Week to Aug 10th

Monday August 06

Markets rallied on Friday and this continued today. There were no economic releases, but President Trump said he was winning the trade war, and the market shrugged off Chinese threats to impose retaliatory tariffs. All indices advanced. DAX was not as strong as the others. The Italian government bought back some debt, pushing their (and US) bond yields down, which was good for Europe. However TRY fell 4% to a new all-time low, which was not. We mentioned in previous weeks how Germany and Turkey’s economies are linked.

The forex effect, surprisingly for EUR was flat, as it was across the board, except for GBP which continued last week’s decline, producing a small uptick in DXY overall. Gold was down $5 on the day.

Tuesday August 07

The RBA rate hold and remarks during Asian session gave AUD a lift, and equities were up as well. However, the indices flattened out in the European and US session, as China threatened $60Bn of retaliatory sanctions, but nevertheless closed the day up, helped by more strong earnings. 413 SPX constituents have now reported for Q2 and 79% have beaten on earnings. The UK FTSE was particularly strong on weak sterling. The big news in equities was a tweet by Elon Musk saying he would take TSLA private at $420. The stock immediately leapt by 10%.to close at $379.50. SNAP beat EPS and revenue estimates, but reported lower user numbers, a similar story to Facebook, Twitter and Netflix. The stock initially shot up 11%, then gave it all up, to open 2.2% down the next day.

USD had a slightly down day, with DXY giving up 0.16%. The picture was mixed, with EUR and AUD up, but GBP (on Brexit ‘no deal’ fears), CAD and JPY slightly down. NZD was flat despite after a flat (0.0%) GDT milk auction. Gold was up in line with the weaker dollar. Oil was also flat on the day.

Wednesday August 08

We have said before how the equity price pattern at the moment is an uptrend on no news, which is then knocked back when a trade war news item appears. So it was today. US trade officials confirmed tariffs on a $16Bn tranche of Chinese imports from August 23. Chinese markets fell in Asia, with the CSI300 near a two-year low. The trend continued into European and US markets. The only exception was FTSE, as GBP gave up further ground against the dollar, the only currency to do so. Mainstream media were still talking about the SPX being near all-time highs, some would say a sure sign it will fall!

Oil had started to fall heavily from about 10:00, on China trade concerns (we have mentioned in the past how trade and Oil are linked, for obvious reasons). A miss on the EIA print at 15:30 exacerbated the problem, and the black stuff ended the day 3.5% down, its worst day for three weeks. 

DXY was down again, but GBP losses trimmed the basket’s decline to 0.1%. The other currencies (and Gold) were slightly up on the day. The notable move of the day was RUB, which fell 3.2% after the US announced further sanctions on Russia following the Skripal poisoning case. RUB was also hurt by the fall in Oil. (BNO was down 3%). The RBNZ held rates, with a dovish outlook and NZD started to fall (see tomorrow).

Thursday August 09

We will cover forex first today. In addition to all their other problems, Turkey has been holding a US citizen in prison following the failed coup attempt in 2016. Talks to release him failed today, and in anticipation of punitive measures, TRY fell 5.12% today, its worst day since October 2008. RUB continued to fall from the previous day, down 1.43%. We also had the NZD collapse, down 1.96% on the day. As a consequence of the Turkey and Russia routs, EM currencies MXN and ZAR fell 1.22% and 2.23% respectively, purely on sentiment, as Mexico and South Africa are not known for their Turkish links [and they didn’t react to RUB on Wednesday]. The Eurozone is strongly linked with Turkey, and EUR fell 0.72% (and PLN 1.04%). AUD fell in line with NZD, and even CAD, JPY and Gold were slightly down. Notably CNY had a flat day (as it did on Wednesday). DXY was therefore up 0.54%. Oil was only slightly down after Wednesday’s drop.

Unsurprisingly, with all this trouble, US stocks fell, although only slightly, and the ‘trade war insensitive’ NDX was 0.2% up. DAX was up, solely on the strength of EUR (The dollar denominated EWG ETF was 0.58% down), and FTSE advanced for the same reason. NKY was flat. Notably, with the huge drop in TRY, the Istanbul BIST100 only managed a 0.2% gain. US yields were down, as traders preferred bonds to Gold/JPY as their risk-off asset class of choice.

