Week to Apr 5th

Equities rally on China hopes, Flat dollar despite wild GBP, Best crypto week for over a year

Mon Apr 01

The first day of the week, the month and the quarter opened strongly after the China Manufacturing PMI beat at 0145. We pointed out the significance of this last week. The figure came in at 50.8 vs 49.9 est, only 0.9 beat, but critically crossing the 50 point, the line between contraction and expansion. The important US ISM similar release beat at 1400, giving a sharp uptick to USDJPY. (the same release for Germany at 0700 - 44.1 vs 44.7 est - showed that last month’s print of 47.6 was not an outlier, as some commentators had thought.

The net result was a strong risk-on run for equities across the board, and an advance of 0.13% for DXY. EUR, JPY, Gold and 10-year Bonds (inverse to yields) dropped suddenly after the ISM print. Against this, CAD perked up after hawkish (well less dovish than expected) remarks from the BoC at 1755. AUD, without news, was flat. The dollar advance would have been greater expect for cable, up 1% on ‘soft’ Brexit hopes.

Tuesday April 02

As we predicted last week, the RBA did indeed join the chorus of doves at 0330, and the day started with a sharp fall in AUD. GBP had collapsed overnight, but climbed back to end the day flat on reports of bipartisan (ie May and opposition leader Corbyn) Brexit talks. CAD faded the Poloz gains. As AUD is not part of DXY, and the other majors had a quiet day, the DXY basket closed virtually flat (-0.03%), as did yields. Gold was slightly up. Equities had another good day, but mostly outside the US. NDX managed to add 0.3% but SPX was flat.

What was interesting is that after months in the doldrums, BTC spiked up 20% up in an hour from 0430, with, obviously, over 100x normal volume (and held onto these gains). This was accompanied by a similar move in ETH, but that took two days to complete. Naturally rumours abounded an Asian ‘whale’ in this unregulated world.

Wednesday April 03

Reports in the FT that the US and China were close to finalising their trade deal, plus a raft of PMI Services beats, resulted in a third day of equity gains, particularly in DAX. Only the US wobbled slightly after their ISM Non-Manufacturing print missed at 1400, trimming an SPX 0.6% advance to 0.2% at the close. After two green days Oil was down slightly after the substantial EIA stock miss (+7.2M vs -0.4M, more is worse) at 1430.

DXY shed 0.22% today, on the contrasting US and other PMIs, and possibly the ADP jobs miss at 1215. Gold was down, and yields and AUD were up in line with risk-on equities. JPY and CAD were probably pulled in two directions, risk on vs dollar weakness and Oil respectively. Both currencies were flat. EUR and GBP were both up.

Thursday April 04

Another up day from equities as Trump confirmed the China progress, although the pace was slowing. FTSE gapped down 0.4% to reflect overnight GBP strength but managed to recover this to end flat. The dollar recovered to close where it ended on Tuesday, evenly across all currencies. Oil faded slightly in line with the dollar. Gold was unusual, spiking down 0.5% through six hours to touch it Mar 7 low before recovering. Yields were flat on the day.

Friday April 05

Without a lead from China, which was closed, markets breathed a sigh of relief on the NFP beat at 1230, showing that last month was an outlier, and all were up, although the DAX gain was marginal. The SPX ran nicely to a pattern we have pointed out before, where after an instant spike, the price fades until the cash open, and then the size of that spike is repeated, as shown in the chart here. The trade is to buy SPX at the open, with a stop below the pre-NFP price, and a target of the ramp repeated. Oil was up 1.5% in line with the mood.

DXY was only very slightly up (+0.07%), EUR made small gains to offset the fall in GBP (Brexit) and CAD (Canadian NFP miss). After a strong week, yields fell 4bp after Trump called for the Fed to reintroduce QE.

The US major markets are now very close to previous all-time highs. SPX and DJIA are 1.68% away, NDX is even nearer at 1.39%, although notably RUT, DAX, NKY are around 10% off. It will be interesting to see if the SPX record close of 2930 is beaten next week.

WEEKLY PRICE MOVEMENT

Another strong week for DAX makes it the top index mover again. In forex, the best trade would have been AUDJPY, up 0.90%. FANGs all beat their parent NDX index, with a particularly strong showing from FB, and the Tuesday crypto spike held, to give BTC and ETH their best week for over a year.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on UUP. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT, not BST)

(Calendar High volatility items are in bold)

• EU consider further Brexit delay
• US, China and German inflation
• ECB rate decision and statement
• Earning season starts on Friday

Monday April 08

After last weeks big calendar and start to the week and quarter, we are back to the usual quiet Monday today. Watch out for any weekend news, particularly on Brexit or Trump tweets. There are rate decisions on ILS and LKR. Markets are closed in Thailand.

