Saturday, 9 December 2017

Week to Dec 8th

Monday saw the effect of the tax bill being passed in the Senate. Indices gapped up and SPX made yet another new intraday all-time high of 2665, but a sharp 100-point sell-off in NDX dragged SPX down to finish 0.1% on the day. NKY followed suit, but the European picture was mixed. After some volatility, DAX edged a small gain, but although FTSE was flat by the cash close, overall it was down on a strong British pound, which rose sharply on positive Brexit news, although some of these gains faded later. Otherwise USD was slightly down against JPY and CAD. Gold, EUR, AUD and 10-year yields were flat, and Oil was down slightly.

Weakness in equities continued on Tuesday, fuelled by misses on US Trade Balance (1330) and PMIs (1445/1500), and concern that the Senate had failed to repeal corporate ‘alternative minimum tax’, a provision which limited the tax advantages for some companies. DAX and FTSE also fell, although NKY managed to stay flat. In forex, AUD put on 50 pips (0.67%) on the Retail Sales beat at 0030, and the Chinese Caixin Services beat at 0145. There was however little reaction to the rate hold. These gains were given up in the European session to end flat on the day. Otherwise USD was slightly up across the board (as were yields), with GBP faded particularly sharply. It then recovered in an almost perfect reversal of Monday’s price/action. Gold fell $9 to £1,266, and touched a two month intraday low of $1,261. Oil was generally flat after a choppy day, on concerns that the rising price will re-open significant US shale capacity.

Early Wednesday was the low point of a V-shaped week for all equity indices. NKY started the ball rolling in the Asian session by giving up 300 points (1.33%), its biggest one-day drop for eight months, the HSI fell 2.1%, and when the DAX future opened at 0700, it immediately gave up 150 (1.15%) points before the cash index and component shares opened. FTSE and SPX had sold off the previous day and so were not affected. Having touched these lows, all indices then recovered throughout the European and US sessions, helped by the ADP jobs beat at 1215, and closed positively, but not by much.

USD had a similar low point, and recovered today. The dollar was up against all currencies, and Gold was down again to a new low. Surprisingly bond yields did not respond and ended 3bp down. As we predicted last week, the Canadian rate decision (1.0% hold) caused a 153 pip (1.21%) spike up for USDCAD, reversing most of last week’s payrolls movement, but no doubt assisted by the sharp drop in the price of Oil. AUD was very volatile after the GDP miss, and ranged 0.86% with a minute, a rare stop-hunting exercise we rarely see these days. It ended up 0.6% on the day.

However, the story of the day was Bitcoin, which put an amazing 21.18% on to reach a new record high of $14,099. The move was so extreme that there were huge differences between the various exchanges. We are quoting Coinbase ( which was the most extreme. The price was $5,870 three weeks ago. But it didn’t end there.

Thursday was a quiet day for news. HoweEquities continued upwards, and as tech stocks belatedly joined the party, we finally got the risk-off triple signal: Gold, JPY and bonds (inverse to yields) were all down (This was despite further falls in China). The only index to fall was FTSE, as GBP rallied sharply in the US session, putting on 165 pips (1.24%) between 1200 and 1830, on news that the UK had settled the Northern Ireland border issue.

Other than against GBP, the dollar was stronger against all the other currencies. It was another risk-on day with Gold and bond prices falling with JPY. GBP and JPY completed their V-pattern returning to their Monday levels, and Oil moved in that direction as well.

Two days of Bitcoin
And if you thought the previous day’s Bitcoin was a spike, today was without precedent. The Coinbase exchange reached an intraday high of $19,694, that’s 39.6% on the previous close. It then pulled back 23% in 15 minutes, the largest and fastest pullback in the crypto-currency’s history, to finish ‘only’up 22.63% on the day. In the three and a half hours before the spike, BTCUSD rose more than SPX has risen during the entire Trump presidency.

We have often said that one sign of a top is when everyone is talking about something, ie it moves out of Wall Street into Main Street. Thursday’s Bitcoin surge was the lead story in the London Times on Friday morning.
London Times Front Page Dec 

We told you last week that Friday was the government shutdown deadline. As he did earlier in the year, President Trump signed another stop-gap bill, to kick the problem down the road, but this time only for two weeks (until December 22nd). NFP did not disappoint, beating the revised (something we also mentioned last week) estimate of 200k by 28k. Unfortunately, the sticking point in the economic recovery, as we have mentioned before, is Average Hourly Earnings which missed (print 2.5% vs est 2.7%). You can see from this chart how this month’s print was particularly poor.

Average Hourly Earnings since 2014
Markets initially sold off the NFP although SPX recovered later in the day to post another gain, and finish the V-pattern for the week, and a closing all-time high of 2650.6. Other indices followed suit, although not at the same time. NKY and DAX made all their gains in the early part of their respective cash sessions, whereas FTSE rose throughout all three sessions, largely following the 1c-plus profit-taking fade in Cable, despite beats on the UK Manufacturing (0930) and NIESR GDP Estimate (1300) prints. Overall both GBP and FTSE posted an inside week (as did NZDUSD in the instruments we cover)

 In currencies, JPY continued downward, but otherwise USD was flat against other currencies. Gold and bond yields were also flat. Oil decided to join the V-shapes by recovering all Wednesdays losses, putting on $1.25 (2.21%) at one point. Bitcoin was quiet too, it ‘only’ dropped 5.37% by midnight.


These are the prices movements for the week on the instruments we cover, with a recovery across the board for USD. The best forex trade would have been to buy USDCAD, up 1.29%. For the second week, NIFTY was the most volatile index but for the first time in ages, the worst performer was Gold which had its worst week since the beginning of May, making a four-month low.

AUDUSD 0.7508 (-1.33%)
EURGBP 0.8791 (-0.34%)
EURUSD 1.1769 (-1.05%)
GBPUSD 1.3381 (-0.68%)
NZDUSD 0.6835 (-0.76%)
USDCAD 1.2846 (+1.29%)
USDJPY 113.49 (+1.19%)
DAX     13162 (+1.67%)
FTSE     7406 (+1.05%)
NIFTY   10265 (+1.42%)
NKY     22881 (+0.27%)
SPX    2650.6 (+0.27%)
GOLD  1248.55 (-2.40%)
OIL     57.34 (-1.63%)

NEXT WEEK (all times are GMT)

As we enter the penultimate week before the holiday closure, it will be interesting to see if the packed schedule produces the  volatility you would expect, given potentially declining volume. Over the weekend we had China PPI and inflation figures, which missed (YoY CPI 1.7% vs 1.8% est). In New Zealand, Finance Minister Robertson speaks at 1900GMT Sunday, followed by Retail Sales at 2145, when forex markets are open.

Monday is quiet, although the US10Y auction may jolt the current yield price out of the torpor it has shown in the last two months. The next round of NAFTA talks start, and will last all week. One interesting event is the opening of XBT Futures (at 2300), the new CME instrument to trade Bitcoin without going to the trouble of wallets etc. For the first time institutional and professional investors, including HFTs of course will be active in the short-term market. Volume is likely to be enormous. If you thought Bitcoin was volatile already, wait for this.

Tuesday is important for AUD with the Australian Outlook Report. Also Governor Lowe is speaking at 2215. UK inflation is expected to rise to 3.1%, although it is so close to the rate set on Thursday, that it is unlikely to affect it. The Alabama Senate seat election (to replace AG Jeff Sessions) will report the result after the markets have closed. With Trump’s thin majority, failure of the controversial candidate Roy Moore to hold the state for the Republicans can only be seen as negative for the markets. Current polling has Moore ahead by seven points, but we all know how accurate pollsters have been in the last couple of years. Moore leans to the right of the party, so he will be a safe voter for the Trump agenda.

Wednesday is the long awaited December rate decision. A hike to 1.5% is widely expected, although the CME FedWatch tool actually has a non-trivial 9.8% chance of a 50bp (to 1.75%) raise. Traders will look for hints to further rate rises, and if they are not found, this suggests that the 25bp increase may actually depress USD. As well as the Alabama result, there is also the important inflation print at 1330, although clearly this is far too late to affect the Fed news. The German inflation and UK unemployment figures make EURGBP worth watching in the European morning session.