Friday August 10

The response of the US to the failed Pastor Brunson talks was swift and savage, doubling tariffs on Turkish steel and aluminum. Turkey is the eighth largest steel exporter in the world, 25% of that of China. Who knew? The US is, unsurprisingly their largest market. Their second largest market is Israel, a stark reminder of the difference between politics and trade! TRY fell 15.63% on the day, the lira’s worst day ever, and the largest move of any major currency since GBP at Brexit, and before that the Swiss franc peg. A slight recovery was quashed when President Erdogan made a defiant speech.

EUR fell 1%, and RUB, ZAR, MXN and PLN performed even worse than on Thursday, with CZK joining the 1%+ club. DXY added 0.65%. A clear risk-off situation meant Gold and JPY were up. Oil staged a small recovery, adding 1.5% on the day. US yields fell 6bp on further movement into safe US bonds. AUD was briefly up (30 pips) on the RBA minutes at 01:30, but then fell in line with the general move.

A second and more serious day in this crisis had a larger effect of stocks. All markets were down, but the strongest effect was, unsurprisingly seen in DAX, down 2%. The Italian MIB was down 2.5%, and the BIST 100 was down 2.3% (so nearly 18% in dollar terms). The US inflation print at 12:30, which was a beat at 2.4%, and an eight-year high, was lost in the turmoil, as was the Canadian stellar jobs beat (54.1k v 17k est) at the same time.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.

WEEKLY PRICE MOVEMENT

DXY added 1.12% this week to hit a 13-month high, as Trump appears to be ‘winning’ the trade war, although JPY shows that it is more a case of US losses being less than foreign countries. Selling anything into JPY would have been a winner, the best major being NZD. (Selling TRYJPY would have yielded 21%!). The Turkish contagion affected DAX most, as we have explained above, making it the best index short of the week.

The crypto collapse continued into a second week, with ETH once again suffering worse than BTC, and unlike it’s bigger cousin, making a 2018, and post-big crash low.

Forex showed a little bit more activity than last week, with a stronger USD upside (DXY added 0.52%). CAD gained for the third week in a row, and was the strongest performer. Selling GBPCAD would have netted 1.25%. The biggest index mover was DAX, which erased most of last week’s gains. After two weeks of rallying, cryptos fell back, once again ETH being weaker than BTC, making a 2018 low against USD and against BTC.

AUDUSD 0.7299 (-1.35%)

EURGBP 0.8931 (+0.43%)

EURUSD 1.1411 (-1.33%)

GBPUSD 1.2766 (-1.78%)

NZDUSD 0.6578 (-2.45%)

USDCAD 1.3137 (+1.13%)

USDJPY 110.82 (-0.36%)

DAX     12429 (-1.68%)

FTSE     7674 (-0.03%)

NIFTY   11429 (+0.61%)

NKY     22210 (-1.58%)

SPX    2837.4 (-0.05%)

GOLD  1211.04 (-0.28%)

OIL     67.70 (-1.33%)

BTCUSD   6143 (-17.22%)

ETHUSD 332.36 (-20.44%)

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

NEXT WEEK (High volatility items are in bold)

Monday August 13

Another quiet start to the week. All eyes will be on the EM currencies, and also any further progress on NAFTA.  There are no important news releases, but Italy’s inflation figure is released at 08:00. 

02:15 CNY China FDI

Tuesday August 14

A double whammy of GDP and CPI from Germany opens the day, swiftly followed by the first of three data prints from the UK this week, the average earnings, together with the less important unemployment and claimant count. The UK does not release new jobs filled figures. The German business sentiment figures missed badly last month. Since then EC President Juncker has met with Trump and the Italian situation has eased. An improved figure is expected, although recent Turkey issue may spoil that. The outcome of the NAFTA auto origin deal with Mexico is expected.

02:00 CNY China Retail Sales/Industrial Production

06:00 EUR Germany GDP MoM (est 0.4% prev 0.3%)

06:00 EUR Germany CPI YoY (est 2.1% prev 2.1%)

08:30 GBP UK AHE/Unemployment/Claimant Count (ex bonus est 2.6% prev 2.7%)

09:00 EUR Eurozone GDP/Industrial Production (GDP est 2.1% prev 2.1%)

09:00 EUR Germany ZEW Economic Sentiment/Current Situation

20:30 WTI API Stock

Wednesday August 15

This is the biggest day of the week for economic news. After the BoE rate hike, and guidance that the next one is a long time away, UK inflation would have to deviate substantially. The core annual figure is expected to rise to 2.2%. This figure will probably be taken by traders along with the previous days earnings figure to determine whether sterling falls any further. US Retail Sales are less important that usual, given that CPI (for which they are a proxy) was reported last week. Watch out for the EIA Stock print, it has been moving Oil noticeably in the last few weeks, in the absence of OPEC noises. Italian Markets are closed for the Assumption Day holiday.

