Week to Oct 29th

NDX ATH, ECB acknowledge inflation, volatile DXY

MY CALL THIS WEEK : BUY EURGBP

THIS WEEK (all times are GMT) 

In a week packed with central bank activity and US corporate earnings, new all-time highs were made in the SPX and DJI, and for the first time since 7th September, NDX finally caught up too with a new high. The Earnings season continues to be a positive driver, although a bad EPS miss by Amazon and in-line earnings from Apple and Facebook were punished. The FTSE also made new 2021 highs, as did oil before both faded lower again. But neither the DAX nor the (key) Russell made new highs … yet!

In the central bank race to tighten, the ECB caved in and admitted inflation was not as transitory as it had hoped, although no changes in policy decisions made. The BoJ were also unchanged while, in comparison, the BoC ended QE and signalled rate hikes in the near future.  This generally contributed to further bearish consolidation in bonds and partly explains why the Dollar was subject to increasing two way volatility which end up with EURUSD back down at its lows after an ECB inspired ramp. Currency volatility increased, with DXY and EURUSD both posting outside weeks, as did Oil, although Gold had an inside week.

WEEKLY PRICE MOVEMENT

The biggest mover this week was NDX, up 3.23%. The top forex mover was EURAUD this week, down 1.49%. Bitcoin was flat but ETH hit new highs, and FANGs were strong despite variable earnings.

Last week’s AUDNZD short lost 0.46%, taking my year to date profit to 3.77% and 28/42 wins. This week I am buying 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)

Although most major earnings have now been reported, the first week of November is busy as we enter the early part of the post Hallowe’en holiday season, traditionally a bullish sign.
The Fed, as always, dominates the week. A taper announcement is virtually inevitable as Fed Quarles confirmed on Oct 20 that the “substantial further progress” test had been met. The focus will now turn to rate hikes to combat inflation. The BoE have been equally bullish recently. Their strategy is that rate hikes are not necessarily preceded by taper. As no adjustment is expected this week, Gov Bailey’s words will be scrutinised closely. There is also a rate decision in Australia, which has now caught up with vaccinations, and is also seeing inflation above 2%.

As if that was not enough, we also have NFP, with a relatively modest estimate of 385k (vs 369k on ADP). Given the order of business this week, the ‘bad is good’ factor is removed, and markets are expected to initially react the logical way, although given the Fed timing, the effect may not be as strong as in previous months.

CALENDAR (all times are GMT)

Monday November 1
01:45 China Caixin Mfr PMI

07:00 Germany Retail Sales (p0.4%)
09:30 UK Markit Mfr PMI
14:00 US ISM Mfr PMI (e60.41 p61.1)
14:30 Canada Markit Mfr PMI
14:45 US Markit Mfr PMI
23:50 BoJ MPC Minutes

Tuesday November 2
00:30 Aus TD Securities Inflation (time approx.)
03:30 RBA Rate Decision/Statement (e0.1% hold)
05:50 RBA Debelle speech
08:55 Germany Markit Mfr PMI
21:30 Aus AiG Performance of Construction Index
22:00 Aus Commonwealth Bank Svcs PMI

Wednesday November 3
00:30 Aus Building Permits
01:45 China Caixin Svcs PMI
09:00 Eurozone Unemployment Rate
12:15 US ADP Employment Change (e369k p568k)
13:45 US Markit Svcs & Comp PMI
14:00 US ISM Services PMI (e61.5 p61.9)
14:00 US Factory Orders (MoM)(Sep)
18:00 Fed Rate Decision/Statement (e0.25% hold)
18:30 FOMC Press Conference

Thursday November 4
00:30 Aus Trade Balance (e1.03B p1.50B)
07:00 Germany Factory Orders
08:55 Germany Markit PMI Composite
09:00 Eurozone Economic Growth Forecasts
09:00 Eurozone Markit Comp PMI
12:00 BoE Rate Decision/Statement (e0.1% hold)
12:30 BoE Governor Bailey speech
12:30 US Trade Balance
12:30 US Productivity/Labor Costs
12:30 US Jobless Claims
12:30 Canada Trade Balance
23:30 Japan Overall Household Spending

Friday November 5
00:30 RBA MPC Statement
07:00 Germany Industrial Production
10:00 Eurozone Retail Sales (p0%)
12:30 US NFP/AHE/UnEmp (NFP e385k p194k)
12:30 Canada NFP/AHE/UnEmp (NFP e65k p157.1k)
14:00 Canada Ivey PMI

Week to Oct 22nd

Strong earnings, New ATHs, Oil holds highs
MY CALL THIS WEEK : SELL AUDNZD

LAST WEEK 

Helped by another week to strong earnings, markets started to pick up seasonal strength this week, and DJIA and SPX made new highs. European indices were weaker, with DAX and FTSE both posting inside weeks. The dollar continued to fall against all currencies, and particularly Gold, back over $1,800 for the first time in a month, although yields showed inflation was still a concern. Oil rose gently maintaining it’s 7-year high, although NatGas pulled back.