06:00 EUR Germany Trade Balance

14:00 USD US Factory Orders (MoM)

Tuesday April 09

Another quiet day, with no releases in the European and US cash sessions, except the JOLTS jobs openings at 1400. Fed Vice Chair Clarida, (voter, obviously) centrist by definition, but thought to be leaning dovishly at the moment. Markets are closed in the Philippines and in Israel where there is an election, where the incumbent Likud government may not win. There is a rate decision on RSD.

01:30 AUD Aus Home Loans

05:45 CHF Switzerland Unemployment Rate

20:30 WTI API Oil Stock

22:45 USD Fed Clarida speech

23:01 GBP UK BRC Like-For-Like Retail Sales

23:50 JPY Japan Machinery Orders

Wednesday April 10

Easily the busiest day of the week, the EU summit is almost certain to grant UK PM May a long extension to Brexit, rather than the short one she has asked for, figuring that the longer the extension, the softer the eventual Brexit, which is the EU’s stated preference. With Bund yields still negative, the ECB statement should prove interesting. Further TLTRO details may be unveiled, and if not, may be asked about in the presser.

US CPI is expected to be unchanged, which validates the Fed’s current no hike policy. The risk is to the upside, ie a beat may make traders think again. Although not a rate set meeting, the FOMC March minutes today put some flesh on the bones of the dovish reversal seem recently.

00:30 AUD Aus Westpac Consumer Confidence

02:30 AUD RBA's Debelle speech

06:15 JPY BoJ Governor Kuroda speech

08:30 GBP UK Manufacturing/Industrial Production

08:30 GBP UK GDP (MoM Feb)

11:45 EUR ECB Rate Decision/Statement (est 0% hold)

12:30 USD US CPI (Core YoY est 2.1% prev 2.1%)

12:30 EUR ECB Presser

15:30 WTI EIA Oil Stock

15:50 USD Fed Quarles speech

18:00 USD FOMC Minutes

Thursday April 11

Voting in the Indian election starts today. The world’s largest electorate will take six weeks to vote, with the counting starting on May 23. Exit polls are notoriously unreliable, but nevertheless, any significant move from the BJP to the Congress party may have an effect on markets. Chinese and German inflation are the key prints on the day.

00:00 AUD Aus Consumer Inflation Expectations

01:30 CNY China CPI (est 2.3% prev 1.5%)

02:30 AUD RBA's Debelle speech

06:00 EUR Germany CPI (est 1.4% prev 1.5%)

12:30 USD US PPI

12:30 USD US Jobless Claims

13:30 USD Fed Clarida 2nd speech

20:00 USD Fed Bowman speech

22:30 NZD Business NZ PMI

22:45 NZD NZ Electronic Card Retail Sales 

Friday April 12

The Q1/2019 Earnings Season starts today with the usual first reporter JPM, and fellow bank WFC, before the bell. The dovish Fed is bad for banks, and traders will be watching forward estimates closely. The IMF begin a three-day meeting in Washington DC. Today is the next Brexit 'deadline' although it is likely another extension will have been granted before then. Markets have a half-day in Sri Lanka. There are elections in Finland on Sunday.

02:00 CNY China Imports/Exports/Trade Balance

02:15 CNY China FDI

09:00 EUR Eurozone Industrial Production

14:00 USD Michigan Consumer Sentiment Index (est 98.0 prev 98.4)

17:00 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits, TradingView or Linkedin (all open in separate windows). Details of how I compile the report are here

Week to Dec 28th

Mon Dec 24

Markets had been falling all the previous week, and today was another huge down, where significantly, the SPX having lost nearly 7% last week, fell a further 3.26%, and entered a bear market, defined as a 20% drop, for the first time since 2008. The high of Oct 3 was 2940.91 and so 20% below this is 2352.32. The market closed at its low of 2351. Other markets followed suit, but of course DAX and FTSE have been over 20% off the highs for some time. Sentiment was not helped by the government shutdown. The one market that didn’t plunge was FTSE, which closed at 1300, (before New York even opened) was actually up 0.52% on the day. Unlike DAX and NKY, FTSE futures also closed then.

DXY fell in line with equities, and was 0.35% down on the day. As you might expect JPY was sharply up, but so was GBP, which added 0.73% in two hours as at US opened. EUR, AUD and Gold were also up, but CAD was dragged down by Oil which fell 6.5% to a equal the 18-month low of June 2017. Yields were down 6bp in line with the dollar and the risk off mood.