00:00 EUR EcoFin Meeting (all day)

00:30 AUD Australia Westpac Consumer Confidence

01:30 AUD Australia Wage Price Index

08:30 GBP UK CPI/RPI (Core CPI est 2.2% prev 1.9%)

10:00 GBP UK Inflation Report Hearings

12:30 USD US Retail Sales MoM (Core est 0.4% prev 0.4%)

12:30 USD US Unit Labor Costs/Nonfarm Productivity

13:15 USD US Capacity Utilization/Industrial Production

14:30 WTI EIA Stock

23:50 JPY Imports/Exports/Trade Balance

23:50 JPY Japan Foreign investment in stocks/bonds

Thursday August 16

Although there is a raft of minor US data, the main calendar event today is the Australian jobs report. The estimate is more modest (and therefore easier to beat) than last month’s blowout figure. It remains to be seen whether this will help the beleaguered AUD which fell sharply last week. RBA Governor Lowe appears before the Australian House for their version of Humphrey-Hawkins. The third UK print, Retail Sales should have limited impact for the same reason as the US release on Wednesday. There is a rate decision in Norway.

01:00 AUD Australia Consumer Inflation Expectation

01:30 AUD Australia NFP/Unemp/Participation Rate (est 27.3k prev 50.9k)

08:30 GBP UK Retail Sales

12:30 USD US Housing Starts/Building Permits

12:30 USD US Jobless Claims

12:30 USD Philadelphia Fed Manufacturing Survey

22:45 NZD NZ Producer Price Index - Input

23:30 AUD RBA's Governor Philip Lowe Speech

Friday August 17

Two more inflation releases today, the Canadian being the more likely to cause volatility. Eurozone figures rarely move the Euro, mainly because the figure tends to follow the individual country releases. The monthly Michigan sentiment index last month showed a significant increase in concern about tariffs. This part of the survey will therefore be of heightened interest this month. Monthly options expire today, which may provide additional volatility.

07:30 AUD RBA Assistant Governor Ellis Speech

09:00 EUR Eurozone CPI (Core est 1.0% prev 1.1%)

12:30 CAD Canada CPI (est 2.0% prev 2.1%)

14:00 USD Michigan Consumer Sentiment Index

17:00 WTI Baker Hughes US Oil Rig Count

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Week to Aug 3rd

Monday July 30

The markets were still spooked on Monday by the momentous FB and TWTR crashes last week, and equity indices were generally down. Only FTSE, an oil proxy, posted a green candle after a 1.55% lift in the price of Oil. The dollar had a tough day, with DXY down 0.33% and all currencies gaining, except a flat JPY, which was unusual at the day saw JGBs (10-year Japanese Gilts) spike to an 18-month high of 0.113%. Gold was up in line with the weaker dollar, but US 10-year bond yields were actually up 1.6bp, and the yield curve (10-year yield minus 2-year yield) widened slightly.

Tuesday July 31

The final day of the month was a Turnaround Tuesday for equities and USD, led initially by the BoJ action to strengthen its QE framework by making its bond buying programme more flexible. The effects were seen in an unusually volatile Asian market which saw the JGB bond yield drop by over half from 0.113% to 0.048%. All indices were up on the day. NDX outperformed after falling nearly 4% from last week’s all-time high.

The forex picture was mixed. JPY was sharply down on the JGB action, as were EUR and GBP, which gave DXY a 0.23% gain. However, Gold, AUD and CAD were up, the latter despite a sharp fall in Oil, on speculation that Iranian exports could avoid sanctions. Yields were down 1bp. The AAPL beat on earnings added 4.5% to the price, a similar reaction to GOOGL last week

Wednesday August 1

The first day of the new month saw a pullback in US and European equities, starting in Asia, and continuing all day, on news that the US could more than double the planned tariffs on $200Bn of Chinese imports. Even the further advance of AAPL to close 5.9% up (and AAPL is 4.24% of SPX, 5.55% of DJIA and 11.99% of NDX) could not prevent indices from posting red candles. Even NDX itself was only flat. Oil fell again, in line, helped by the EIA Stock miss at 14:30. Oil prices are strongly linked to international trade, for obvious reasons. FTSE suffered the worst, because it is a oil proxy, and also because GBP bucked the currency trend and rose slightly in anticipation of Thursday’s BoE rate decision. NKY was slightly up, reacting to the previous day’s JPY move.

