In a week which perhaps fittingly saw the start of the Chinese New Year of the Bull, indices, yields and Oil remained strong in defiance of the previous Friday’s NFP miss, while the VIX traded below 20 for the first time since February 2020. And yet the Dollar reversed all week on lower expectations of a Fed rate hike and rising inflation pushing real rates further into the red even though CPI missed expectations with a print of 1.4%. Tesla's announcement that it has bought $1.5bn in Bitcoin raised questions of corporate speculation and even though they have made more profit on this bet than from selling cars, the stock is lower on the week. US politics were again in the news with Trump's impeachment trial proceeding and Biden's first phone call with Xi demonstrating relations could remain tense.
Mon Feb 8
Over the weekend, TreasSec Yellen urged Congress to pass the stimulus package, and there was no letup in last week’s rally, with SPX up 0.7% and NDX up 1%. Oil was up in line. Hopes that respected ex-ECB President Mario Draghi could form a government in Italy boosted Italy’s MIB 1.5% on top of last weeks 7% gain. The safe haven dollar sold off against all currencies and Gold. Bonds were flat on the day.
Tue Feb 9
Stocks snapped a six-day run, and took a breather today, although NDX eked out a 0.1% gain. There was no particular news, just probably some profit-taking, and the NDX outperformance shows the mood was still risk-on, as reflected by a further move out of USD across the board (Gold was also up), and Oil still rising. Bonds were slightly up.
Wednesday February 10
Missing on Chinese and US inflation figures were followed (after a gap up to a new ATH) by a sharp 1% drop at the US open today, although the main index largely recovered with SPX down 0.1%. However NDX fell 0.3%. The dollar was flat today, so Gold followed risk instead and rose, along with bonds and JPY. Oil was slightly up, ignoring the equity move.
Thursday February 11
Markets were up again today after a positive jobs report, although it was an inside day, they did not reach Wednesday’s high. Nevertheless, with NDX outperforming and Gold, bonds and JPY falling, it could just about be called a risk-on day. The dollar was again flat bouncing off the 90.30 low. Oil pulled back after several days of rallying.
Friday February 12
Vaccine progress and stimulus hopes produced a late strong rally pushed SPX and NDX up 0.5% to new ATHs. Oil was up, and Gold, bonds and JPY were down in line. The dollar turned back up earlier in the day, although that faded as stock rallied.
WEEKLY PRICE MOVEMENT
A strong week for equities, although nowhere near as strong as last week. The strongest performer by far was NKY. AUD continued to rally, and AUDUSD was the strongest performer up 1.07%. Bitcoin rallies to new all-time highs. FANGS were variable, but hardly different from the indices as a whole.
My second AUDNZD long paid off, up 0.57% making my running total +1.67% with 5/6 wins. I think the dollar will recover more next week, and AUD may take a breather. I will therefore sell AUDUSD
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)
- FOMC Minutes
- Retail earnings phase starts
- OpEx week
- Heavy industrial data
Monday, February 15
Over the weekend, as expected, Trump was acquitted in impeachment and Mario Draghi was appointed Prime Minister of Italy. There is a Eurogroup meeting all day. Markets are closed in the US for Presidents Day , and in Canada and Hong Kong. Markets remain closed in China until Thursday for New Year.
23:50 Japan Q4 Prelim GDP (QoQ e2.3% p5.3%) (Sunday)
04:30 Industrial Production (YoY)(Dec)
10:00 Industrial Production s.a. (MoM)(Dec)
Tuesday February 16
There is an EcoFin meeting all day. No significant US news
00:30 RBA MPC Minutes
03:00 China Imports/Exports/TB (time approx.)
10:00 Eurozone ZEW Survey – Economic Sentiment(Feb)
10:00 Eurozone Q4 Prelim GDP (QoQ e-0.7% p-0.7%)
10:00 Germany ZEW Economic Sentiment(Feb)
23:30 Aus Westpac Leading Index (MoM)(Jan)
23:50 Japan Imports/Exports/TB
Wednesday February 17
The key day of the week with US Retail Sales and the FOMC Minutes.
01:00 RBA Kent speech
07:00 UK CPI (YoY e0.5% p0.6%)
13:30 US Retail Sales (Control Group e0.4% p-1.9%)
13:30 Canada BoC CPI (Core p1.5%)
16:00 BoE Ramsden speech
19:00 FOMC Minutes
Thursday February 18
Retail giant and DJIA component WMT kicks off the retail phase of earnings season. There are rate decisions in Turkey and Indonesia.
00:30 Aus NFP/UnEmp (NFP e50k p50k, UE e6.5% p6.6%))
11:00 BoE Saunders speech
12:30 ECB MPC Minutes
13:30 US Building Permits/Housing Starts (MoM)(Jan)
13:30 US Jobless Claims(Feb 5)
13:30 Philly Fed Mfr Survey(Feb)
15:00 Eurozone Consumer Confidence(Feb) Prel
22:00 Aus Commonwealth Bank PMIs
23:30 Japan National CPI
Friday February 19
Markit PMIs in all three groups (manufacturing, services and composite) are released today for Germany, Eurozone, the UK and the US. Today is OpEx day, so expect additional volatility.
00:30 Aus Retail Sales (e2.0% p-4.1%)
07:00 UK Retail Sales
08:30 Germany Markit PMIs (Mfr e56.5 p57.1)
09:00 Eurozone Markit PMIs (Comp e48.1 p47.8)
09:00 UK Markit PMIs (Services e40.5 p39.5)
13:30 Canada Retail Sales (e0.1% p1.3%)
14:45 US Markit PMIs