Thursday is even busier than Wednesday, and it all happens very quickly. Following Eurozone PMIs and UK Retail Sales, we have a 90 minutes period with both GBP and EUR rate decisions/statements, and the important US Retail Sales. Expect considerably volatility in both currencies against each other and USD. If that were not enough, the two-day EU Council meeting begins, and it is vital for UK PM May that the EU27 confirm that “sufficient progress” has been made, although this may not come until the following day.

In relatively minor news, there are also rate decisions on CHF, NOK, TRY, and MXN  (and for that matter South American currencies COP, CLP, and PEN), the NZ Outlook Report at 0000, and the Australian ‘NFP’, BoC Governor Poloz speech at 1740 (published at 1725). All this as USD follows post-Fed volatility, and NAFTA, the tax bill reconciliation, Russiagate and Brexit roll on. Is that enough for you?

Friday doesn’t have much in the way of releases, but the Eurozone and NAFTA conferences end, and some traders will be finishing for the holiday and therefore rebalancing their positions. BoE newly-converted hawk Haldane speaks at 1315. Russia makes a rate decision, a 25bp cut is expected.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Dec 10
2145 NZD Electronic Card Retail Sales

Mon Dec 11
0000 AUD HIA New Home Sales MoM
1700 USD US 10Y bond auction

Tue Dec 12
0030 AUD Mid-Year Economic & Fiscal Outlook Report
0030 AUD House Price Index
0200 CNY China FDI
0430 JPY Tertiary Industry Index
0930 GBP UK CPI est 3.1% prev 3.0%
1000 EUR Germany ZEW Sentiment
1900 USD Monthly Budget
2130 WTI API Stock
2330 AUD Westpac Consumer Confidence

Wed Dec 13
0700 EUR Germany CPI YoY est 1.5% prev 1.8%
0930 GBP UK ILO Unemployment Rate/Claimant Count
1000 EUR Eurozone Industrial Production
1530 WTI EIA Stock
1900 USD Fed Rate Decision est 1.5% prev 1.25%
1900 USD FOMC Economic Projections
2350 JPY Japan FDI

Thu Dec 14
0000 AUD Consumer Inflation Expectation (CPI proxy)
0001 GBP RICS Housing Price Balance
0030 AUD Employment Change/Unemployment Rate (equivalent to NFP)
0200 CNY China Retail Sales/Industrial Production
0830 EUR Germany Markit PMIs
0900 EUR Eurozone Markit PMIs
0930 GBP UK Retail Sales
1200 GBP BoE Rate Decision (0.5% hold est)
1245 EUR ECB Rate Decision
1330 USD US Retail Sales
1330 EUR ECB MPC Statement and Press Conference
1330 USD US Jobless Claims
1445 USD US Markit PMIs
2130 NZD Business NZ PMI
2350 JPY Japan Tankan Manu Outlook

Fri Dec 15
0600 EUR Germany Wholesale Price Index
1000 EUR Eurozone Trade Balance
1415 USD US Industrial Production/Capacity Utilisation
1800 WTI Baker Hughes Rig Count

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Sunday, 3 December 2017

Week to Dec 1st

The markets entered the week after Thanksgiving quietly. As we predicted last week, AMZN made further gains on Monday, gapping up past $1,200 to close the day $10 up. However, a 0.72% fall in the Shanghai Composite index weighed, and all indices were down. However SPX, NDX, and DJIA managed to eke out slight new all-time highs. The slight risk-off mood was confirmed by advances in Gold, JPY and bond prices (inverse to yields). Otherwise USD fell in early trading, but recovered to end the day slightly up against all other currencies. Oil was down ahead of the OPEC meeting.

Once again we had Turnaround Tuesday. All indices were well up (with further US ATHs) on the tax cut momentum, and comments from new Fed Chair Jay Powell on easing of financial regulation. Gold and JPY were down as were bond prices initially, although they ended up flat. After an initial dip, GBP was up on the day after it was confirmed that the UK intended to fully honour the Brexit ‘divorce bill’ removing the largest obstacle to a post-Brexit trade deal. However, it was on its own, all other currencies fell against the USD and DXY was 0.4% on the day. Oil was down slightly again, down 0.2% to $57.99 anticipating the API Stock miss at 2130 after the pit closed.

On Wednesday SPX and DJIA were up again, touching new intraday highs after the US GDP beat at 1330. However, other equity indices fell, NDX giving up 1.20% on the day, as tech stocks rotated into financials. DAX and FTSE posted losses, the former despite the inflation beat at 1300, and NKY was roughly flat. The ongoing progress in Brexit pushed GBP above $1.34 to a new two-month high. USD rose against all other currencies except EUR, which rose slightly, with a net result of a flat DXY. This was reflected in higher bond yields, up 6bp at 2.39% and lower Gold prices.

The market still had no news on the OPEC cuts, and after an early rally, Oil dropped sharply by $1 (1.71%) on the EIA stock miss, although unusually, the sell off was into the miss. The price recovered 45 minutes later, to sell off again into the close.

Thursday was a blowout for US indices after Trump critic and former presidential candidate John McCain confirmed he would support the tax bill, with DJIA putting on 1.28% and together with SPX making another ATH. NKY also ramped as JPY continued to slide along with Gold and bond prices (inverse to yields), very much risk-on. The mood was not shared in Europe, DAX and FTSE both fell after early rallies following the German Unemployment beat at 0900. The forex trend for the week continued with GBP (and EUR) outperforming the dollar, but other currencies giving up ground. Oil performed an almost exact repeat of Wednesday’s price action, as OPEC and Russia agreed to extend cuts until the end of 2018.

Friday was the most volatile day of the week, and indeed for many months. SPX had given up 1% in the Asian session, and was slowly climbing again on anticipation of the tax cut, when a bombshell dropped. Trump’s former national security advisor Michael Flynn had already pleaded guilty to lying to the FBI, but an ABC report at 1600 (1100 EST) said that Trump instructed him to contact Russian officials before the election which would have been illegal. SPX immediately dropped 45 handles (1.7%). However, it turned out that the story was “fake news”, and the instruction was actually issued after Trump became President-elect, a perfectly normal action. The market quickly recovered and finished the day slightly up, although it couldn’t quite make another high. The picture elsewhere was mixed. USDJPY fell on the Flynn news and did not recover, and NKY, already down, fell with it. DAX had already collapsed in the morning, and did not recover. Only FTSE managed modest gains, as GBP turned down slightly after a week of gains.

We promised volatility in CAD last week, and we got it. In a standout move, the loonie recovered all the week’s losses, after the best jobs report for over four years. The print of 79.5k (equivalent to 715k in US NFP terms) blew away the 10k estimate, and CAD put on 193 pips (1.5%) on the day. This was of course helped by the weakened dollar and a sharp (2.5%) rise in Oil as traders digested the OPEC news.

All the currency patterns for the week were reversed, EUR and GBP were down, whereas AUD and Gold were sharply up in line with JPY. Bond yields were also down.


These are the prices movements for the week on the instruments we cover, with a mixed USD pattern. The best forex trade would have been to buy GBPJPY, up 1.76%. For once, NIFTY was the most volatile index and overall biggest mover, down 2.58% on poor fiscal deficit news.

AUDUSD 0.7609 (-0.01%)
EURGBP 0.8821 (-1.40%)
EURUSD 1.1894 (-0.29%)
GBPUSD 1.3472 (+1.00%)
NZDUSD 0.6887 (+0.17%)
USDCAD 1.2683 (-0.20%)
USDJPY 112.16 (+0.61%)
DAX     12946 (-0.93%)
FTSE     7329 (-1.08%)
NIFTY   10121 (-2.58%)
NKY     22819 (+0.79%)
SPX    2643.4 (+1.58%)
GOLD  1279.19 (-0.71%)
OIL     58.29 (-1.15%)

NEXT WEEK (all times are GMT)

Another busy week ahead with two rate decisions and NFP, not to mention the ongoing tax bill and Flynn situations.