Otherwise USD was generally up again. A quick rule of thumb to see if it is USD or EUR that is the focus of traders is to glance at the EUR and AUD (an unrelated currency) charts. It is clear to see this week that USD has been the driver, the two charts are similar until mid-Thursday. Both were down, along with Gold. However, today, CAD joined JPY and GBP in beating USD, but the moves were small. Yields were up 3.9bp, followed the rising DXY, crossing the 3% line and making a three-month high into the Fed rate hold. There were however no notable moves after the release.

Thursday August 2

Readers will remember that last Wednesday July 25 was a day of two halves, and so it was again today. Asian and European markets (and US futures) fell in pre-US trading on the continuing trade war worries. Markets, as you might expect took hits roughly scaled to their exposure, with China coming off worst, Japan next, and then DAX and STOXX. The latter did not fare any worse than DAX, Germany may be the strongest EU economy, but it is the biggest exporter, and therefore most exposed.

However, the mood changed completely in the US session. SPX came off a futures low of 2789, a technical support area from July, and rose solidly all day adding 1.4% from the low. The cash-only SPY posted a bullish engulfing near-marubozu candle, the second in two weeks, a pattern not seen for nearly two years. The only news to support this was the moderate Jobless Claims beat at 12:30. The other indices recovered, but not sufficiently to go green.

DXY had its best day of the week up 0.57%. The biggest loser was GBP after the long-awaited rate hike to 0.75% which was accompanied by BoE Governor Carney, who said there would be no more rate hikes this year, and suggested a figure of 1.21% (only 0.46% more), later revised to 1.5% by 2021 (three years away). You can’t get much more dovish than that, and cable immediately fell 0.5%, and after a slight rebound finished the day 0.8% down. However, the was against a background of a further USD advance across the board. Gold was down in line. Oil sharply rebounded (up 2.1%) recovering Wednesday’s losses. Yield were down 2bp, back under 3%.

We had a US all-time record with the Facebook crash last week, and today there was another. AAPL continued its advance past $207.04, the point at which its market cap exceeded one trillion dollars, the first US company in history to do so. Exuberant journalists had little to say about PetroChina, who hit the magic figure on the day of their Shanghai IPO on Nov 5, 2007. The company’s market cap a year later was less than 26% of that figure, the largest single company destruction of shareholder wealth in history. Remember though, this AAPL price is far from a bubbler. AAPL trades at a PE of 18.8 compared to an SPX average PE of 23.7.

Friday August 3

On a day when China announces retaliatory tariffs on $60Bn of US good, the Non-farm payrolls misses by 20% (a surprise after the ADP and Jobless Claims beats), and rising markets most of the week, you would expect a profit-taking pullback on Friday. But that’s not what happened. After gently rising in early trade, markets rallied after the NFP miss (157k vs 195k estimate) with SPX adding 0.38%. We mentioned last week how the AHE figure is as, if not more, important than the jobs number, and this print (2.7%) was in line with estimates. The currently topical Trade Balance release also beat. Only NKY was down on the day, probably due to the market hours.

The currency position was mixed. A flat DXY masked a picture we have seen before. The underlying trend was a weaker dollar (JPY, CAD, AUD and Gold showed near-identical price action during the day), but GBP (following the BoE remarks) and EUR on another spike in Italian yields (and TRY concerns) followed an initial dip, but failed to rise after the NFP release, and ended up down for the day. Yields pulled back again in line with the dollar, and Oil faded slightly.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.

WEEKLY PRICE MOVEMENT

Forex showed a little bit more activity than last week, with a stronger USD upside (DXY added 0.52%). CAD gained for the third week in a row, and was the strongest performer. Selling GBPCAD would have netted 1.25%. The biggest index mover was DAX, which erased most of last week’s gains. After two weeks of rallying, cryptos fell back, once again ETH being weaker than BTC.