Tuesday December 25

Christmas Day, and NKY futures had followed SPX down on Monday, and the cash market closed 5% down overall (ie from Monday’s Asian cash close). No other markets were open, but DXY futures moved down 0.12%

Wednesday December 26

Today was the start of the short Santa Rally, as defined in Jeffrey Hirsch’s Stock Market Almanac, and what a rally it was. After the S&P/Case-Shiller Home Prices beat at 14:00, DJIA rose by over 1,000 points, the first time ever in history. PX gapped up and closed at its high, 4.96% up to close at 2485, which is where it stood the previous Wednesday. DAX and NKY performed similarly, but FTSE (including futures) was closed. Although this may have been the ‘spirit of Christmas’, a more likely explanation is the 9.7% increase in the Oil price, as it bounced off the (Monday, and November 2016 and June 2017) triple low to add 9.71%, its best day since Feb 22, 2016.

The ‘Turnaround Wednesday’ (ie would have been Tuesday but for Christmas) extended to the dollar, with DXY adding 0.47%, and in an exact reversal, GBP, EUR, Gold and particularly JPY were sharply down, whereas CAD was up. Only AUD kept direction, and added for the day. Yields also reversed back up in line with the mood.

Thursday December 27

The over-enthusiasm was tempered on Thursday. After a mixed Jobless Claims report at 13:30, and no progress on the shutdown, SPX and other indices pared their gains, all pulling back, but still ahead of the Monday close, and then rallying sharply into the US close. This was timing, SPX ended green, but the foreign indices, being futures at that time didn’t quite hold all Wednesday’s gains. FTSE had closed before the US session even opened on Monday, and missed the Wednesday rally. It plunged over 2.6% to a new two-and-a-half year low, before recovering over half that loss in futures. the late US session. FTSE cash close 2% down on the day. There were, in hindsight, some arbitrage possibilities on this index as it tried to catch up.

The dollar turned back down, with DXY softening by 0.45%, but again the picture was mixed, JPY and Gold were up as equities turned down, the former giving up over half its gain into the equity closing rally. EUR was well up, but GBP, which had swung over 1 cent earlier in the week was relatively flat. As Oil retreated from its stellar one-day gain, CAD followed it down, and yields gave up most of their Wednesday spike, in line as on Monday. The correlations have been strong this week, the USDJPY and US10Y charts look very much like the one for SPX.

Friday December 28

After a wildly volatile week, Friday was much flatter. SPX and NKY were flat on the day, where the lagging (due to market time differences) European indices posted solid green candles. It is a sign of the current volatility that the relatively small moves on the charts were still 1.26% up for DAX, and 1.01% for FTSE, in normal markets, a big ramp. This was despite a notable miss in German CPI (1.7% vs 1.9% est) at 1300, which notably capped the rising EUR, which stopped rising at that point, unlike JPY, GBP and Gold which carried on rising all day. AUD and CAD had early rallies, but the EIA Stock miss at 1530 (two days late because of the holiday), and consequent fade in the Oil price sent the latter into reverse, to be the only currency weaker than the dollar this week. Yields were down again, to close the week at 2.718%, an 11-month low.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day. Currency moves are stated in relation to the US dollar. Dollar moves are referenced from the DXY basket.

WEEKLY PRICE MOVEMENT

After the disastrous crash into Christmas Eve, the market did produce a Santa Rally, and indices ended the week slightly up. DJI made its first ever 1,000 point up day on Dec 26. The US outperformed other countries, but this may have been because they had more closed days. We are of course still well down on the month.

DXY gave up 0.49%, exactly the same amount as last week. Forex was much flatter than usual, but the biggest winner JPY is an indicator the market is still nervous. CADJPY was the only pair to move more than 1%. NDX immensely outperformed SPX. The tech index was up 4.86%, and AMZNs move was outstanding. Of great note this week was the recovery of Ethereum, which has put on 66% in the last two weeks, its best since March 2017, long before the crypto bubble burst.

(Crypto prices are given as at 0000GMT Saturday, after the other markets close.)

AUDUSD 0.7044 (+0.14%)

EURGBP 0.9001 (+0.09%)

EURUSD 1.1438 (+0.48%)

GBPUSD 1.2708 (+0.40%)

NZDUSD 0.6706 (-0.06%)

USDCAD 1.3638 (+0.26%)

USDJPY 110.28 (-0.86%)

DAX     10583 (+0.71%)

FTSE     6734 (+1.45%)

NIFTY   10860 (+0.99%)

NKY     19980 (+0.54%)

SPX    2486.4 (+2.75%)

GOLD  1280.76 (+1.97%)

OIL     45.04 (-0.27%)

BTCUSD   4037 (+1.46%)

ETHUSD 142.13 (+27.49%)

FB     133.20 (+6.60%)

AAPL   156.23 (+3.65%)

AMZN  1478.02 (+7.30%)

NFLX   256.08 (+3.93%)

GOOGL 1046.68 (+5.59%)

DXY     96.39 (-0.49%)

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold). 