Early on Saturday morning, the Senate passed the tax bill as expected, and Greece (remember them) reached a preliminary deal on further reforms needed to leave the bailout plan next August.

Monday is deadline day for the UK Government to come up with an improved ‘divorce’ offer. ECB member Costa speaks in Portugal, but news is light, and we expect the tax bill and the Flynn case to continue to dominate.

Tuesday has a raft of PMIs, but the main area of focus is Australia, where retail sales is reported shortly before the interest rate decision. AUD is still very weak and traders will be listening for policy guidance, although little is expected. There is also a rate decision in Poland.

Wednesday gets busier. The House and Senate start to reconcile their versions of the tax bill. ADP, the ‘sneak preview’ of NFP is published, with an estimate 15% higher than the NFP estimate. The biggest news of the day is the Canadian rate decision. It will be interesting to see if this pushes USDCAD up, having reached channel support last Friday, or whether hawkish remarks push CAD higher.

On Thursday, Germany’s ruling SPD party starts a three-day convention in Berlin, the pressing issue being the still unresolved coalition. There are some signs of hope which would be positive for EUR and DAX. The main news release is Eurozone GDP, although the effect of this is muted as it comes after the individual countries report.

Friday is the US government shutdown deadline, although there are already plans to avert this with a stop-gap bill. The big news, as always is NFP, with particular focus on wage growth (AHE) if the figure is broadly in line with estimates. Please recheck the estimate on the day, as it has been known to move as the week progresses.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Dec 04
0000 AUD HIA New Home Sales
0000 AUD TD Securities Inflation
0930 GBP UK Construction PMI
1000 EUR UK Producer Price Index
1500 USD US Factory Orders

Tue Dec 05
0001 GBP UK BRC Like-for-like Sales
0030 AUD Australia Retail Sales
0145 CNY China Caixin Services PMI
0330 AUD RBA Rate Decision (1.5% hold est)
0855 EUR Germany Markit Services PMI
0900 EUR Eurozone Markit Services PMI
1330 USD US Trade Balance
1330 CAD Canada International Merchandise Trade
1445 USD US Markit Services/Composite PMI
1500 USD US Non-Manuf PMI
2135 WTI API Stock

Wed Dec 06
0030 AUD Australia GDP
0800 EUR ECB Non-MPC minutes
1000 (approx) EUR German Euro Bund Auction
1315 USD US ADP (est 214k prev 235k)
1330 USD US Productivity/Unit Labor Costs
1500 CAD Canada Rate Decision (1.0% hold est) 
1530 WTI EIA Stock
2230 AUD Australia Performance of Construction Index
2350 JPY Japan FDI

Thu Dec 07
0030 AUD Australia Trade Balance/Imports/Export
0500 JPY Japan Coincident/Leading  Economic Indices
1000 EUR Eurozone GDP (est 2.5%, prev 2.5%)
1330 USD US Jobless Claims
1500 CAD Canada Ivey PMI
1900 USD US Consumer Credit Change 

Fri Dec 08
0000 USD US Government Shutdown Limit
0030 AUD Australia Investment Lending/Home Loans
0200 CNY China Trade Balance
0500 JPY Japan Eco-Watchers Survey
0700 EUR Germany Trade Balance
0930 GBP UK Manuf/Industrial Production
1300 GBP UK NIESR GDP estimate
1330 USD US NFP (est 185k prev 261k)/Unemployment/AHE/AWH

1700 WTI Baker Hughes Rig Count

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Saturday, 25 November 2017

Week to Nov 24th

The German coalition problems weighed on Monday, causing pressure on EUR during the Asian session. It rebounded sharply at the European open, only to fade again and end the day roughly flat from Friday’s close. DAX reacted inversely and was up 0.5% on the day. It was risk-on as Gold, JPY and US 10-year bond prices (inverse to yields) fell heavily. The Bund was flat. SPX NKY and FTSE were also up on the day, the latter being in spite of GBP also being up on positive Brexit news. In a similar pattern to last week AUD was down with Gold, and CAD was down with Oil, which took a slight rest from its upward trajectory.

Tuesday was another good day for equities with SPX ramping to touching another all-time high, briefly breaking the 2600 roundpoint. DJIA, NDX and RUT closed at fresh records. DAX added 1% on a flat Euro, and FTSE and NKY added to Monday’s gains. Yields were down as was USD against all other currencies, and so was Gold and Oil, the latter making another two-year high after the API beat at 2135.

Something very strange happened in Hong Kong. The HSI cash had just closed at 0900, touching a record and roundpoint 30,000. When the futures opened at 0915, there was a huge 4.5% momentary spike (to 31339) which immediately retraced. This then induced volatility and the index traded between 30,200 and 29,600 for the rest of the week, completely unlinked to other indices.

Wednesday saw the UK budget, and as we predicted last week, housebuilding stocks moved sharply downwards on news that the government is going to investigate their land-banking policies. FTSE had spiked up in the morning, but gave all that up after the Budget to end the day a mere 0.1% up. SPX showed its strength by only falling 0.1%. However, NKY was down sharply as JPY rose, as was DAX, giving up the gains earlier in the week on continued German political uncertainty, but partly on a rising Euro, which in turn was the effect of USD which had been falling all day again (against all currencies) and was accelerated by dovish FOMC minutes. The December hike is fully priced in (in fact, CME Fedwatch now has an 8.5% chance of a 50bp hike rather than 25bp) , but the minutes showed concern about low inflation. DXY hit its lowest level for a month. As you would expect Gold and bond prices rose quite significantly. Risk-off again, and Wednesday turned around Tuesday. Oil was flat, despite the EIA miss at 1530. 

Thursday was Thanksgiving and US and Japanese markets were closed. Of course futures were still traded around the world, but volume was thin, and so were the price movements. Indices were all slightly up, despite a heavy sell-off in China (see HSI note above). DAX had an early rally despite the GDP miss at 0700, mixed PMIs at 0830, and a climbing Euro. SPX futures were active around this time, but stopped moving around the time the US session would have opened.

Currencies were directionless on this holiday, with EUR (after the Eurozone PMI beat), and AUD slightly up, but GBP (after UK GDP came in as expected), JPY and CAD slightly down. The Canadian Retail Sales print was interesting. It missed, but it is not normally regarded as a high-volatility event. However on this day of thin trading, the miss caused CAD to drop an instant 42 pips (0.33%), and continue to fall until Friday morning. The overall effect was that DXY edged down another 0.1%, Oil continued its advance to new (two year) highs, and Gold was flat. The bond market was closed.

Friday was a half-holiday in the US, and of course the famous Black Friday shopping day. Even without any instant sales results, AMZN traders just assumed they would perform, and the shares rose throughout the short session to finish 2.67% up on the day and 5.37% on the week. Similar enthusiasm was shown across the board, with all indices rising again, SPX and NDX closing at record highs, and the VIX at an all-time low. DAX and EUR rose in unison (the latter to a two-month high). following the upbeat IFO sentiment prints at 0900, and some progress on German coalition talks. NKY was also up as JPY fell (with Gold - risk-on again), and only FTSE struggled with rising GBP to end flat.

Surprisingly, despite USD falling against all currencies except AUD (a Gold proxy), and particularly against EUR, leading to a 0.4% fade in DXY to a now two-month low, bond yield were actually up, although this was a gap-up following Thursday’s holiday.

Oil was up again, this time following news of a leak in the Keystone pipeline, and expectations that cuts will be extended at next week’s OPEC meeting.


These are the prices movements for the week on the instruments we cover, with USD down across the board. The best forex trade would have been to buy EURUSD, up 1.20%. Once again NKY was the most volatile index, but the overall winner was, as is often the case, WTI, with the January contract rising 3.82%

AUDUSD 0.7610 (+0.61%)
EURGBP 0.8946 (+0.36%)
EURUSD 1.1929 (+1.20%)
GBPUSD 1.3338 (+0.94%)
NZDUSD 0.6875 (+0.94%)
USDCAD 1.2709 (-0.47%)
USDJPY 111.48 (-0.54%)
DAX     13067 (+0.69%)
FTSE     7409 (+0.34%)
NIFTY   10389 (+1.03%)
NKY     22641 (+1.09%)
SPX    2602.4 (+1.00%)
GOLD  1288.29 (-0.41%)
OIL     58.97 (+3.82%)

NEXT WEEK (all times are GMT)

As we move into the final week of November, and the holiday season, the question is are we poised for the Santa rally, covered in our email earlier this week. 

