Week to Sep 24th

Brief dip on China Evergrande crisis, bonds and JPY underperform

MY CALL THIS WEEK : SELL CADJPY

LAST WEEK

The Chinese Evergrande crisis caused a weekend gap down (SPX 0.69%, NDX 1.73%) and equity markets spent the rest of the week filling the gap. This was helped by a slightly dovish take (vs expectations) on taper. The Fed offered no taper timetable, but a slight move up in the dot plot. Yields, which take a longer view, rallied on the latter. A sharp dip in EURUSD recovered the next day. An initial post-BoE rally in sterling quickly retracted. A strong oil-led loonie and weak equity recovery yen led to an overall flat dollar base for the week. Gold similarly had a flat week, and Oil rallied slightly towards the end of the week.

WEEKLY PRICE MOVEMENT

The biggest mover this week was FTSE again, up 1.26% after being down 0.93%. The top forex mover was CADJPY this week, up 1.64%. Bitcoin and ETH were down with the general risk-off. FANGs were generally flat as was NDX.

My second week buying EURNZD buy made another 0.32% taking my year to date profit to 7.52% and 27/37 wins. This week I will go with my reversal strategy and sell CADJPY.

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)

The final week of Q3 reports CPI from Germany and Eurozone, and US Personal Consumption Expenditure, the Fed’s preferred inflation metric. Otherwise the week is largely PMI reports, and volatility is as likely to come from end of month and quarter repositioning as it is from scheduled news. Of more interest is the next stage in the Chinese Evergrande saga, where further payment deadlines arise next week. In politics, we have the German election on Sunday, with the replacement of titan Angela Merkel after 16 years, although the new Chancellor and indeed the coalition makeup will not be known for days or weeks. More immediately is Japan’s LDP leadership vote, with maverick vaccines minister Taro Kono fighting it out with traditional and bland Fumio Kishida. The first round, with two other (female) candidates is on Wednesday.

CALENDAR (High volatility items in bold)

Monday September 27

12:30 US Durable/ND Capital Goods (Core DG e0.5% p0.8%)

23:50 BoJ MPC Minutes

Tuesday September 28

00:30 Australia Retail Sales (e-2.4% p-2.7%)

06:00 Germany Gfk Consumer Confidence

13:00 US Housing/Home Price Indices

14:00 US Consumer Confidence(Sep)

23:50 Japan Retail Sales

Wednesday September 29

09:00 Eurozone Consumer Confidence/Business Climate

14:00 US Pending Home Sales

23:50 Japan Industrial Production

Thursday September 30

01:00 China PMIs (Mfr e50.2 p50.1)

06:00 UK Final Q2 GDP (e-1.5% p4.8%)

07:55 Germany Unemployment Rate/Change

09:00 Eurozone CPI (Core p1.6%)

09:00 Eurozone Unemployment

12:00 Germany CPI (MoM e0.1% p0.9%))

12:30 US PCE QoQ

12:30 US Jobless Claims

12:30 US GDP Annualised (e6.6% p6.6%)

13:45 Chicago PMI

23:30 Japan Jobs/UnEmp

23:50 Japan Tankan Large Manufacturing Index (e13 p14)

Friday October 1 

00:30 Aus Building Permits

01:45 Caixin Manufacturing PMI(Sep)

06:00 Germany Retail Sales (MoM e1.5% p-5.1%)

07:55 Germany Markit Mfr PMI

08:30 UK Markit Mfr PMI

12:30 US PCE MoM & YoY

13:30 Canada Markit Mfr PMI

13:45 US Markit Mfr PMI

14:00 US ISM Mfr PMI (e59.9 p59.9)

14:00 Michigan CSI