AUDUSD 0.7399 (-0.03%)

EURGBP 0.8893 (+0.02%)

EURUSD 1.1565 (-0.76%)

GBPUSD 1.2998 (-0.83%)

NZDUSD 0.6743 (-0.69%)

USDCAD 1.2990 (-0.53%)

USDJPY 111.22 (+0.23%)

DAX     12642 (-1.32%)

FTSE     7676 (+0.03%)

NIFTY   11360 (+0.73%)

NKY     22567 (-0.28%)

SPX    2838.7 (+0.84%)

GOLD  1214.40 (-0.77%)

OIL     68.61 (-0.52%)

BTCUSD   7421 (-9.37%)

ETHUSD 417.73 (-11.17%)

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

NEXT WEEK (High volatility items are in bold)

Monday August 06

As we move into Northern Hemisphere vacation time, Monday is complete absent of US news releases, and is expected to be a quiet day, playing out the results of last week’s FOMC and NFP. There is a GBP 30-year bond auction at some point in the European morning. Canada is closed for the August Civic holiday.

22:30 AUD Australia AiG Performance of Construction Index

23:01 GBP UK BRC Like-For-Like Retail Sales (YoY)

23:30 JPY Japan Overall Household Spending (YoY)

Tuesday August 07

With Australian inflation below the RBA 2-3% target, the RBA rate decision, or rather the statement accompanying it is unlikely to surprise, and continued ranging of AUD is expected. Volatile social media stock SNAP, still a loss maker (EPS est -0.31) reports after the bell, as does DIS. The earnings season is now drawing to a close with most majors having reported. Again, there is very little in the way of significant releases from Europe and North America.

02:00 NZD RBNZ Inflation Expectations (QoQ)

04:30 AUD RBA Rate Decision/Statement (1.5% hold est)

05:00 JPY Japan Leading Economic Index

06:00 EUR Germany Industrial Production/Trade Balance

14:00 CAD Canada Ivey PMI

14:00 NZD NZ GDT Milk Index (time approx.)

19:00 USD US Consumer Credit Change

20:30 WTI API Stock

Wednesday August 08

As with Australia, no surprises are expected from the RBNZ and the currency is expected to carry on ranging. Similarly RBA Governor Orr, speaking so soon after the Australian rate decision is unlikely to move the currency. Other than an unimportant Mortgage Applications print, we have another day of no US releases. Fed Barkin (hawkish, voter) speaks at 12:45.

00:30 AUD Australia Westpac Consumer Confidence

01:30 AUD Australia Home Loans/Investment Lending for Homes

02:00 CNY China Imports/Exports/Trade Balance (time approx)

03:05 AUD RBA's Governor Philip Lowe Speech

15:30 WTI EIA Stock

21:00 NZD RBNZ Rate Decision/Statement (1.75% hold est)

23:50 JPY Japan Machinery Orders

Thursday August 09

Chinese inflation at 01:30 may set the tone for Asia. This is followed by the US PPI which is a forward indicator of inflation, and at the end of the day we have Japanese GDP. Today the USTR and Japan’s Economy Minister Motegi hold their first bilateral trade talks in Washington. Any positive news to come out of this (remember the EU in July) should help NKY and USDJPY. Singapore and South Africa are closed for holidays.

01:00 AUD Consumer Inflation Expectation

01:30 CNY China CPI

08:00 EUR Eurozone Economic Bulletin

12:15 CAD Canada Housing Starts s.a (YoY)

12:30 USD US Producer Price Index ex Food & Energy (YoY)

12:30 USD Jobless Claims

12:30 CAD New Housing Price Index

22:30 NZD Business NZ PMI

23:50 JPY Japan GDP

Friday August 10

Friday is the big day of the week for economic releases. A third airing of RBA views in the week is unlikely to matter, but as Europe opens, we should see some action. UK GDP at 08:30 is the first release since the rate hike last week, which did not lift GBP. A positive print here may do so, as cable is currently sitting at a support level. Even more important is the US inflation figure, one of the dual mandates of the Fed. Concurrent with this is the Canadian jobs report, one week later than the US this month. CAD has recently outperformed other currencies, and volatility is the norm on this release.

01:30 AUD RBA MPC Minutes

08:30 GBP UK GDP QoQ MoM (QoQ est 0.1%, prev 0.2%)

08:30 GBP UK Manufacturing/Industrial Production

12:30 USD US CPI  (Core est 2.3%, prev 2.3%)

12:30 CAD NFP/Unemployment/Participation (est 24k/5.8%, prev 31.8k/6.0%)

17:00 WTI Baker Hughes US Oil Rig Count

18:00 USD Monthly Budget Statement

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here.