Monday is a quiet day, as is the weekend. However, there may be some delayed volatility following the holiday on Thursday and half-holiday on Friday. In particular retail stocks which report a bumper Black Friday should see movement, although retail leader AMZN already rose over 2% on the day.

Tuesday’s highlight is the confirmation hearing for Jay Powell, the new Fed chair at the Senate Banking committee at 1445. Traders will be looking for any variance from Janet Yellen’s views. There is also a BoC press conference at 1615, with Governor Poloz and Senior Deputy Governor Wilkins. Economic data is light.

Wednesday is stronger on data, with German inflation (giving a hint to Eurozone inflation the next day), followed by US GDP and QoQ Personal Consumption Expenditure, the latter being a strong inflation proxy.  Fed Williams (centrist) is speaking at 1745 after Janet Yellen.

Thursday is month end, and some volatility should be seen for month-end rotation. Main news is German unemployment and Eurozone inflation. The MoM and YoY PCE figures are important, but any serious change will have been shown in the QoQ on Wednesday. OPEC hold a one-day meeting in Vienna, and are expected to discuss cut extensions, which have been working well, and of course have driven up the price of Oil 28% in under five months. A six-month extension is the consensus, so a longer or shorter period would most likely produce a noticeable move in the price. There is also a minor speech from Fed Kaplan.

Friday sees a new month, and a raft of Markit Manufacturing PMIs. These don’t in themselves tend to move currencies much, but as always, a big miss from one and a strong beat from another could move the pair in question. The final Manufacturing PMI of the day is the US ISM at 1500. This is more important, although no large variation is expected. Although it is the first Friday of the month, the US NFP data is not until next week. However, the Canadian jobs report is today, with a modest 10k estimate, along with Canadian GDP at the same time, so volatility in CAD is very likely.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Nov 27
0900 EUR EU Financial Stability Review
1500 USD US New Home Sales
1530 USD Dallas Fed Manuf Business Index

Tue Nov 28
0700 EUR Germany Gfk Consumer Confidence
1400 USD US Home Price Indices
1445 USD New Fed Chair Powell testifies
2350 JPY Japan Retail Trade

Wed Nov 29
0930 GBP UK Consumer Credit/Mortgage Approvals
1000 EUR Eurozone Sentiment Indicators
1300 EUR Germany Harmonised Index of Consumer Prices
1330 USD US PCE QoQ (CPI proxy)
1500 USD Pending Home Sales
1530 (approx) Fed Yellen speaks
1530 WTI EIA Stocks
1800 USD Fed Beige Book
2000 NZD RBNZ Financial Stability Report
2145 NZD NZ Building Permits
2350 JPY Japan FDI

Thu Nov 30
0000 AUD Australia HIA New Home Sales
0001 GBP UK Gfk Consumer Confidence
0100 CNY China PMIs
0700 EUR Germany Retail Sales
0900 EUR Germany Unemployment Rate/Change
1000 EUR Eurozone Unemployment Rate
1000 EUR Eurozone CPI
1330 USD US Personal Income
1330 USD US PCE MoM and YoY (CPI proxy)
1330 USD US Jobless Claims
1330 CAD Canada Current Account Q3
1445 USD Chicago PMI
2230 AUD Australia AiG Performance of Manuf Index
2330 JPY Japan CPI/Overall Household Spending
2330 JPY Japan Job/Applicants, Unemployment

Fri Dec 01
0145 CNY Caixin Manuf PMI
0855 EUR Germany Markit Manuf PMI
0900 EUR Eurozone Markit Manuf PMI
0930 GBP UK Markit Manuf PMI
1330 CAD Canada GDP
1330 CAD Canada Employment/Unemployment
1430 CAD Canada Markit Manuf PMI
1445 USD US Markit Manuf PMI
1500 USD ISM Manuf PMI/Prices Paid
1500 USD US Construction Spending

1700 WTI Baker Hughes Rig Count

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Sunday, 19 November 2017

Week to Nov 17th

NKY fell 1.3% in the Asian session on Monday partially giving up spectacular gains in previous weeks, but also affected by the continuing oil price rise. Japan imports all its oil. Otherwise it was fairly flat for indices after the previous week’s red candle. Nevertheless, SPX managed a 0.1% rise despite the 7.6% drop in GE after they announced a dividend cut. DAX fell sharply, down 165 points at one point, and breaking the psychological 13,000 barrier. However it recovered in the US session to close only 18 points down on the day.

Currencies only moved slightly, and were mixed. DXY was slightly up (0.11%) on the day and 10-year yields advanced 1bp, but this belied a mixed picture. EUR was up a little, JPY was flat, GBP fell 0.5%, and AUD and CAD were notably down. Gold and Oil were also flat.

Tuesday was another weak day for equities, and all indices fell, in particular DAX which was reacting to a strong Euro.  Markets also reacted to a sharp drop in Oil, down 3% on the day, and further weakness from GE, the SPX and DJIA’s oldest component. EUR had its best day for months, up 1.13% after German GDP beat expectation at 0700 and Eurozone GDP held as expected at 0.6% at 1000. GBP also rose 50 pips (0.4%) on the UK CPI beat at 0930. The risk-off in equities was confirmed by the classic rises in JPY and Gold, and fall in yields. Only AUD and CAD failed to make progress and were flat on the day.

The equity downtrend continued on Wednesday, with all indices lower. Analysts cited high PE ratios (important) and uncertainty about the slow progress of the tax reform. In particular the SPX recorded its biggest one day drop in ten weeks, although this was only 0.6%, but the VIX touched its highest level since mid-August.

Currencies were again mixed, despite the beats on US Retail Sales and CPI at 1330. GBP and JPY were slightly up, and yields were down. However, EUR gave up a little ground after an early spike to a one-month high, and AUD and CAD were down again, as was Gold. Oil was flat on the day. AUD in particular fell sharply (53 pips) on the big Consumer Confidence miss (-1.7 vs +3.6) at the Asian session open, and this fade held all day.

On Thursday, the House of Representatives voted to approve their version of the tax bill, and this turned the trend in equities. SPX was up 0.8%, erasing the week’s losses, and other indices followed suit ,and bond yields were up. It was not completely risk-on, as although JPY only faded slightly, and Gold was even slightly up on the day. DXY was almost flat (0.09% up), because EUR was nearly flat (after the Eurozone CPI came in as expected at 1000), and GBP and CAD advanced. AUD and Oil were flat on the day. The Australian payrolls miss at 0030 (3.7k vs 17.5k) had surprisingly little effect. 

Friday was option expiry day. The reversal in indices was short-lived, and the downtrend resumed — SPX was down 0.3%. FTSE manage to remain flat, perhaps on the ramp in Oil, which nearly recovered all Tuesday’s losses, possibly because of option expiry and rollover, although there was remarkably less contango this time. This was put down to fresh news that US Special Prosecutor Mueller has issued subpoenas to several of President Trump’s campaign officials.

In line with this, Gold, JPY and bond prices (the inverse of yields) were up, as were EUR and GBP. CAD fell sharply after the CPI print came in as expected at 1330, giving up 0.5%, although most of this was recovered by the end of the day. Nevertheless, CAD and the beleaguered AUD ended the day down.

So in summary, a risk-off week seeing appreciation in Gold, JPY and bond prices, and a clear separation between EUR and GBP advancing, and AUD, NZD and to an extent CAD fading. However, despite a change in sentiment from, say, two weeks ago, SPX only fell 0.18% on the week, and is still up on the month.


These are the prices movements for the week on the instruments we cover. A risk-off week with JPY and Gold both up, and all indices down, but otherwise a mixed picture for USD. A bad week for AUD and NZD, and the best forex trade would have been to buy EURNZD, up 2.74%. After four weeks as the strongest riser, it is not surprising that NKY fell the most this week.

