LAST WEEK

Monday October 2
Reports today that the US is considering tariffs on all Chinese goods not currently subjected to them depressed the US markets and SPX was down 0.7% and NDX down 1.6%. NKY followed suit as it often does. However, the situation in Europe was more optimistic, as DAX and FTSE were encouraged by Friday’s S&P rating on Italy, which was not as bad as feared, ad were up on the day. The MIB was up 1.9%. The BOVESPA in Brazil hit record highs after the election of right-wing President Bolsonaro.

USD had a good day, with DXY up 0.38%. The move was across the board, with all currencies and Gold down. Oil was also down in line with the weaker dollar, and concern about China trade. 10-year yields were flat on the day.

Tuesday October 30
Earnings beat before the bell from MA, KO and PFE help shift the mood today, and indices recovered. Also important was a volte-face from Trump where he told Fox New that he expected a “great deal” with China. An interesting side-effect today was a very strong performance by the South Korean KOSPI, after the US government restricted certain semiconductor parts exports to China, with SK being the beneficiary. Samsung was up 3.8%. SPX added 1.6%, and all other indices followed.

FB reported after the bell, and it is perhaps a sign of the softening mood that although it missed one metric (user growth) the stock did not plummet. After a brief spike down, it was firmly up in AH trading.

DXY was up another 0.33% today, as EUR, GBP and JPY (83.1% of the basket) continued to fall. However AUD and CAD were up, the latter after bullish remarks from BoC Governor Poloz at 1930. Gold was down and yields were up in line with the dollar. Oil continued to fall for the same reasons as Monday.

Wednesday October 31
Markets were up again on the last day of the traditional summer cycle, where the theory goes that confidence switches from defensive to risk stocks. This effect could be seen as SPX rose 1.1% but the riskier NDX put on 2.31%, buoyed of course by FB which rose 3.8%, and was at one point 7% up. Nevertheless the month closed as the worst for equities since May 2010, with SPX down 7.83%, with an 11.03% intramonth low.

DXY only added 0.12% today, but this was enough to beat the Aug 15th spike, and make a new 16-month high. EUR continued to fade on a mixed CPI report at 10:00, as did yesterday’s outperformers AUD and CAD. JPY advanced slightly, after two days of losses. GBP was ahead after UK Brexit minister said a Brexit deal is ‘in sight’. Gold was marginally down as was Oil again. However yields were up after ADP jobs beat at 12:15, on the expectation that strong jobs growth accelerates the rate hike path.

Thursday November 1
President Trump today reported a “long and very good conversation” with President Xi. In addition to the new month and winter effects, this produced a third day of gains, with SPX up 1.1% and NDX 1.8%. European indices were likewise up, and only NKY was slightly down, pressured a reversal in JPY after two days of gains. However, the mood was spoilt by AAPL, the worlds largest company, when they reported after the bell. Although they beat on EPS and revenue, a lowering of forward guidance, and a decision to stop reporting iPhone unit sales (a key metric for investors) in future led to a 4% drop AH.

It was a different story in currency. DXY pulled back sharply from the new high made on Wednesday, down 0.83%, its worst day in three months. The fundamental reason was firstly that the UK government announced that an agreement on financial services trade (dear to the hearts of traders) had been reached, which helped both EUR and GBP, and secondly, as part of the BoE Rate Decision (hold as expected) presser, Gov Carney said that rates would have to go up faster in the event of an orderly Brexit.

It is a fact that the clearer the message, the stronger the reaction, and you can’t get much clearer than that. This of course now means that Brexit success or failure news will have an even larger effect on sterling. GBP ended up 2.1% on the day, its best day since Apr 18, 2017. EUR was ‘only’ up 0.85%, although it is notable that it was also at a support low from August.

Of course DXY was at a resistance high from the same time. When technicals and fundamentals align, you get strong reactions, and there was a sharp move up in unconnected currencies AUD and CAD. Gold had its best day in three weeks, up 1.5% and yields were down, both in line with the weaker dollar. The pressure on Oil intensified, and the price collapsed through August and June support, dropping 3% in an hour in the US session, after Iran pointed out how many waivers the US had given to their Oil sanctions, and it was reported that OPEC output was the highest in two years. Oil is down 18% in the last four weeks, and October was its worst month since July 2016.

Friday November 2
The upbeat mood for the new month was dented by the AAPL news, and a refutation by Larry Kudlow, saying there is no new trade plan for China. Instead of welcoming the NFP beat (259k vs 190k, AHE/Unemployment as expected), the market saw it as “good news=bad news”, as explained in Wednesday above. This was confirmed by a noticeable spike up in both USDJPY and 10-year yields on the NFP print, the latter closing 7bp up, its best day since October 3rd, when the trigger was an exceptional PMI beat.

These two factors pushed SPX down 0.6% and NDX down 1.2%. This was partly mathematical as AAPL is the largest component of both indices (SPX 4.4%, NDX 12.5%), but it was notable that AAPL had started to recover in the PM, only to fall again after NFP, and end the day 6.9% down. DAX and NKY, unaffected by AAPL were slightly up on the day. FTSE was slightly down, no doubt weighed by Oil which fell again to close its worst week since February.

It was a quiet forex day, with DXY was slightly up, but evenly against all currencies and Gold. Both sides of the 49th parallel beat on NFP, but there was still a 47 pip (0.36%) spike up in USDCAD on the release.