Week to Jul 27th

Monday July 23

After falling in early trade, markets advanced to post modest gains for the day as trade war tensions were balanced by an early rise in the price of Oil (lost in late trade) on Iran tension, and a fairly positive outcome from the G20 summit in Argentina. Only NKY was down, reflecting the early strength of JPY and the time the market is open. USD generally had a good day with DXY advancing 0.25%, with all currencies and Gold giving ground. US 10-year bonds yields were particularly strong, up 7bp to a five-week high. GOOGL reported after the bell (a day earlier than we advised last week) and beat estimates, putting on 5% after hours to a new ATH.

Tuesday July 24

Buoyed by the GOOGL beat, a Chinese tax cuts and spending plan, rallying metals (not Gold) and Oil prices, equities continued to advance, shrugging off misses on the Housing Prices (13:00) and PMIs (13:45) prints. All Indices were up again. DXY was more or less flat on the day as a decline in EUR, its largest component, after mixed European PMIs at 08:00 was balanced by gains in all the other major currencies, where the Turnaround Tuesday effect was seen. Yields followed this and gave up some of Monday’s gain. Oil also turned, and put on 0.8%. Gold showed some volatility but ended up flat on the day.

Wednesday July 25

A definite day of two halves today in equities. US auto giants GM and FCAU both cut their forward earnings forecasts because of steel and aluminum tariffs. GM dropped 8.16% (4.6% at the close), and FCAU, who also missed on Q2 earnings fell 15.66% (11.83% at the close). Autos do not really feature in US indices, DJIA has none, GM, the largest in SPX is only 0.2% by weight, and TSLA is only 0.6% of NDX, so the US index effect was minimal. 

However, as we have mentioned before, the four German auto giants DAI, BMW, VOW and CON make up about 20% of DAX. The knock-on effect (sector sentiment) meant DAX was down 1.26% by the European close, despite the beat on all three Business Sentiment indicators at 08:00. 

However, reports of the meeting between President Trump and European Commission President Juncker, released after the European close were much more positive than expected, saying they would “work toward” zero tariffs, ie free trade. Critically, after the meeting Trump said he would not raise tariffs on European cars. Markets swiftly recovered, with SPX reaching a new near five-month high. DAX and NKY futures performed similarly. Only FTSE stayed down, as Britain will of course not benefit from any EU-US trade deal after Brexit.

DJIA leader BA missed on earnings and guidance before the bell. The stock plunged 3.5% in early trading, but had recovered nearly all of it after the Juncker lift. The real shock was when FB reported after the bell. Although they beat, the slowing in subscriber growth caused a rout. The stock fell 20% instantly, dragging TWTR down 2% with it, and shaving 100 points off NDX futures. This was the largest one-day (or instant) disappearance of single-stock market capitalisation ($120Bn) of all time, beating INTC ($91Bn) which fell 22% on Sep 22, 2000. Or to put it another way, $370 for every man, woman and child in the US. (There was an incident in Germany on Oct 28, 2008, where VOW fell 46% ($143Bn) after rising 170% on the previous two days due to a large short position being unwound)) 

Foreign currencies (and Gold) also rallied on the Juncker news, taking 0.4% off DXY. The effect was particularly strong on CAD as traders interpreted the softening to the EU as positive for NAFTA. The loonie was also helped by a 1.7% (sustained) spike up in Oil after the strong (-6.15M vs -2.33M, lower is better) beat on EIA inventory. Yields were up 2bp in line with the risk-on sentiment.

Thursday July 26

The Asian and European markets opened up on the EU trade talk success. FTSE was surprisingly weak given a further advance in Oil on news of a temporary Saudi shipment suspension, and a sharp fall in GBP. However, despite a $25Bn buyback announcement, oil giant Shell (the largest FTSE component weighing 10.35% across the RDSA.L and RDSB.L shares) fell 3.6% on its earnings miss, leaving the London index virtually flat on the day.

TWTR reported before the bell, and it was a similar story to Facebook. EPS and Revenue were fine, but a drop in users caused the stock to sink over 20%.

To complete the FANG earnings season, AMZN reported at the end of the day, and doubled the estimate ($5.07 EPS vs $2.50 est). Shares rose a moderate 3%. A clear pattern is now emerging with these FANG stocks. If every metric is positive, there is a moderate gain. If any metric (not just EPS and Revenue) disappoints, the stock falls heavily.