AUDUSD 0.7564 (-1.21%)
EURGBP 0.8914 (+0.84%)
EURUSD 1.1787 (+1.07%)
GBPUSD 1.3214 (+0.18%)
NZDUSD 0.6811 (-1.67%)
USDCAD 1.2769 (+0.66%)
USDJPY 112.08 (-1.25%)
DAX     12978 (-1.14%)
FTSE     7384 (-0.81%)
NIFTY   10283 (-0.38%)
NKY     22396 (-1.26%)
SPX    2576.7 (-0.18%)
GOLD  1293.64 (+1.47%)
OIL     56.80 (-0.18%)

NEXT WEEK (all times are GMT)

The holiday season starts this week, and data is light, and the FOMC and ECB Minutes will be the main events.

On Monday, we get a lot of ECB speakers. Draghi speaks at 1400 and 1600, and also on the roster are Nwotony at 1145, Lautenschlager at 1215 and Constancio at 1415. Data is light.

Tuesday sees the RBA minutes, and also a speech from Governor Lowe. AUD touched a five-month low last week. Traders will be wondering how low it can go. The monthly GDT milk auction has had little effect on NZD recently, but give the currency’s recent strong move to the downside, again this is one worth watching.

Wednesday is a bit busier, with the UK Budget statement, although this is primarily a tax change bill, and nothing major is expected, except in the area of housing. Volatility will probably be limited to UK Housebuilding stocks. The FOMC minutes will be keenly watched. The current consensus on the CM FedWatch tool is a 96.7% chance of a hike in December. Any dovish remarks which put this in doubt could therefore put negative pressure on USD. The US Durable Goods print is not expected to produce much volatility, given its proximity to the Fed minutes.

Thursday is Thanksgiving and US and Japanese markets are closed. (Japan call it Labor Thanksgiving Day). Trading is therefore expected to be very light. Focus is of course on Europe, with UK GDP and then the ECB Minutes. The latter is the big event, watch for EURUSD volatility all day. There is also a rate decision on the South African ZAR, 6.75% hold expected.

Thanksgiving is followed by Black Friday, the retail bonanza. Expect bullish announcements from AMZN even before the end of the day. US Markets are open, but expect reduced volatility as many traders make a long weekend of the holiday, and data is light.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Nov 19
2350 JPY Japan Trade Balance

Mon Nov 20
0700 EUR Germany Producer Price Index
1400 EUR ECB President Draghi speaks

Tue Nov 21
0030 AUD RBA Minutes
0430 JPY Japan All Industry Activity Index
0900 EUR EU Financial Stability Review
0900 AUD RBA Governor Lowe speaks
1330 USD Chicago Fed National Activity Index
1430 (approx) NZD GDT Milk Auction
2030 WTI API Stock
2300 USD Fed Yellen speaks

Wed Nov 22
0800 EUR ECB non-MPC Minutes
1300 (approx) GBP UK Budget Statement
1330 USD US Initial Jobless Claims
1330 USD US Durable Goods Orders
1530 WTI EIA Stock
1800 USD FOMC Minutes

Thu Nov 23
0700 EUR Germany GDP
0830 EUR Germany Markit PMIs
0900 EUR Eurozone Markit PMIs
1230 ECB MPC minutes
2145 NZD NZ Trade Balance
2350 JPY Japan FDI

Fri Nov 24
0900 EUR Germany IFO Sentiment
1445 USD US Markit PMIs

1700 WTI Baker Hughes Rig Count

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Sunday, 12 November 2017

Week to Nov 10th

The previous week’s rally continued into Monday, with SPX, DJIA and NDX all hitting fresh peaks, particularly with energy stocks, as Oil rose at one point by 3.5%, and settled at 2.82% up on the the day, on uncertainly surrounding the surprise Saudi corruption crackdown, where dozens of billionaires and princes were arrested. Tax cut anticipation also helped. FTSE was also slightly up, although the non-oil indices DAX and NKY remained flat. The Saudi situation (and Fed Dudley’s retirement announcement) was seen as risk-off in currencies and Gold and JPY were up. CAD followed Oil of course, helped by the PMI beat at 1500. Following the Australian inflation beat at 0100, AUD (and GBP) were also up against the dollar, and 10-year US bond yields were down 3bp at 2.32% on the day.

It was Turnaround Tuesday again for indices. US indices again touched intraday all-time highs, but pulled back and ended the day down, as the tax plan was delayed another day, and another Saudi issue, a spat over Lebanon was reported. Oil gave back a little of Monday’s gains. DAX and FTSE also pulled back but NKY carried on advancing. After RBA rate decision at 0330 completely gave up Monday’s gains and more. Indeed the turnaround applied across the board to the dollar, which advanced against all currencies, after beats on US data such as JOLTS Job Openings (1500) and Consumer Credit (2000). Only GBP held its own after an early dip, to finish the day flat. As you would expect therefore, Gold was down and bond yields were up.

Wednesday saw the rally resume and SPX made another all-time high as did NDX on a tech stocks rally, whereas financials retreated on concerns about the details of tax reform. The mood was less strong elsewhere but NKY, DAX and FTSE all made gains. Oil pulled back again after the EIA miss at 1530. The tax issues also weighed on USD, which lost ground again all currencies. NZD was particularly strong, putting on 50 pips (0.73%) after the rate hold at 2000, and press conference at 2100. Gold rose in line, but surprisingly bond yields were actually up half a basis point on the day.

The euphoria collapsed on Thursday. In Asia, NKY briefly rallied to a quarter-century high of 23420, then gave up 1,100 points (4.69%) by the middle of the US session. NKY has of course put on 22.3% in the last 10 weeks. European stocks had their worst day for four months with DAX down over 200 points (1.5%), despite the Trade Balance beat at 0700. FTSE was also down. The mood was reflected in the US, at one point the SPX was down 1%, although it recovered to finish 0.25% down on the day. The general consensus was that this was due to failure to make progress on tax, as House Republicans released a draft bill which differed from the original proposals, in particular that the proposed corporation tax cut from 35% to 20% may be delayed until 2019. Of course, simple profit-taking may have played a part.

USD followed the mood, and was down 0.5% against JPY and 0.4% against EUR. The other currencies followed suit, and Gold was up. Once again, however, bond yields disconnected from USD, and were up. Oil was up again as Saudi political developments unfolded, and the Brent-WTI spread, which had been falling, started to rise again. Saudi Oil is traded at the Brent price.

Friday was a US public holiday (the observance of Veteran’s Day, which falls on Saturday this year), and although US markets were open, trade was subdued, and as you might expect, there was more volatility in ES futures during the European morning, than in SPX itself during the cash session. All indices were slightly down as the tax cut debate continued.

The USD picture was mixed. EUR was up, and GBP rallied after breaking resistance at 1.3175, as was CAD, slightly, on very little volatility. However AUD, JPY and Gold were down, as was Oil. 10-year yields continued their disconnect by rising sharply.


These are the prices movements for the week on the instruments we cover. USD was down across the board, GBPUSD, up 0.87% was the standout winner. The strongest index movement up was (for the fourth week) NKY up 1.16%. The largest overall movement was the DAX, down 2.62%

AUDUSD 0.7657 (+0.13%)
EURGBP 0.8840 (-0.36%)
EURUSD 1.1662 (+0.47%)
GBPUSD 1.3190 (+0.87%)
NZDUSD 0.6927 (+0.35%)
USDCAD 1.2685 (-0.56%) 
USDJPY 113.50 (-0.47%) 
DAX     13127 (-2.62%)
FTSE     7444 (-1.50%)
NIFTY   10322 (-1.24%)
NKY     22681 (+1.16%)
SPX    2581.3 (-0.25%)
GOLD  1274.95 (+0.48%)
OIL     56.90 (+2.30%)

NEXT WEEK (all times are GMT)

The weekend sees Mario Draghi speak unexpectedly on Saturday at 1000 and RBA Deputy Governor Guy Debelle speaks in Sydney on Sunday. Otherwise the theme of the week is inflation (CPI) prints, with half the G10 (US, UK, Sweden Eurozone and Canada) all reporting.

