الأسبوع المقبل: بنس مقابل هاريس في بؤرة التركيز بعد مناظرة رئاسية فوضوية

يأمل كل من نائب الرئيس مايك بنس وسيناتور كامالا هاريس في الخروج من مناظرة المرشحين لمنصب نائب الرئيس، والتي ستعقد هذا الأسبوع، بكرامة أكثر مما فعله المرشحان الرئاسيان في الأسبوع الماضي. لا يفترض أن يكون هذا أمرًا صعبًا. يأتي أيضًا الكثير من البنوك المركزية هذا الأسبوع، ويشمل هذا قرار الفائدة من بنك الاحتياطي الأسترالي ومحاضر أحدث اجتماعات اللجنة الفيدرالية للسوق المفتوحة والبنك المركزي الأوروبي.

الانتخابات الأمريكية: مزيدًا من اللياقة من بنس وهاريس في مناظرة المرشحين لمنصب نائب الرئيس؟

يشهد هذا الأسبوع ثاني مناظرات الانتخابات الأمريكية، وهذه المرة هي المواجهة الواحدة والوحيدة بين نائب الرئيس مايك بنس وسيناتور كامالا هاريس.

يبدو أن المناظرة الرئاسية الأولى في الأسبوع الماضي كان تأثيرها محدود على الاستفتاءات، وينظر إليها على أنها إحراج كبير، حتى أن لجنة المناظرات الرئاسية قد أعلنت عن أنها ستجري تغييرات على نسق الأحداث القادمة في محاولة لجعل الأمور أكثر نظامًا.

أحد التغييرات المأخوذة في الاعتبار هي غلق ميكروفون المرشح إذا حاول المقاطعة بصورة مبالغ فيها. وعلى الرغم من أن هذا سيؤثر على ترامب أكثر من بايدن، فقد لا يضر بالضرورة الرئيس، الذي لم يعط منافسه فرصة كبيرة للزلل في المرة السابقة.

ستعقد مناظرة المرشحين لمنصب نائب الرئيس في الساعة 9:00 م بالتوقيت الشرقي يوم 7 أكتوبر (1:00 ص بالتوقيت العالمي المنسق يوم 8 أكتوبر). آخر مرة ظهر فيها بنس في مناظرة تعرض على التلفاز الوطني كانت في أكتوبر 2016. على الجانب الآخر، تمرن هاريس كثيرًا في الأشهر الأخيرة.

محاضر اجتماعات اللجنة الفيدرالية للسوق المفتوحة و البنك المركزي الأوروبي

يحيط اجتماعا اللجنة الفيدرالية للسوق المفتوحة وحسابات البنك المركزي الأوروبي بمناظرة المرشحين لمنصب نائب الرئيس هذا الأسبوع.

حصلت اللجنة الفيدرالية للسوق المفتوحة على فرصة في الشهر الماضي لمعالجة استراتيجيتها الجديدة لاستهداف التضخم المتوسط، بالرغم من أنه، وفقًا لتوقعاتها، سيمر وقت طويل قبل أن يقدر صناع السياسة على ترك التضخم ينطلق. قد تقدم أحدث الاجتماعات المزيد من الوضوح، لكن مع المناظرة التي ستحدث بعد بضع ساعات، فقد لا تعيرها الأسواق اهتمامًا كبيرًا.

أشارت رئيسة البنك المركزي الأوروبي كريستين لاغارد بعد أحدث الاجتماعات مع مجلس الإدارة أن معدل صرف اليورو/الدولار قد ارتفع بصورة ملحوظة، بالرغم من أنها قالت أيضًا «كما تعلمون، لا نستهدف معدل الصرف». يمكن أن يعطي محضر الاجتماع المزيد من المعلومات حول كيف يخشى صناع السياسة من أن اليورو القوي قد يؤثر على ولاياتهم.

بالرغم من انخفاض اليورو/الدولار بعد تجاوز 1.20 في بداية سبتمبر، فإن الزوج يتجه نحو نفس المستويات التي شوهدت عندما كان البنك المركزي الأوروبي يفكر في قوته.