WEEKLY PRICE MOVEMENT

The biggest mover this week was SPX, up 1.64%. The top forex mover was NZDUSD this week, up 1.32%. Bitcoin and ETH were very flat after weeks of turbulence, and FANGs were once again variable, at odds with NDX as a whole.

Last week’s NZDCAD made 1.14% for me, taking my year to date profit to 4.23% and 28/41 wins. This week I am selling AUDNZD.

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)

Next week is the busiest for some time. We have the ECB meeting on Thursday, and also rate decisions from Canada and Japan. This is also the central Q3 earnings week with DJIA and particularly NDX heavyweights reporting including FB, MSFT, GOOGL, AMD, AAPL, and AMZN. We also have inflation from Australia, Germany and Eurozone, and Q3 GDP from the US, Germany and Eurozone. Finally, the last week in October (Hallowe'en) traditionally ends the summer doldrums, and moves the market into the November-April seasonally strong period.

CALENDAR (High volatility items in bold)

Monday October 25

08:00 Germany IFO Sentiment Indicators

12:30 Chicago Fed National Activity Index

13:00 BoE Tenreyro speech

21:00 FB ER

Tuesday October 26

08:00 ECB Bank Lending Survey

13:00 US Housing/Home Price Indices

14:00 US New Home Sales/Consumer Confidence

21:00 GOOGL, MSFT, TWTR, V ER

Wednesday October 27

00:30 Australia CPI (QoQ e0.7% p0.8%)

12:00 KO, MCD ER

12:30 US Durable/ND Capital Goods (NDC e0% p0.6%)

14:00 BoC Rate Decision/Statement (e0.25% hold)

15:15 BoC Press Conference

23:50 Japan Retail Sales

Thursday October 28

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

06:00 BoJ Press Conference

07:55 Germany Unemployment Rate/Change

09:00 Eurozone Consumer/Industrial Confidence

11:45 ECB Rate Decision/Statement (e0% hold)

12:00 Germany CPI (e4.4% p4.1%)

12:30 US PCE QoQ

12:30 US Q3 Prelim GDP (e2.5% p6.7%) 

12:30 US Jobless Claims

13:30 ECB Lagarde Presser

14:00 US Pending Home Sales

21:00 AMZN ER

21:30 AAPL ER

23:30 Tokyo CPI

23:30 Japan Jobs/Unemployment

23:50 Japan Industrial Production

Friday October 29

00:30 Aus Retail Sales (MoM e-2.5% p-1.7%)

06:00 Germany Q3 Prelim GDP (e2.2% p1.6%)

09:00 Eurozone Q3 Prelim GDP (e3.5% p14.3%)

10:00 Eurozone CPI (e3.7% p3.4%)

12:30 US PCE MoM & YoY

12:30 Canada GDP MoM

13:45 Chicago PMI

14:00 Michigan CSI

Week to Oct 15th

Earnings week strong start, CPI beat, Taper looming

MY CALL THIS WEEK : BUY NZDCAD

LAST WEEK

After a lacklustre start, the strong earnings from JPM on Wednesday and the US CPI beat triggered a two-day rally as the other banks also easily beat estimates, with a particularly strong showing from GS. A Fed taper announcement in November still looks likely and the Fed’s Bostic admitted price increases “will not be brief.” The market’s reaction to all this was somewhat contra to the norm, reversing recent strength in the USD and yields, accompanied by large rallies in stocks and metals.

WEEKLY PRICE MOVEMENT

The biggest mover this week was NKY, up 3.64%. The top forex mover was NZDJPY this week, up an amazing 4.13%, a major forex magnitude not seen for years. Bitcoin and ETH were strongly up again, and FANGs were once again variable.

Another bad week, losing 2.69% on my CADJPY short, taking my year to date profit to 3.09%, half of what it was two weeks ago, and 27/40 wins. This week I am buying NZDCAD again.