Monday December 31

Between railing at the Democrats about the shutdown, President Trump tweeted over the weekend that he spoke again to President Xi of China and [the trade] “deal is moving along very well” and “Big progress being made!”. Previous tweets in this vein have lifted the market.

New Year’s Eve falls on a Monday, as it did in 2012, 2007 and 2001. Traditionally this is the last day of the Santa Rally, and also of course the last day of the fiscal month, quarter and year, where any last-minute window-dressing (rotation of stocks to make fund holdings look good) takes place. However, it’s another pre-holiday, so expect lighter trading and surprises are less likely. The stock market is open all day, but the bond market closes at 1900. There is little news.

01:00 CNY China NBS PMIs

15:30 USD Dallas Fed Manufacturing Business Index

Tuesday January 01

New Year's Day and all markets are closed, so a bigger break than Christmas. Futures will open at 6pm EDT. The only news is from Australia, where it is of course Wednesday morning.

21:30 AUD Aus AiG Performance of Mfg Index

Wednesday January 02

Markets return today for the first day of trading in 2019, (except for Japan and New Zealand which remain closed a second day), although news is just a constant stream of Manufacturing PMIs. Traditionally it is an up day as institutions start buying for the new reporting year, but in this market, who knows. In theory, it is the start of earnings season, and 69 companies report, although the first reports on consequence are JPM. WFC and UNH on Jan 15.

01:45 CNY China Caixin Manufacturing PMI

08:55 EUR Germany Markit Manufacturing PMI

09:00 EUR Eurozone Markit Manufacturing PMI

09:30 GBP UK Markit Manufacturing PMI

14:00 NZD GDT Milk Index

14:30 CAD Canada Markit Manufacturing PMI

14:45 USD US Markit Manufacturing PMI

Thursday January 03

The ISM PMI is the most important print of the day, and it is expected to decline, although last month’s print beat substantially. A similar decline (est 58, prev 60.7) is expected in the ISM Prices Paid report. The ADP jobs report is always watched to give an indication of Friday’s NFP. Like last week, the API oil report is two days late due to the holidays. Japan is closed for a third day. 

00:00 AUD Aus TD Securities Inflation (MoM)

09:30 GBP UK Construction PMI

13:15 USD US ADP Employment Change (est 175k pr 179k)

13:30 USD US Jobless Claims

15:00 USD US ISM Manufacturing PMI/Prices Paid (PMI est 58 pr 59.3)

15:00 USD US Construction Spending (MoM)

21:30 WTI API Stock

Friday January 04

The biggest day of the week sees NFP, where estimates are a little lower than usual. We have this issue where markets are entering bear territory, yet US economic figures are quite good, and the Fed only works from the latter, despite recent strong pressure from the White House. An NFP beat has a strong chance of being taken as “good news is bad news” (and a miss vice versa), meaning it will confirm or delay rate hikes. Added to that Chair Powell joins a panel in Atlanta with previous Fed Chairs Yellen and Bernanke today. What he says will be watched very closely. Also on today are Fed members Mester at 1300 and Barkin at 1830. Like last week, the EIA report is two days late due to the holidays. Japan’s markets open for 2019.

Unusually, there are Saturday speakers this week, Fed Williams at 1300 and Bostic at 1515.

01:45 CNY China Caixin Services PMI

08:55 EUR Germany Unemployment Rate/Change

09:00 EUR Eurozone Markit Services/Composite PMIs

09:30 GBP UK Mortgage Approvals

09:30 GBP UK Markit Services PMI

10:00 EUR Eurozone CPI/PPI (Core CPI est 1% prev 1%)

13:30 USD US NFP/AHE/Unemp/Participation (NFP e178k p155k, AHE e3.1% p3%)

13:30 CAD Canada NFP/Unemp/Participation (NFP est 5k, pr 94.1k)

14:45 USD US Markit Markit Services/Composite PMIs

15:15 USD FOMC Member Bostic speech

15:15 USD Fed Chair Powell Speech

15:30 WTI EIA Stock

18:00 WTI Baker Hughes US Oil Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of them interest you, please click the links. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits or Linkedin (all open in separate windows)