Monday sees further work on the US tax bill. There is an ‘Open Executive Session’ in the Senate at 2000, and there some further indication of the yes/no positions of the House. There also speeches by Fed Harker at 0010, ECB Constancio at 0900, and BoJ Kuroda at 1745.

Tuesday has more Central Bankers, at some point in the day we will hear from outgoing Fed Chair Yellen, ECB Draghi, BoJ Kuroda, and BoE Carney, along with various speeches by other bank members. Also the committee stage of the EU Withdrawal Bill begins in the UK Parliament.  If that weren’t enough, we have German and UK inflation, and Eurozone GDP all within a three-hour window.

Wednesday focus in on the US, with Retail Sales and CPI being reported together at 1330. UK Unemployment is at 0930, but the key measure will be wage growth, an important determinant of future rate rises. Central Bank speakers include Fed Evans, BoC Wilkins (2345), ECB Lane (0700) and RBA Ellis (0700).

Thursday sees the important Australia employment report. The estimate is 15k, lower than last month’s 19.8k (and equivalent to 202k in US terms, whose population is 13.5 times as many). UK Retail Sales is somewhat less important now we have had a rate hike, although we will still be producing our monthly fractal. A new report appears today. ADP have started to produce payroll statistics in Canada, although notably, these figures come two weeks after the official Canadian jobs report. Other than that, we have BoE Governor Carney speaking in a plenary session with other BoE MPC members, Fed Mester at 1410, and ECB and Bank of France Governor Villeroy de Galhau at 1430.

Friday’s main release is Canadian CPI. Given other recent data, it would take a very strong print to reverse CAD’s recent decline. Mario Draghi speaks in Germany at 1300, and Fed Williams is expected to speak also. US Congress goes into recess as politicians return to district work for the Thanksgiving Week. The public holiday and potential start of the ‘Santa Rally’ is the following Thursday. Friday is also monthly option expiry day.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Nov 13
0010 USD Fed Harker speaks
0200 CNY China FDI
1900 USD US Monthly Budget

Tue Nov 14
0200 CNY China Retail Sales
0200 CNY China Industrial Production
0700 EUR Germany CPI
0700 EUR Germany GDP
0805 USD Fed Evans speaks
1000 EUR Eurozone GDP
1000 EUR Eurozone Industrial Production
1000 EUR Germany ZEW Sentiment
2030 WTI API Stock

Wed Nov 15
0000 AUD Australia Westpac Consumer Confidence
0930 GBP UK Unemployment/Claimant Count Change
1000 EUR Eurozone Trade Balance
1330 USD US Retail Sales
1530 WTI EIA Stock
2350 JPY Japan FDI

Thu Nov 16
0030 AUD Australia Payrolls/Unemployment
0100 AUD Australia Consumer Inflation Expectations
0700 EUR Germany Wholesale Price Index
0930 GBP UK Retail Sales
1000 EUR Eurozone CPI
1330 USD Jobless Claims
1330 CAD Canada ADP
1330 USD Philly Fed Manuf Survey
1415 USD Industrial Production/Capacity Utilisation
1500 USD NAHB Housing Market Index
1530 CAD Boc Review

Fri Nov 17
1330 USD Building Permits/Housing Starts
1330 CAD Canada CPI
1700 WTI Baker Hughes Rig Count

2230 NZD Business NZ PMI

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Sunday, 5 November 2017

Week to Nov 3rd

On Monday, charges were filed against Trump’s campaign manager Paul Manafort and the mood changed from Friday’s all-time highs. The US PCE report at 1230 was as expected. SPX and NKY fell slightly, but DAX and FTSE were flat. DAX was particularly subdued, trading in a narrow 40-point range. USD was down across the board as were bond yields, and Gold was up. Oil was nearly flat, added a few cents on the day to make a new 7-month high.

It was definitely Turnaround Tuesday on the last day of the month. SPX almost exactly reversed Monday’s move as did Gold, JPY, bond yields and AUD. NKY and FTSE were also up, and although Germany was closed, DAX futures rose by 70 points. CAD was down after the Canadian GDP miss at 1230. At 1000, Eurozone GDP beat (2.5% vs 2.4%) but CPI miss (1.4% vs 1.5%). This means of course that real GDP beat (1.1%) by 0.2%, but surprisingly EUR was flat. GBP was up on the day on expectations of the Thursday rate hike.

Wednesday was another down day for most indices, except DAX where the previous day’s closure probably produced a delayed rally. After a brief spike to a new all-time high following the ADP jobs beat at 1215 (235k vs 225k), SPX ended down, as did NKY and FTSE. There was surprisingly little immediate reaction to the Fed Rate hold at 1900, but USD did well all day, rising against all currencies. Gold’s behaviour often changes, today it was up in line with stocks falling, but ignoring the stronger dollar. Bond yields were also detached from the rising dollar. They fell sharply (4bp) before the US session opened, and despite a brief rally on the Fed release, ended the day down.

Thursday saw the US tax bill unveiled (a day late), and President Trump confirmed the widely expected appointment of Jerome ‘Jay’ Powell as the new Fed Chair, replacing Janet Yellen. Both news items were largely priced into markets. SPX rose gently on the day. NKY advanced very slightly and DAX was flat. FTSE rose over 100 points, but this was largely a function of the move in GBP. NDX gapped after Facebook beat estimates the night before, but gave up those gains during the US session to end the day down.

The biggest market mover on the day was the Bank of England rate rise. Despite the headlines being hawkish (first rise in 10 years, a ‘beat’ on the committee votes (7-2 vs 6-3 estimate), the accompanying statement that further increases would be limited and gradual was read as dovish. GBP fell 1.34% in the next five hours to touch a four-week low, and become the only currency to have an outside week. A clear example of buy the mystery sell the history. Otherwise USD was slightly down on the day against other currencies, Gold was slightly up, and yields were down. But like equities, there was not much response considering the significance of events. 

Friday was NFP day and a surprise miss after the ADP beat, although the estimate was large, and the figure of 261k was still good, and above the ADP result. SPX fell 0.22% on the print, but had started to recover even before the opening bell and ended the day well up, finishing the day and week at another all-time high. DJIA and NDX also made new all-time highs. NKY similarly made a new 21-year high, but FTSE and DAX were fairly flat. The Canadian jobs figure was a substantial beat (35.5k vs 14.5k estimate), equivalent to 319k in US terms, as the US has nine times the population of Canada. USDCAD dropped 120 pips (0.92%) in 30 minutes, and then started to recover. Otherwise USD had a good day but the picture was uneven. EUR, AUD and Gold were sharply down, NZD only slightly down, and GBP was even slightly up. DXY finished 0.18% up on the day. After a fairly quiet week, Oil was strongly bid from about 1530, and put on 2.43% in the three hours until the pit closed the for week.


These are the prices movements for the week on the instruments we cover. Currency movement was very muted with all USD pairs except GBP having an inside week. The best trade would have been to sell GBPNZD, down 0.83%. The strongest index movement was (for the third week) NKY up 1.68%, but as usual, the most volatile instrument was Oil, up 2.64%.

AUDUSD 0.7647 (-0.33%)
EURGBP 0.8872 (+0.41%)
EURUSD 1.1607 (+0.02%)
GBPUSD 1.3076 (-0.37%)
NZDUSD 0.6903 (+0.44%)
USDCAD 1.2757 (-0.39%) 
USDJPY 114.04 (+0.18%) 
DAX     13480 (+1.92%)
FTSE     7557 (+0.77%)
NIFTY   10452 (+0.70%)
NKY     22420 (+1.68%)
SPX    2587.8 (+0.28%)
GOLD  1268.90 (-0.31%)
OIL     55.62 (+2.64%)

NEXT WEEK (all times are GMT)

Over the weekend President Trump is playing golf with Japanese PM Abe, and Daylight Savings time ends in the US, bringing New York back in line with Europe. Spain has issued an arrest warrant for Catalan leader Puigdemont, who is holed up in Brussels. This can’t be helpful to EUR, although the effect of the crisis has been largely confined to IBEX volatility. There are regional elections in Sicily which may give clues to the forthcoming Italian general election which must be held within six months from now.