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)

Earnings season continues next week, with a wider range than the banks last week. As always first FANG to report is NFLX on Tuesday, with NDX giants TSLA and INTC later in the week. Dow giants IBM, JNJ and PG also report. From China, we have GDP, Retail Sales and a rate decision, as well as an Evergrande debt deadline on Tuesday. There are inflation reports from the UK and Canada, but otherwise little of significance in sovereign scheduled data. The first Bitcoin ETF is launched on Monday.

 
CALENDAR (High volatility items in bold)

Monday October 18
02:00 China Q3 GDP (YoY e5.2% p7.9%)
02:00 China Retail Sales (YoY e3.3% p2.5%)
09:30 Fed Quarles speech
15:40 BoC Lane speech
18:00 US Monthly Budget Statement

Tuesday October 19
00:30 RBA Meeting Minutes
12:30 US Building Permits/Housing Starts
17:15 Fed Bowman speech
19:00 Fed Waller speech
23:30 Aus Westpac Leading Index
23:50 Japan Imports/Exports/TB

Wednesday October 20
01:30 PBoC Rate Decision/Statement (e3.85% hold)
06:00 UK CPI (p3.2%)
09:00 Eurozone CPI
10:30 Germany 10Y Bond Auction (time approx.)
12:30 Canada BoC CPI (p3.5%)
17:00 Fed Quarles speech
18:00 Fed Beige Book

Thursday October 21
00:30 Aus NAB Business Confidence
12:30 Philly Fed Mfr Survey
12:30 US Jobless Claims
14:00 Eurozone Consumer Confidence
19:00 RBA Governor Lowe speech
22:00 Aus Commonwealth Bank PMIs
23:30 Japan National CPI

Friday October 22
06:00 UK Retail Sales
07:30 Germany Markit PMIs 
08:00 Eurozone Markit PMIs
08:30 UK Markit Mfr/Svcs PMIs
12:30 Canada Retail Sales (p-0.6%)
13:45 US Markit PMIs

Week to Oct 7th

V-Shaped flat week, Big NFP Miss, Oil holds highs

MY CALL THIS WEEK : SELL CADJPY

THIS WEEK

In a week of continuing two-way volatility, stock markets initially tested lower and reversed into strong rallies. Two of the major headwinds for risk markets were partially resolved or at least delayed. Firstly, the problematic rally in natural gas and oil took a breather after Russia agreed to increase supplies and also the US energy secretary Jennifer Granholm raised the prospect of releasing emergency oil reserves. Soon after, the US debt ceiling crisis was again kicked down the road as the Senate approved a deal to increase the borrowing limit into December. It was a good week for US yields as the 10-year broke the September high and the USD consolidated recent gains near the yearly highs.  The surprisingly low NFP at 194k (albeit with with +169k previous revisions) left equity traders confused, and markets hardly moved Friday. The dollar only had a brief spike down. 

WEEKLY PRICE MOVEMENT

The biggest mover this week was NKY, down 2.51%. The top forex mover was CADJPY this week, up 2.45%. Bitcoin and ETH were nicely up. FANGs were very variable.
Very bad choice to buy NZDCAD, down 1.45% and taking my year to date profit down to 5.78% and 27/39 wins. However, I will stick to the reversal plan 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

Earnings season opens next week, with as always, the banks. JPM is first out of the gate on Wednesday followed by BAC, WFC and C the next day and GS on Friday. DJIA health giant UNH also reports. In all cases, the estimates are materially lower than Q2 which means even if the banks beat (they usually do), there is no guarantee of further upward price movement. Notably, the financials sector estimates are underperforming the S&P as a whole for the first time in five quarters. It’s a relatively quiet week in sovereign data, with only inflation from the US (and Germany and China) of note. With US PPI also reporting on Thursday, any mismatch between raw material and finished goods prices will be highlighted. The FOMC minutes on Wednesday will be scrutinised, of course, but unlikely to move markets. The week ends with the start of the IMF conference.

CALENDAR (All times GMT, high volatility items in bold)

Monday October 11
02:00 China FDI (time approx.)
10:00 UK NIESR GDP Estimate (time approx.)