Note that TWTR and FB results had a strong effect on the FANG+ index (ICE:NYFANG), which broke through an upward trendline for the first time since the index was created in late 2017.

On the positive trade news, and anticipation of the GDP figure on Friday, talked up by Larry Kudlow, Trump’s economic advisor. the dollar had its best day of the week, with DXY putting on 0.66%. A lacklustre ECB press conference did not really move EUR, as it simply fell in line with all the other currencies and Gold. Yields were up 3bp in line with the stronger dollar.

Friday July 27

Friday’s GDP print had been widely anticipated, but in the end came in at 12:30 as estimated at 4.1%, and the PCE (inflation proxy) figure missed. A clear case of buy the rumor sell the news, and that’s what the market did. The DAX had already been selling off in the European morning and accelerated in the US session (although once again, FTSE was out of sync, and only sold off after Europe closed.) Also NKY only started selling after the print. Both XOM and CVX missed estimates. XOM duly fell, but CVX rallied as the report included a $3 billion buyback.

The dollar had rallied earlier, but gave up ground after the release, in line with indices. Most currencies were up, although Gold and GBP were flat. Oil was also down after advancing all week. Yields were down 1bp in line with the weaker dollar.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.

WEEKLY PRICE MOVEMENT

A second quiet week overall for currencies, with a slight USD upward bias (DXY added 0.25%). Without any more Brexit news, GBPUSD had an inside week. Note whilst all percentages are negative, this means CAD and JPY were up. Selling EURCAD would have netted you 1.18%. Indices had performed well until the sell-off on Friday.

NIFTY did not sell off, posting a marubozu weekly candle, and its best week since January 2017. This was the best index trade. BTC continued to recover strongly, and for the second week well outperformed ETH. ETHBTC has fallen over 20% in the last two weeks. 

AUDUSD 0.7401 (-0.23%)

EURGBP 0.8891 (-0.36%)

EURUSD 1.1653 (-0.56%)

GBPUSD 1.3107 (-0.15%)

NZDUSD 0.6790 (-0.24%)

USDCAD 1.3059 (-0.62%)

USDJPY 110.97 (-0.40%)

DAX     12811 (+1.99%)

FTSE     7674 (+0.10%)

NIFTY   11278 (+2.43%)

NKY     22631 (+0.41%)

SPX    2815.0 (+0.60%)

GOLD  1223.78 (-0.61%)

OIL     68.97 (+1.26%)

BTCUSD   8188 (+11.66%)

ETHUSD 470.24 (+4.71%)

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

NEXT WEEK (High volatility items are in bold)

A packed week offers three major rate decisions as well as NFP, and a larger than usual number of economic releases.

Monday July 30

With a light schedule, attention will probably turn again to the trade war. The only news of note is the bi-monthly German inflation figure, which is expected to remain the same as two weeks ago. Although we are in the peak of earnings season, there are no significant (to indices) releases today. Look out also for any hints from China of retaliatory tariffs and/or internal policy stimulus.

23:50 JPY Japan Retail Sales (Sunday)

08:30 GBP UK Mortgage Approvals

09:00 EUR Eurozone Business Climate

12:00 EUR Germany CPI (est 2.1% prev 2.1%)

14:00 USD US Pending Home Sales (MoM)

22:45 NZD NZ Building Permits s.a. (MoM)

23:00 GBP UK Gfk Consumer Confidence

23:30 JPY Jobs/Unemployment

Tuesday July 31

The first rate decision of the week comes at 02:00. Although a rate hold is virtually a certainty, traders will be looking to see if any change in policy is announced, given the recent sharp upturn in JGB 10-year yields which hit an 18-month high last week. The Eurozone GDP, inflation and unemployment figures are, unusually, released concurrently. Normally these do not move EUR much, but all three in the same direction might. In the US, the final comments for the second tranche of tariffs on $16bn of Chinese imports are due. Trump may well say something about how he wishes to USTR to act.

High-flyer SHOP reports before the bell, but the central event of the entire earnings calendar, AAPL, the largest company in the world, reports after the close, usually a good 30 minutes after. They have only missed once in the last 22 quarters, and the EPS estimate at $2.18 is 51c lower than the Q1 actual. However, as we have seen recently, forward guidance and subsidiary metrics will also have to be good for the stock to rise.