Overall next week looks like being quieter than last, but as we saw little volatility on a lot of news then, we cannot be certainly of low volatility now.

With little news on Monday, focus turns to the first draft of the tax bill which was being prepared over the weekend. At the very end of the day are the usually uneventful BoJ MPC minutes.

Tuesday see the RBA rate decision. A hold is expected. Of more interest is a possible downgrade of the bank’s inflation forecast which would further depress AUD — unless of course it is already baked into the price which has already fallen 3% in the last four weeks. Also President Trump arrives in South Korea and speaks at the National Assembly, an obvious time for some reaction from Kim Jong Un. BoC Governor Poloz gives a speech in Montreal at 1745. The State Opening of Parliament in New Zealand ‘Throne Speech’ (equivalent to the British Queen’s Speech) will outline the priorities for the new incoming government and may move NZD.

On Wednesday Trump is in Beijing with President Xi, so again look out for unexpected comments about North Korea, or indeed the relationship with China. There are also the relatively unimportant Polish rate decision and Russian inflation figures. The main event of the day comes at end for Europeans and Americans, the NZD rate decision. A hold is expected. NZD has fallen nearly 10% in three months, and recently bounced off May support. In a similar but opposite case to Australia, traders will be looking for an upgrade to the inflation forecast, which would be positive for NZD.

Thursday has a lot of data, but none of it particularly important, unless of course there are big upsets, for example in the Chinese inflation print at 0130. The Bank of France Governor Villeroy de Galhau, an ECB board member speaks in Brussels at 1500.

Friday is similarly light, although there is a raft of UK manufacturing stats in the European morning. As Veterans Day falls on a Saturday this year, Friday is a public holiday in the US. Stock and bond markets are open as normal, but like Columbus Day, trading is expected to be lighter than normal.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Nov 05
2350 JPY BoJ MPC Minutes

Mon Nov 06
0100 JPY Gov Kuroda speaks
0100 AUD Australia TD Securities Inflation
0855 EUR Germany Markit Services/Composite PMIs
0900 EUR Eurozone Markit Services/Composite PMIs
1000 EUR Eurozone Producer Price Index
1300 USD FOMC Yellen speaks
1500 CAD Canada Ivey PMI
2230 AUD Australia AiG Performance of Construction Index

Tue Nov 07
0001 GBP BRC Like-for-like Retail Sales
0330 RBA Rate Decision (est hold 1.5%)
1500 GBP UK NIESR GDP estimate
2000 USD Consumer Credit Change
2030 USD API Stock

Wed Nov 08
0200 CNY China Imports/Exports/Trade Balance
0800 EUR ECB non-MPC Minutes
1315 CAD Canada Housing Starts
1530 WTI EIA Stocks
2000 NZD RBNZ Rate Decision (est hold 1.75%)
2100 NZD RBNZ Press Conference
2350 JPY Japan FDI

Thu Nov 09
0001 GBP UK RICS Housing Price Balance
0030 AUD Australia Home Loans/Investment Lending
0130 CNY China PPI/CPI
0430 JPY Japan Tertiary Index
0500 JPY Japan Eco-Watchers Survey
0700 EUR Germany Trade Balance/Imports/Exports
0900 EUR Eurozone Economic Bulletin
1000 EUR EC Economic Growth Forecasts
1330 USD US Jobless Claims
2145 NZD NZ Electronic Card Retail Sales

Fri Nov 10
0030 AUD RBA Monetary Policy Statement
0930 GBP UK Manuf Production

1700 WTI Baker Hughes Rig Count

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Sunday, 29 October 2017

Week to Oct 27th

Last weekend saw Shinzo Abe’s LDP party re-elected in Japan, an anti-EU party elected in the Czech Republic, and autonomy votes in Northern Italy. Also the Catalan crisis rumbled on. The Japanese election gave NKY a brief boost to a 21 year high in the Monday Asian session, and USDJPY touched a 15-week high, but as Europe opened, markets were in risk-off mode. All indices were down by the end of the day, and only Gold and JPY were up. Other currencies all faded slightly against USD, and Oil was flat. Interestingly, the Brent/WTI spread narrowed by 0.8% to $5.50.

Tuesday saw a sharp rise in NKY to a fresh high. European indices rose slightly after mixed German (0730) and Eurozone (0800) PMIs, and SPX was largely flat. However the DJIA hit a new intraday all-time high after strong earnings by Caterpillar (3.91% of DJIA) and 3M (6.52%). In currencies, EUR crept up slightly in the run-up to Thursday’s rate and QE decision, but other currencies fell against USD, especially NZD, which hit a five month low as the incoming government said it planned to reform the Central Bank mandate. Similarly yields were up and Gold was down. Oil had a lacklustre 50c rally.

Wednesday saw equity markets take a breather. All markets were down, SPX posting its worst day for over a month, despite beats in Durable Goods (1230) and the Housing Price Index (1300). Other markets followed suit, particularly FTSE which reacted to the GBP movement.

In currencies there was more volatility than we have seen for a while, due to three major releases. In the Asian session, there was a miss on Australian inflation at 0030, which send AUD tumbling 0.94% on the day. Then at 0830, the UK GDP beat made traders feel next week’s rate hike was a near-certainty, and the British pound put on 0.95%. in three hours. Finally we had the Canadian rate decision. Although another hike after last months 0.25% increase was very unlikely, the effect of the hold print was an immediate 1.1% rise in USDCAD.

Unsurprisingly the risk-off note to equities meant that, after spikes down, Gold, JPY were up. Money has to flow somewhere. Otherwise EUR was up and NZD was down, continuing the same trend as Tuesday. Visa (3.22% of DJIA, not 8% as reported last week), and Boeing (7.54%, not 4.66%) both reported earnings beats, but this didn’t affect the overall mood. Oil eased very slightly on the day. Bond yields were initially up, at one point touching a seven-month high. They faded but still ended the day up. This means that in one day money rotated out of stocks and bonds into safe haven assets, and then some of that money went back into bonds.

It was business as usual on Thursday, and indices were up again. DAX had its best day since Sep 11th, putting on nearly 200 points (1.5%) to finish at an all-time high on EUR weakness. Other indices were similarly impressive, recovering Wednesdays losses to varying degrees. IBEX benefited from both the euro, and hopes that the Catalan president might pull back on secession plans. At 1145 the ECB announced, as expected, the tapering calendar for QE, saying it will last through 2018, and rate hikes may not appear until 2019. Most of the announcement was expected, so the fall in EUR was not instant. However, it slowly sold off all day, finishing 162 pip (1.38%) down.

The dollar had a very strong day across the board, on reports than (dove) Janet Yellen was now out of the running for the Fed Chair position, forcing GBP and JPY to give up all of their Wednesday gains. AUD was down as the Australian government had lost their majority due the High Court deciding that their deputy Prime Minister being ineligible to sit in parliament as he has dual nationality. Gold and bond prices were down in line, as was CAD, despite Oil putting on about 50c.

AMZN, GOOGL, MSFT and INTC all reported after the US bell Thursday. All four beat estimates, and NDX immediately rose 60 points (1%), and finished Friday 126 points (2.08%) up. The day saw strong beats (at 1330) in US YoY GDP (3.0% vs 2.5%) and QoQ PCE (1.5% vs 1.2%), which pushed all indices up. The print was particularly impressive given the recent hurricanes. SPX, NDX and DAX closed at all-time highs again, and NKY at a 21-year high. The DJIA was weighed down by Chevron (3.51% of the DJIA) which fell 4.2%, who reported a decline in output (despite beating revenue and EPS estimates). The other loser was IBEX as it became clear that Catalan President Puigdemont was going ahead with his illegal independence declaration, forcing Madrid to take unilateral action.

