28 Oct: US stocks, dollar, yields all firm ahead of Wednesday’s FOMC Meeting. Thin calendar until then.

By | October 28, 2019

The US$ was higher on Friday despite traders looking towards Wednesday’s FOMC Meeting, at which it is expected that the Fed funds rate will be cut by another 25 basis points. The Euro was dragged down by Sterling, which entered the world of the absurd as confusion reigned over whether or not the UK will leave the EU this week after the EU failed to reach an agreement on a Brexit extension. The UK had asked the EU for an extension and MPs voted in principle for a Brexit deal last Tuesday but pushed against Boris Johnson’s timetable for passing a Brexit deal by the 31st October Brexit date. Johnson then pushed for a general election but has faced backlash after the Labour leader, Jeremy Corbyn, said on Friday that he would only agree to an election if a “no-deal” Brexit was off the table. Who knows where we head next?!

Elsewhere, the metals, particularly Silver, and stocks moved higher in expectation of a Fed rate cut on Wednesday but talk of progress in the US China trade talks then helped to push prices back down to where they had started the day. WTI was also up by around 1% on Friday, and nearly 6% on the week, on the back of the midweek rally driven by strong US oil consumption. US Stocks were underpinned by the solid round of earnings seen last week, and with more to come this week it may be that we see the S+P make a new all-time high, just 9 points away, at 3030.

Note that China’s industrial profits were released over the weekend and fell by 5.3% yy in September, down for a second consecutive month after August came in at -2% yy, and may have some early impact on the Aud$ on Monday morning.

In terms of data on Friday, there was little from the US, but from Europe the Germany Gfk consumer sentiment for November dropped to 9.6, down from 9.8, missing expectation of 9.8 and weighing on the Euro. The German IFO Business Climate was unchanged at 94.6 in October, slightly above expectation of 94.5, while the Current Assessment index dropped to 97.8, down from 98.6 and missed expectation of 98.0. The forward Expectations index rose to 91.5, up from 90.9, and beat expectation of 91.0, while the IFO noted that “the German economy is stabilizing”. Whether the ECB feels the same is yet to be seen as the EU data remains generally soft and a further easing looks likely.

The coming week starts quietly enough but heats up as we progress through it, culminating in the US employment data on Friday, although the main event of the week is going to be the November FOMC Meeting, at which a 25 bp rate cut is widely expected and would make it the 3rd consecutive monthly cut. Before then, Monday and Tuesday will see mostly secondary figures (Monday – US Chicago Fed National Activity Index, Wholesale Inventories, Goods Trade Balance, Dallas Fed Mfg Business Climate, and – Tuesday – RBA’s Lowe Speech, US Case Shiller House Price Index, Consumer Confidence, Pending Home Sales, API Weekly Crude Oil Stock Inventory). Note that Mario Draghi will be speaking today, with his final thoughts as Chairman of the ECB, before hangin gover the riens to Christine Lagarde in November. Aside from the FOMC on Wednesday we get inflation data from Australia and Germany, and from the US – the Preliminary Q3 GDP and US Personal Consumption/Expenditure figures for September. Thursday will be another busy one, with the focus likely to be on the Australian Private Sector Credit and Building Permits, along with the China Manufacturing/No-Manufacturing PMI and the BOJ Meeting/Interest Rate Decision/Press Conference at which rates are expected to be on hold although someanalyst sugged the possibility of a drop in rates from -0.1% to -0.2%. Finally, Friday will see the Australian PPI, Australian/Japan, Caixin China Manufacturing PMIs as well as the ISM Mfg PMI/Prices Paid although all the focus is likely to be on the US Jobs figures. Have a good day.

Economic data highlights will include:

Mon: NZ Holiday, CBI Distributive Trade Survey – Realised, US Chicago Fed National Activity Index, Wholesale Inventories, Goods Trade Balance, Dallas Fed Mfg Business Climate, BOE’s Tenreyro Speech

Tue: Tokyo CPI, RBA’s Lowe Speech, German Import/Export Index, US Case Shiller House Price Index, Consumer Confidence, Pending Home Sales, API Weekly Crude Oil Stock Inventory

Wed: Japan Retail Trade, Australian New Home Sales, CPI, German Unemployment, CPI/HICP, EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, US Preliminary GDP, FOMC Meeting/Interest Rate Decision/Press Conference, ADP Jobs data, EIA Crude Oil Stocks Weekly Change, Personal Consumption/Expenditure

Thur: NZ Building Permits, Activity Outlook, Japan Industrial Production, Australian Private Sector Credit, Import/Export Index, Building Permits, China Manufacturing/No-Manufacturing PMI, BOJ Meeting/Interest Rate Decision/Press Conference, Japan Housing Starts, Construction Orders, German Retail Sales, EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, US Personal Consumption/Expenditure Index, Jobless Claims, Chicago Purchasing Managers Index

Fri: Australian PPI, Australian/Japan, Caixin China Manufacturing PMIs, US Jobs/NFP/Average Hourly Earnings data, ISM Mfg PMI/Prices Paid

Market moves, in brief:

FX: DXY 97.85 (+0.18%)

Bonds: US10Y; 1.800% (+1.84%), German 10Y; -0.374% (+7.47%), UK 10Y; +0.583% (+6.70%), Australian 10Y; 1.071% (-2.21%), NZ 10Y; 1.210% (-4.48 %), China 10Y; 3.232% (-0.04%)

Stock Indices: DJI; xxxx%, S+P; xx%, NASDAQ; xxxx%, EUStoxx50; xxxx%, FTSE100; xxxx%, Shanghai Composite; xxxx%,

Metals: Gold $1505 oz (+0.11%), Silver $18.04 oz (+1.28%), Copper $2.6825 lb (+0.54%), Iron Ore $90.22 per tonne (NYMEX) (+0.12%),

Oil: WTI $56.66 pb (+1.09%)

CURRENCIES
EURUSD: 1.1078
Res  1.1095  1.1110  1.1125
Sup  1.1065  1.1050  1.1035
USDJPY: 108.68
Res  108.80  109.00  109.20
Sup  108.50  108.25  108.05
GBPUSD: 1.2823
Res  1.2865  1.2905  1.2945
Sup  1.2785  1.2745  1.2705
USDCHF: 0.9944
Res  0.9955  0.9975  0.9995
Sup  0.9930  0.9910  0.9890
AUDUSD: 0.6820
Res  0.6835  0.6850  0.6870
Sup  0.6810  0.6795  0.6780
NZDUSD: 0.6348
Res  0.6365  0.6380  0.6395
Sup  0.6340  0.6325  0.6310
INDICES / COMMODITIES
S&P.fs: 3019.03
Res  3025.00  3035.00  3045.00
Sup  3010.00  3000.00  2990.00
DJ30.fs: 26891.50
Res  26975.00  27080.00  27175.00
Sup  26845.00  26745.00  26650.00
SPI200.fs: 6739
Res  6750  6765  6785
Sup  6725  6705  6685
XAUUSD: 1504.16
Res  1510.00  1515.00  1520.00
Sup  1500.00  1495.00  1490.00
XAGUSD: 18.04
Res  18.10  18.25  18.40
Sup  17.90  17.75  17.60
WTI.fs: 56.57
Res  56.75  57.35  58.00
Sup  56.05  55.40  54.75

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