01:00 AUD Australia HIA New Home Sales (time approx)

01:00 CNY China NBS PMIs

01:30 AUD Australia Building Permits (MoM)

02:00 JPY BoJ Rate Decision/Statement (est -0.1% hold)

04:00 JPY BoJ Press Conference

06:00 EUR Germany Retail Sales (MoM)

08:00 EUR Germany Unemployment

09:00 EUR Eurozone GDP/CPI/Unemployment Rate

12:30 USD US PCE

12:30 CAD Canada GDP

13:00 USD S&P/Case-Shiller Home Price Indices (YoY)

13:45 USD Chicago Purchasing Managers' Index

20:30 WTI API Stock

22:45 NZD NZ Employment/Unemployment/Participation

23:30 AUD Australia AiG Performance of Mfg Index

Wednesday August 1

We may see the USTR decision on the $16Bn tariff package as early as today. Otherwise, after a raft of PMIs, the all-important Fed rate set meeting minutes are published at 18:00. A hold is priced by CME Fedwatch at 97.5% likelihood. Commentators will be looking for signs of dovishness, even as far as lowering the dot plot from two to one additional hike this year, given the subdued inflation levels, the tariff effect on the economy, and of course the recent comments from Trump about the hikes and the dollar. If this does happen, USD will start to fall again, but history tells us this will not be instant.

Today is the peak of earnings season with 402 companies reporting. Of interest are loss making TSLA, already down 20% from its June high, and extremely vulnerable on the downside should anything negative transpire, given the very recent change in tech stock sentiment. X is another interesting stock. Theoretically a beneficiary of tariffs, it will be interesting to see if their guidance reflects that.

01:45 CNY China Caixin Manufacturing PMI

07:00 EUR ECB non-MPC Minutes

07:55 EUR Germany Markit Manufacturing PMI

08:00 EUR Eurozone Markit Manufacturing PMI

08:30 GBP UK Markit Manufacturing PMI

10:00 EUR Germany 10-y Bond Auction

12:15 USD US ADP Employment Change

13:30 USD US Markit Manufacturing PMI

14:00 USD ISM Manufacturing/Prices Paid

14:30 WTI EIA Stock

18:00 USD Fed Rate Decision/Statement (est 2.0% hold)

Thursday August 2

Attention moves to the UK on Thursday, where a delayed rate hike is finally expected, the first to rise above the 0.50% set ten years ago. Or is it? GBP is about where it was on Jul 18, the day of the inflation miss, and Brexit concerns have not gone away. Watch also for the votes, which often have as much effect as the rate. Other data today is light, although in Japan we have BoJ Deputy Governor Amamiya speaking at 01:30, and at the other end of the day, the BoJ MPC Minutes, although these are unlikely have much effect, given the rate decision presser two days earlier.

01:30 AUD Australia Imports/Exports/Trade Balance

08:30 GBP UK PMI Construction

11:00 GBP BoE Rate Decision/Statement (est 0.75%, prev 0.50%)

12:30 USD US Jobless Claims

23:50 JPY BoJ MPC Minutes

Friday August 3

The pace of data continues unabated on Friday, (mostly PMIs again) but the main print is of course NFP, and the equally important AHE. The unemployment rate (est 3.9%, prev 4.0%) is now at what some economists call the ‘natural rate’, and comfortably inside the Fed’s own target. The statistic therefore becomes less important. On the other hand, the AHE must continue to outpace inflation, for the public to be able to afford rate hikes. In fact, it is arguable that AHE may have more effect than the jobs figure. The US trade balance figure is also published at the same time, of greater interest given the tariff wars. Note there is so simultaneous Canadian print this month.

01:30 AUD Australia Retail Sales s.a. (MoM)

01:45 CNY Caixin China Services PMI

07:55 EUR Germany Markit Services/Composite PMI

08:00 EUR Eurozone Markit Services/Composite PMI

08:30 GBP UK Markit Services PMI

12:30 USD NFP/AHE/Unemployment (NFP est 195k prev 213k, AHE est 2.7% prev 2.7%)

12:30 USD US Trade Balance

12:30 CAD Canada International Merchandise Trade

13:45 USD US Markit Services/Composite PMI

14:00 USD US ISM Non-Manufacturing PMI

17:00 WTI Baker Hughes US Oil Rig Count

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