After a very strong day for USD on Thursday, DXY was nearly flat on Friday, managing only a 9c (0.1%) gain, driven mainly by continuing EUR (and to an extent GBP) weakness. Despite the stocks blowout, the classic indicators of risk-off were surprisingly present (Gold, JPY and bond prices all up), and even beleaguered AUD and NZD posted green candles for the day. However, the 2-year bond yield hit a nine-year high of 1.63%. It was notable that oil rose sharply to a six-month high on further speculation that OPEC cuts will be extended, adding 2.43% for the day, and 4.15% for the week (and CAD followed suit). Signs perhaps, as on Wednesday, that we are seeing brisk intermarket rotation.


These are the prices movements for the week on the instruments we cover. The dollar was again up across the board, and best forex trade of the week would have been short AUDUSD at 1.80%. The strongest index movement was (as last week) NKY up 2.76%, but as often happens, the most volatile instrument was Oil, up 4.15%

AUDUSD 0.7672 (-1.80%)
EURGBP 0.8836 (-1.02%)
EURUSD 1.1605 (-1.46%)
GBPUSD 1.3124 (-0.46%)
NZDUSD 0.6873 (-1.18%)
USDCAD 1.2807 (+1.47%) 
USDJPY 113.83 (+0.28%) 
DAX     13226 (+1.83%)
FTSE     7499 (-0.32%)
NIFTY   10379 (+2.30%)
NKY     22050 (+2.76%)
SPX    2580.6 (+0.19%)
GOLD  1272.85 (-0.59%)
OIL     54.19 (+4.15%)

NEXT WEEK (all times are GMT)

Over the weekend, we saw Spain implement their direct control of Catalonia, following the regional president’s refusal to back down. This was expected, so it remains to be seen what will actually happen. Markets generally ignored the statement by special prosecutor Robert Mueller that charges have been filed in his Russiagate investigation. Notably President Trump’s Twitter account has been uncharacteristically quiet. Note also that Daylight Savings Time in Europe (including the UK) has ended, but does not end in the US until next weekend. This means that, for Europeans, all US events are an hour earlier than usual. Don’t forget!

The week is one of those where the Fed rate decision and NFP are both present. It promises to be the heaviest week for a long time, and volatility is assured. We cannot remember an NFP week where NFP was not the main event!  Monday sees the important YoY and MoM US PCE inflation proxy figure, although as we had the QoQ on Friday, the effect is somewhat muted. HSBC, the largest individual component of the FTSE (7.7%) reports earnings at 0400 during the Asian session 

Tuesday brings the BoJ Rate Decision. JPY touched long-term support last week, and anything hawkish could bring significant downside for USDJPY. A double Eurozone whammy of GDP and CPI is released at 1000. This allows us unusually to calculate disinflationary growth by deducting one from the other, which is est 1.0%, prev 0.8%. CPI growth is more important than GDP as a positive for EUR. Canadian GDP is less important. Although loonie hawks were clearly looking for a rate hike last week, the next decision is not until Dec 6, and we have the Canadian jobs report, another GDP and CPI print, and a speech by Gov Poloz between then and now. Another FTSE heavyweight, BP (4.8%), reports before the UK open.

If that wasn’t enough, the week really starts on Wednesday. The ADP report estimate is a huge 75k lower than the NFP estimate. A miss would be startling. After that is the key figure of all PMIs, the ISM Manufacturing figure and prices paid, a forward indicator for growth. The Fed announcement is expected to be a rate hold (CME Fedwatch give that a 98% chance), with an indication of a rate hike in December. However, this could be Janet Yellen’s last appearance, and so the accompanying statement will be watched carefully. Note also that this is the day that the draft tax bill is due to be released. The question of course is how much of the benefit is already priced into the markets, which are of course at all-time highs. The ‘high tax’ index of stocks is still lagging the SPX.

Finally, we have Facebook (3.41% of NDX, 1.84% of SPX) and TSLA (0.75% of NDX) both reporting after the bell. We saw what happened to Amazon last week. If FB performed similarly that would translate to 27 points in NDX. TSLA of course is not a large component, but a miss has the potential to move the stock by a huge amount.

Thursday will also be volatile as President Trump is scheduled to announce his decision for the Fed Chair. The current consensus is that he will pick either current Governor Jay Powell (a continuity candidate). The second favored candidate is John Taylor (a hawkish outsider and author of the ‘Taylor Rule’). Reappointment of Yellen is considered an outside chance. The political spread betting site PredictIt rates Powell at 78, Taylor at 13 and Yellen at 10. A Taylor or Yellen appointment should therefore depress USD and bond yields slightly, whereas a Taylor appointment may cause a bigger move to the upside. One possible scenario being mentioned is a Powell appointment with Taylor as vice-chair. This should also be positive for USD.

In the UK, a doubling of the base rate to 0.50%, the first increase for ten years, is expected at 1200 following mostly hawkish central bank comments and good data over the last couple of months. The overall trend for GBP is still bearish, and the hike is largely priced in. We saw last week how the spike up on UK GDP beat faded within 24 hours. We may see a similar price/action pattern here, especially if the MPC vote is less than 6-3 in favour. Obviously if the decision is a hold, cable should fall substantially. Also in the UK, Royal Dutch Shell (two stocks RDSA and RSDB, totalling 9.8%) of the FTSE report earnings before the open.

To finish the day, AAPL, the world’s biggest company reports earnings after the bell. AAPL is 11.84% of NDX, 4.79% of DJIA and 3.70% of SPX.

The pace continues unabated on Friday with the US and Canadian jobs reports. The US estimate of 300k is the highest for many years, after last month’s first time contraction for years. The Canadian estimate is much less ambitious at 14.5k (equivalent to 130k in the US relative to populations. Given everything else that has happened this week, and the reduced effect of NFP on the markets, compared to, say, three years ago, we don’t expect anything momentous, unless of course, there are big surprises. We will focus on USDCAD at the time of the release, other markets will depend where we are by then.

The following weekend sees US Daylight Savings Time end, to realign with Europe.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Oct 30
0700 EUR Germany Retail Sales
0930 GBP UK Mortgage Approvals
1000 EUR Eurozone Sentiment Indicators
1230 USD Personal Consumption Expenditure YoY/MoM (inflation proxy)
1430 USD Dallas Fed Manuf Business Index
2145 NZD NZ Building Permits
2330 JPY Japan Unemployment/Jobs
2330 JPY Japan Overall Household Spending

Tue Oct 31
0000 AUD Australia HIA New Home Sales
0001 GBP UK Gfk Consumer Confidence
0100 CNY PMIs
0200 JPY BoJ Rate Decision (est -0.1% hold)
0350 JPY BoJ MPC Statement
0630 JPY BoJ Press Conference
1000 EUR Eurozone GDP (est 2.4% prev 2.3%)
1000 EUR Eurozone CPI (est 1.4% prev 1.5%)
1230 CAD Canada GDP
1300 USD Home Price Indices
1345 USD Chicago PMI
2030 WTI ADP Oil Stock
2145 NZD NZ Employment/Unemployment
2230 AUD AIG Performance of Manuf Index

Wed Nov 1
0145 CNY China Caixin Manuf PMI
0930 GBP Markit Manuf PMI
1215 USD ADP Payrolls (est 225k prev 135k)
1400 USD US ISM Manuf PMI/Prices Paid
1400 USD US Construction Spending
1430 CAD Canada Markit Manuf PMI
1445 USD US Markit Manuf PMI
1800 USD Fed Rate Decision (est 1.25% hold)
2350 JPY Japan FDI

Thu Nov 2
0030 AUD Australian Imports/Exports
0855 EUR Germany Markit Manuf PMI
0900 EUR Germany Unemployment (est -11k, prev -23k)
0900 EUR Eurozone Markit Manuf PMI
0930 GBP UK PMI Construction
1200 GBP BoE Rate Decision (est rise to 0.50%, prev 0.25%)
1230 USD US Jobless Claims
1230 GBP BoE Gov Carney speaks

Fri Nov 3
0030 AUD Australia Retail Sales
0145 CNY China Caixin Services PMI
1230 USD US NFP (est 300k, prev -33k)
1230 CAD Canada Net Change in Employment (est 14.5k prev 10k)

1445 USD Markit PMIs

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