قرار معدل الفائدة لبنك الاحتياطي الفيدرالي

أسواق العقود الآجلة تراهن بثبات على أن بنك الاحتياطي الأسترالي سيخفض الفائدة إلى 0% عندما يجتمع في هذا الأسبوع. تظهر العقود الآجلة للمعدل النقدي بين البنكي اليومي ASX 30 فرصة بنسبة 64% للخفض في وقت الكتابة.

يأتي هذا بعد تعليقات حديثة من نائب المحافظ جاي دبل، الذي استخدم حديثًا لتحديد أدوات السياسة التي يأخذها بنك الاحتياطي الأسترالي في اعتباره لمساعدته على تحقيق ولايته المزدوجة على التوظيف والتضخم.

التدخل في الصرافة الأجنبية ومعدلات الفائدة السالبة كانا على القائمة كلاهما.

مراقبة البيانات الاقتصادية

من حيث البيانات الاقتصادية، سنشاهد مؤشر مديري المشتريات الصناعي الأمريكي من ISM ومطالبات البطالة الأسبوعية، والإنتاج الصناعي الألماني، والكثير من البيانات من المملكة المتحدة يوم الجمعة، والتي تشمل الناتج المحلي الإجمالي الشهري، والإنتاج الصناعي وأرقام ناتج البناء.

تسليط الضوء على XRay هذا الأسبوع

اقرأ كامل الجدول الزمني لتحليل السوق المالي والتدريب عليه.

17.00 UTC 05-Oct Blonde Markets
From 15.30 UTC 06-Oct Weekly Gold, Silver, and Oil Forecasts
17.00 UTC 07-Oct Webinar: 10 Trading Rules for Every Level of Trader
17.00 UTC 08-Oct Election2020 Weekly
12.00 UTC 09⁠-⁠Oct Platform Walkthrough

الأحداث الاقتصادية الأساسية

أحترس من أكبر الأحداث على التقويم الاقتصادي هذا الأسبوع. متاح على المنصة تقويم كامل للأحداث الاقتصادية و أحداث الشركات

07.15 – 08.30 UTC 05-Oct Finalised Eurozone, UK Services PMIs
14.00 UTC 05-Oct US ISM Nonmanufacturing PMI
03.30 UTC 06-Oct RBA Interest Rate Decision
Pre-Market 06-Oct Paychex – Q1 2021
After-Market 06-Oct Levi’s – Q3 2020
06.00 UTC 07-Oct German Industrial Production
07-Oct Tesco – Interim Announcement 20/21
14.30 UTC 07-Oct US EIA Crude Oil Inventories
18.00 UTC 07-Oct FOMC Meeting Minutes
01.00 UTC 08-Oct US Vice President Nominee Debate
11.30 UTC 08-Oct ECB Monetary Policy Meeting Accounts
12.30 UTC 08-Oct US Weekly Jobless Claims
14.30 UTC 08-Oct US EIA Natural Gas Storage
06.00 UTC 09-Oct UK Monthly GDP, Production, Output

Stocks slip after Wall St bounce (bull trap?), FX markets tune into Brexit and ECB

Fear casts a long shadow. If the virus doesn’t get you, the fear might. It’s almost a trope in economic and trading circles: it’s not the virus causing the damage to the economy and businesses, but the twin enemies of a chaotic government response and worst of all, fear.

Fear is what gets you in the end. Fear is what cripples the recovery, be that fear of the virus (I won’t go out) or fear of arbitrary knee jerk responses (why bother booking a holiday abroad). Fear of tax raids is another we might add for many investors looking at how public policy may affect their returns.

Dunelm warns over Christmas lockdowns, IAG announces rights issue

There is a fear stalking some companies. Dunelm this morning warned off a ‘severe but plausible’ scenario in which there are further lockdowns over Christmas. Sales might not recovery fully until 2023, management worry.

