and Oil were up, particularly NDX. The dollar also rallied after early gains to close positive although the net gain was slight. However, the haven trio was more or less flat.

Friday July 3

US markets were closed today for observed Independence Day, although SPX futures came off slightly, as did world indices, and Oil. The dollar also fell slightly. Gold was flat, and bonds did not trade.

WEEKLY PRICE MOVEMENT

A rally in GBP saw FTSE (and NKY) end flat this week, where DAX and the US indices put in solid gains, in particular NDX, which was 5% up. The best performing pair was NZDJPY. Cryptos continued to stay flat, it is now six weeks since Bitcoin moved more than 5% in a week. A great week for FANGS which by an large even outperformed NDX.

My own instincts were never so bad. NZD was the best performer and I shorted it, losing 1.74%, nearly a quarter of my accumulated gain. 22 weeks, 10 wins, and a total of 6.09%. Forex movement isn’t clear again, so I will take a safe low-volatility pair and buy EURGBP.

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)

• Quiet week
• US COVID cases rising
• RBA Rate Decision
• Various PMIs

Monday July 6

Back to work after the 3-day weekend, and rhe services PMI today is estimated at 49.9, if it beats over 50, it will join the manufacturing sector in exhibiting post-COVID normality.  There is a rate decision in Israel. Markets are closed in Czechia and Lithuania.

01:00 Aus TD Securities Inflation

06:00 Germany Factory Orders

09:00 Eurozone Retail Sales (YoY)(May)

13:45 US Markit Services/Composite PMIs (Jun)

14:00 US ISM Non-Manufacturing PMI (Jul) (e49.5 p45.4)

14:30 Bank of Canada Business Outlook Survey

22:00 NZIER Business Confidence (QoQ)(Q2)

Tuesday July 7

The Australian rate decision is today’s main news, with little significant in Europe and the US. Fed Bostic speaks at 1300. There is $46B US03 bond auction today. There is also a rate decision in Malaysia.

04:30 RBA Rate Decision/Statement (e0.25% hold)

06:00 Germany Industrial Production s.a. (MoM)(May)

10:00 Germany 10-y Bond Auction (time approx.)

14:00 JOLTS Jobs Openings

14:30 NZ GDT Milk Index (time approx.)

15:00 Canada Ivey PMI

17:00 Fed Quarles speech

18:00 Fed Day and Barkin on a panel

Wednesday July 8

Focus is on Europe today, with two speeches by ECB VP Luis de Guindos. Fed Bostic also speaks again  at 1715. There is a $29B US10 auction today.

08:45 ECB De Guindos speech

09:00 EC Economic Growth Forecasts

14:00 ECB De Guindos speech

Thursday July 9

The thin news week continues, with only the Chinese inflation of note. Fed Bostic is on for a third time at 1700. Markets are closed in Brazil and Argentina.

01:30 China CPI (e2.5% p2.4%)

01:30 Aus Home Loans/Investment Lending for Homes (May)

06:00 Germany Trade Balance (May)

12:30 US Jobless Claims

Friday July 10

Canada’s jobs report comes a week after the US one this month, closing a quiet week before earnings season starts the following Tuesday, with as usual JPM, WFC and Citi out of the gate first on Tue 14th. Markets are closed in Argentina and Singapore.

12:30 US PPIProducer Price Index ex Food & Energy (YoY)(Jun)

12:30 Canada NFP/AHE/UnEmp (NFP e675k p289.6k)