Week to Jun 8th

LAST WEEK (all times GMT)

Monday June 04
Equity markets gapped up and rose further on Monday, with RUT, and NDX and its top component AAPL hitting all-time highs, and as concerns about Italy faded (Italian yields fell 28bp!), and despite the ongoing ‘trade war’ issues. JPY and Gold were down in line with rising equities (risk on). Commodity currencies AUD and CAD were up (despite a sharp 1.3% fall in oil, and a 2% fall in Brent) but cable was down. Despite this mixed picture, US 10-year yields were firmly up by 5bp to 2.94%

Tuesday June 05
Indices continued to rally on Tuesday, with another ATH for NDX and RUT, two indices considered to be less affected by trade wars. DAX was virtually flat on the day, after EUR rallied as tensions reduced in Italy, and FTSE and NKY were slightly down on a stronger pound and yen respectively, the former after the UK Markit Services PMI beat at 09:30. We can say that the USD trend was down as Gold, Oil, and bond prices (inverse to yields) were up, however CAD and AUD were down, the latter after the RBA rate hold at 04:30.

Wednesday June 06
A third day of rally, this time across the board as all indices were up, more on momentum than news. This was despite further rallying of EUR and GBP, the former because ECB board member and BuBa President Weidmann that the central bank could end its bond buying programme before the end of 2018. German Bund yields rose 10bp, and even US yields put on 5bp, despite the day being weak for USD. AUD was strong after the GDP beat at 01:30, as was CAD after the Trade beat at 12:30. In fact JPY was the only currency to fall, leaving DXY down 0.1% on the day. Gold was flat, and Oil was down 0.7% after the EIA Stock miss at 14:30. Notably Brent was up 0.5%, widening the BNO-WTI spread.

Thursday June 07
We were guided on Thursday by the weekday average chart for SPX provided by our friends at marketseasonals.com. This week the index performed almost exactly as the average, with NDX and RUT coming off their highs. The picture was not uniform, as SPX was flat, and DJIA was actually up, following a sharp 4.37% rise in MCD after restructuring plans.

DAX and FTSE came off even more sharply as EUR and GBP continued their upward path. This often happens with a few days of currency appreciation, the relevant index breakdown is delayed and then happens suddenly. The risk-off mood (Gold, JPY and bond prices up) was exacerbated by weekend G7 worries after Trump set out his position in a combative tweet. Also Italy is not yet right, Italian 10-year yields added 10bp today. When you add in the potential German car tariff Trump has been talking about, the DAX fade of 178 points (1.38%) was not surprising.

In forex, whilst EUR, GBP and JPY were up, AUD and CAD bucked the trend again and fell. Oil was up nearly 2%, erasing the previous day’s losses after reports that troubled OPEC member Venezuela was a month behind in its deliveries.

Friday June 08
After a poor start due to G7 tensions, US markets still managed to close green Friday, although as you might expect, non-US markets fared badly, as the potential victims in a trade war. Risk-off JPY and Gold were up. Currencies reflected the equities position, ie USD was up, and European currencies were down, as was AUD. Yields were up in line with the stronger dollar (or perhaps it’s vice versa). The surprise move of the day was CAD which despite the miss on jobs at 12:30, the Trump/Trudeau tension, and a volatile but ultimately down day in Oil, still managed to put on 0.35% (45 pips) to end the day and week green against the 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 low volatility week. USD was down across the board, but only slightly. The best forex trade was buying EUR, but even this yielded less than 1%. Indices were similarly flat, with SPX being the best trade. Cryptos followed suit with a second sub-10% week .

AUDUSD 0.7595 (+0.40%)
EURGBP 0.8771 (+0.46%)
EURUSD 1.1767 (+0.94%)
GBPUSD 1.3409 (+0.50%)
NZDUSD 0.7032 (+0.66%)
USDCAD 1.2926 (-0.20%)
USDJPY 109.51 (+0.02%)
DAX     12798 (+0.43%)
FTSE     7703 (-0.01%)
NIFTY   10757 (+0.57%)
NKY     22697 (+1.50%)
SPX   2779.02 (+1.74%)
GOLD  1298.72 (+0.38%)
OIL     65.49 (-0.30%)
BTCUSD   7641 (+1.58%)
ETHUSD 602.45 (+3.95%)

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

 

NEXT WEEK (all times are GMT)

A packed week ahead includes three rate decisions, four inflation prints, and two jobs reports, as well as plenty of opportunity for Trump-related black swans.