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

After the worst month for years closed, there was a clear turn-up in equities and downturn in the dollar, leaving DXY flat on the week. Risk-on currencies AUD and NZD (not part of DXY) were the best performers, and risk-off marker JPY was the worst. Buying NZDJPY would have netted you 3.08%. The strongest index rebound was NIFTY, and after many months of lower volatility, Oil made the largest move of all. The FANGS were mixed, a consequence of different reporting dates.

AUDUSD 0.7223 (+1.83%)
EURGBP 0.8773 (-1.45%)
EURUSD 1.1389 (-0.31%)
GBPUSD 1.2982 (+1.16%)
NZDUSD 0.6657 (+2.23%)
USDCAD 1.3121 (-0.12%)
USDJPY 113.21 (+1.17%)
DAX     11554 (+2.66%)
FTSE     7113 (+2.51%)
NIFTY   10553 (+5.40%)
NKY     22065 (+3.51%)
SPX    2719.3 (+2.27%)
GOLD  1233.05 (-0.00%)
OIL     62.80 (-7.05%)
BTCUSD   6427 (-1.59%)
ETHUSD 202.22 (-1.37%)
FB     150.35 (+3.43%)
AAPL   207.48 (-4.08%)
AMZN  1665.53 (+1.38%)
NFLX   309.10 (+3.09%)
GOOGL 1071.49 (-1.13%)

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

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold). 

Monday November 05
Over the weekend President Trump meets President Putin in Paris. DST ends in the US, bringing it back into line with Europe. Today the US reimposes some tariffs on Iran. Eurozone finance ministers meet in Brussels. President Xi is scheduled to speak during the China International Import Expo and traders will be watching for any comment on the trade war. Also on today are BoJ Governor Kuroda, BoC Governor Poloz, and ECB Vice President Guindos.  Russian markets are closed for Unity Day.

23:50 JPY BoJ MPC Minutes (Sunday)
01:00 JPY BoJ Governor Kuroda speaks

01:45 CNY Caixin China Services PMI
09:30 GBP UK Markit Services PMI
13:10 CAD BoC Governor Poloz speaks
14:45 USD US Markit Services/Composite PMI
15:00 USD US ISM Non-Manufacturing PMI
23:30 JPY Japan Overall Household Spending (YoY)

Tuesday November 06
Today are the US mid-term elections. The probability of the Republicans losing the House but retaining the Senate are both put at 85%. ECB Lautenschlaeger speaks at 12:00. One normally unimportant release, the Spanish Markit Services print at 08:15 is significant. The estimate is 51.8, the lowest for years, and a move below 50 (the point between expansion and contraction) could have a severe effect on the IBEX and Spanish bonds. Singapore is closed for the second day of Diwali.

00:00 USD US Mid-term Elections (exit polls all day)
00:01 GBP UK BRC Like-For-Like Retail Sales (YoY)
02:00 NZD RBNZ Inflation Expectations (QoQ)
03:30 AUD RBA Rate Decision/Statement (est 1.5% hold)
08:55 EUR Germany Markit Services/Composite PMI
09:00 EUR Eurozone Markit Services/Composite PMI
14:00 NZD NZ GDT Price Index (time approx.)
15:00 USD JOLTS Jobs Openings
18:00 USD US10 Bond Auction
21:30 WTI API Stock
21:45 NZD Employment/UnEmp/Participation (Q3 Emp est 0.5% prev 0.5%)

Wednesday November 07
The mid-term polls close at 0100, and enough results should be in by 0500 to determine the composition of Congress. Expect a wild ride on ES and YM futures in the Asian session. It is expected that the US Section 232 report on the auto industry results will be announced, leading to further auto tariffs.ECB trade chief Cecilia Malmstrom speaks today in Brussels. Indian markets start a two day Diwali holiday for the third and final days of the religious festival.

05:00 JPY Japan Leading Economic/Coincident Index
07:00 EUR Germany Industrial Production (YoY)
08:00 EUR ECB non-MPC Minutes
10:00 EUR DE10 Bond Auction
15:00 CAD Ivey PMI
15:30 WTI EIA Stock
20:00 NZD RBNZ Rate Decision/Statement (est 1.75% hold)
20:00 USD US Consumer Credit Change

Thursday November 08
The FOMC rate set meeting is unusually on Thursday this month, rather than the usual Wednesday. A hold is expected, although surprisingly, there is a 7.2% chance (higher than usual) of a hike, per the CME FedWatch tool. The only significant (to indices) earnings report this week is DIS, after the bell. India is closed again.

02:00 CNY Imports/Exports/Trade Balance (time approx)
10:00 EUR EC Growth Forecasts
13:15 CAD Canada Housing Starts s.a (YoY)
19:00 USD Fed Rate Decision/Statement (est 2.25% hold)

Friday November 09
Somewhat quieter today, and markets will almost certainly still be reacting to the mid-terms and the Fed. The main release of the day is UK GDP at 09:30. Fed Quarles (centrist, 2018 and 2019 voter) speaks at 13:15 .

00:30 AUD RBA Monetary Policy Statement
01:30 CNY China CPI/PPI
09:30 GBP UK GDP (QoQ est 0.6% prev 0.4%)
09:30 GBP UK Manufacturing/Industrial Production
13:30 USD US Core PPI
15:00 USD Michigan Consumer Sentiment Index
18:00 WTI Baker Hughes US Oil Rig Count