Tuesday October 12
06:00 UK Claimant Count/AHE/UnEmp (UnEmp e4.5% p4.6%)
09:00 Eurozone ZEW Economic Sentiment
09:00 Germany ZEW Economic Sentiment
23:30 Aus Westpac Consumer Confidence

Wednesday October 13
02:00 China Imports/Exports/TB
06:00 UK Manuf/Ind Production
06:00 UK GDP MoM
06:00 Germany CPI (e3.4% p4.1%)
09:00 Eurozone Ind Production
12:30 US CPI (e4% p4%)
14:30 BoE Cunliffe speech
18:00 FOMC Minutes
18:00 US Monthly Budget Statement
22:00 RBA Debelle speech

Thursday October 14
00:00 Aus Consumer Inflation Expectations
00:30 Aus NFP/UnEmp (NFP e-120k, p-146.3k)
01:30 China CPI (e0.9% p0.8%)
04:30 Japan Industrial Production
12:30 US PPI
12:30 US Jobless Claims
12:30 Initial Jobless Claims 4-week average
17:00 Fed Williams speech

Friday October 15
00:00 IMF Meeting (all day)
02:00 China NBS Press Conference
02:00 China Retail Sales (p2.5%)
10:30 Germany 10Y Bond Auction (time approx.)
12:30 US Retail Sales (e-0.2% p0.7%)
14:00 Michigan CSI (e74 p72.8)

Week to Oct 1st

End of quarter, SPX worst week of the year, Dollar makes 2021 highs

MY CALL THIS WEEK : BUY NZDCAD

LAST WEEK

The raising of the debt ceiling prompted a rise in yields, which together with other negative factors such as the energy crisis, and Chinese slowdown meant SPX had its worst week of 2021, and worst month of the year, whereas the safe-haven dollar had its best week since June, making new 2021 highs, with all pairs except CAD down. The risk-off mood gave the DJI/NDX ratio its best week since May as NDX touched July lows. Oil also touched July highs, and is less than a dollar away from a seven-year high.


WEEKLY PRICE MOVEMENT

The biggest mover this week was NKY, down 4.89%. The top forex mover was NZDCAD this week, down 1.28%. Bitcoin and ETH bucked the general trend and were up over 12%.  FANGs were generally down as much as NDX.

My CADJPY short lost 0.29% taking my year to date profit to 7.23% and 27/38 wins. This week I will try the reversal strategy and buy NZDCAD.

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)

In September, Fed Chair Powell noted it'll take one more "decent" jobs report to set the taper wheels in motion - not a "super-strong" one, just one that's "reasonably good". This week’s estimate of 500K, if met or exceeded should do the trick. The market response will show how much taper is already priced in, after September’s 4% drop, the worst month since the pandemic started. We are at a juncture, DJIA has just bounced off the SMA200d as it did last November, but historically October is the second-worst month (after September!) for equities.  Our research suggests NFP week is usually positive, and next week onwards earnings will be the main driver.

On Monday, OPEC meet to review output. The current plan is to increase output by 400kbpd, the latest ‘tapering’ of the cuts. However, given that the price of oil is over $75, a level it has not breached for seven years, and recovery demand being stronger than expected, the committee may well agree a larger increase. Unusually, the market has not priced this in yet.

On Wednesday, COVID fortress New Zealand (only 4,000 cases and 27 deaths), which has already ended QE, is almost certain to double the NZD base rate to 0.5%, being the first of the major six to do so, and third overall (after KRW and NOK).


CALENDAR (High volatility items in bold)

Monday October 4
08:00 OPEC Meeting

14:00 US Factory Orders
21:30 Aus AiG Construction Index
22:00 Aus Commonwealth Bank Svcs PMI
23:30 Tokyo CPI

Tuesday October 5
00:00 Aus TD Securities Inflation
00:30 Aus Imports/Exports/TB (TB e10.6B p12.1B)
03:30 RBA Rate Decision/Statement (e0.1% hold)
07:55 Germany Markit Composite PMI
08:00 Eurozone Markit Composite PMI
12:30 US Trade Balance
12:30 Canada Trade Balance
13:45 US Markit Svcs/Comp PMI
14:00 ISM Services PMI (e59.8 p61.7)
17:15 Fed Quarles speech

Wednesday October 6
01:00 RBNZ Rate Decision/Statement (e0.5% p0.25%)
06:00 Germany Factory Orders
09:00 Eurozone Retail Sales
12:15 US ADP

Thursday October 7
05:00 Japan Leading Economic Index
06:00 Germany Industrial Production
11:30 ECB MPC Accounts
12:30 US Jobless Claims
12:40 Fed Williams speech
14:00 Canada Ivey PMI
16:00 BoC Governor Macklem speech
23:30 Japan Household Spending/Current Account

Friday October 8
01:45 China Caixin Services PMI
06:00 Germany Trade Balance
12:30 US NFP/AHE/UnEmp (NFP e500k p235k)
12:30 Canada NFP/AHE/UnEmp (UnEmp p7.1%)