Monday June 11
Monday is likely to be dominated by the fallout from the G7 meeting. The British broker IG Markets runs a proprietary weekend market for DJIA, FTSE and DAX, and you can see that the 150-point DJIA drop indicates a gap down open. The only news today is UK Manufacturing and Production and Trade Balance. No Fed speakers today as the pre-FOMC purdah continues. Australian markets are closed for the Queen’s Birthday (but curiously the UK is not).

Tuesday Jun 12
Today is the possibly historic Trump-Kim summit. Anything positive here could deflect market trade war concerns, and of course the day will have finished in Singapore before New York opens. In the UK, the Brexit bill goes back to the House of Commons, and we have the key unemployment and average earnings figures. These will need to be good to keep up GBP momentum. Also out is US inflation, although this print is too close to FOMC to make any different to the rate decision.

Wednesday June 13
FOMC Rate Set day, and a rise from 1.75% to 2.00% is widely expected. No change is expected to the ‘dot-plot’, the summary of all voting members future intentions. A speech by Chair Powell is scheduled and his language will be watched closely. No let up in matters affecting GBP, with the all-important inflation figure this morning. Key is the ex-food and energy figure estimate at 2.1%.

Thursday June 14
The fourth print to affect GBP this week is Retail Sales, although this will have less effect as it is only an inflation proxy, and the real thing was the day before. Traders now have all the information they are going to get to predict whether the BoE will raise rates next week.

The main event of the day is the Euro rate decision, or more correctly the 13:30 press conference, where traders will be looking for ECB Pres Draghi to confirm Weidmann’s bullish remarks last week. German CPI earlier in the day will also have an effect on EUR although this rarely deviates from the estimate. The US Retail Sales print is less important because the same reason given above about the equivalent UK print.

Friday June 15
The third rate decision of the week comes from Japan, although this is less of an event—unless of course BoJ Gov Kuroda says something unexpected. In practice in a week like this, markets will still be digested the ECB and Feb positions. ECB Cœuré speaks at 08:45. Also today, the USTR to publish final list of $50bn Chinese imports subject to 25% tariff. This many affect certain sectors in US stocks.

 

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

Sun Jun 10
23:50 JPY Japan Machinery Orders

Mon Jun 11
08:30 GBP UK Manufacturing/Industrial Production

Tue Jun 12
01:00 USD Trump – Kim meeting
01:30 AUD Australia Home Loans/Investment Lending
02:00 CNY China FDI
08:30 GBP UK Unemployment/AHE/Claimant Count Change
09:00 EUR Germany ZEW Survey – Economic Sentiment/Current Situation
12:30 USD US CPI (est 2.2% prev 2.1%)
18:00 USD US Monthly Budget Statement
20:30 WTI API Stock

Wed Jun 13
00:00 EUR Eurogroup meeting (all day)
00:30 AUD Westpac Consumer Confidence
02:00 AUD RBA Governor Philip Lowe Speech
02:00 CNY China GDP (QoQ) (prev 1.4%)
08:30 GBP UK CPI/RPI/PPI (est 2.6% prev 2.5%)
09:00 EUR Industrial Production s.a. (MoM)
10:00 EUR DE10 Bond Auction
12:30 USD PPI ex Food & Energy (YoY)
15:30 WTI EIA Stock
18:00 USD Fed Rate Decision/Statement/Conference (est 2.00% prev 1.75%)

Thu Jun 14
00:00 EUR EcoFin Meeting (all day)
01:00 AUD Australia Consumer Inflation Expectation
01:30 AUD Australia NFP/Unemployment/Participation (est 18k prev 22.6k)
02:00 CNY China Retail Sales/Industrial Production (YoY)
06:00 EUR Germany CPI (est 2.2% prev 2.2%)
08:30 GBP UK Retail Sales
11:45 EUR ECB Rate Decision (est 0.0% prev 0.0%)
12:30 USD US Retail Sales (MoM) (est 0.4% prev 0.3%)
12:30 USD Jobless Claims
12:30 EUR ECB Statement and Press conference
22:30 NZD Business NZ PMI

Fri Jun 15
02:00 JPY BoJ Rate Decision/Statement (est -0.1% prev -0.1%)
03:30 AUD RBA Assistant Governor Ellis Speech
04:00 JPY BoJ Press Conference (time approx)
09:00 EUR Eurozone CPI (est 1.9% prev 1.9%)
13:15 USD Industrial Production/Capacity Utilization
14:00 USD Michigan Consumer Sentiment Index
17:00 WTI Baker Hughes US Oil Rig Count

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