Meanwhile IAG has warned demand has eased and now expects capacity to decline this year more than previously thought. Available seat kilometres are forecast to drop by 63% in 2020 and still be 27% below 2019 levels in 2021. Previously it had forecast declines of 59% and 24% respectively. The forecasts came as IAG announced a €2.75bn discounted rights issue to strengthen its balance sheet.

Even Morrison’s, which has seen sales surge, is nursing a drop in profits because the new order means more of the lower margin online business is required.

Names like Azhag the Slaughterer and Gorbad Ironclaw are designed to strike fear into people’s hearts, but investors in Games Workshop have had less reason to be afraid than many. Today’s trading update shows continued strong progress despite the pandemic – indeed staying indoors for long stretches is something their customers are not afraid of.

Shares jumped over 10% after the company reported a very strong three months to August 30th, with sales up to £90m from £78m a year ago. Online growth has been strong. It also declared a dividend of 50p. Peel Hunt raised its price target on the stock.

Global equities rebounded – a classic bull trap?

Yesterday saw a big risk rally as global equities recovered from a 3-day sell-off led by US tech shares. Wall Street – equity markets bounced strongly. The Nasdaq added 2.7%, while the S&P 500 was up 2%. The Nasdaq held its 50-day moving average, with this level offering the major support for the rally. The S&P 500 ran into resistance at the 21-day line. There was some selling into the close though, which makes you wonder if it’s a classic bull trap before the next swing lower.

Vix futures (Sep) broke the rising trend line to trade at 28.50, having taken a 37 handle last Friday. The FTSE 100 climbed over 1.3% to recover the 6,000 level, while the DAX added 2%.

Europe soft as markets await ECB decision

European stock markets turned lower this morning as investors look ahead to the ECB meeting today. The meeting comes amid a sharp rally for the euro that has left policymakers concerned. The line in the sand for the central bank was 1.20 on EURUSD – a level that prompted chief economist Philip Lane to comment that “the euro-dollar rate does matter”. Traders should pay attention to any nod to currency worries from Christine Lagarde.

Whilst the consensus is that the ECB will take no further policy action, policymakers may choose to act, albeit any action at all would be around the PEPP programme rather than slicing interest rates lower. As noted earlier this week, the sharp decline in inflation could force the ECB to take swifter action than the market is anticipating. Eurozone inflation turned negative in August, declining to –0.2% from +0.4% in July.

Sources yesterday indicated the ECB is more confident in its economic projections – it was not entirely clear whether they meant they are more confident that they are right about the , or more confident they will improve.

However, even here the ECB probably doesn’t need to push its PEPP envelope, given only €500bn has been used out of €1.35bn available. I think Christine Lagarde may seek talk up this being a target, rather than a ceiling.

In summary, on the balance of probabilities the ECB will not make any monetary policy changes but will lean hard on jawboning the euro lower and talking up the unused room in the PEPP programme and that it will do whatever it takes to support the recovery and stand ready to expand it if required. EURUSD trades at 1.1820 in a steady pattern ahead of the meeting.

Pound up but Brexit remains key risk

The pound rebounded yesterday afternoon and held gains after the EU said it would not kybosh talks because of the U.K. threat to rip up the withdrawal bill – the internal market Bill. This removed the immediate risk of a collapse in trade talks, which appears to have driven the aggressive move lower in the morning with cable hitting a six-week low. This sent cable hard back to 1.30 in a sharp risk reversal that many newly minted shorts firmly on the wrong side.

But we should caution that sterling remains very exposed to further negative headlines and risks appear still skewed to the downside for the time being and we can only say that sharp moves lower – in the region of one big figure – are to be expected. The EU this morning is said to be considering legal action against the UK over the bill. GBPUSD just traded a little under 1.30 again as morning trading got going in London, possibly with this news weighing on sentiment – again highlighting the headline risk.

Today sees the talks wrap with the usual order of service involving the two sides giving separate press conferences. The focus on the EU side will be to what extent the internal market build has undermined trust.  Remember a deal will always look a lot more distant than it may be in reality.

US jobless claims numbers are also due later. These have become a useful barometer for the US economic recovery and tend to show that the momentum from the initial post-lockdown snapback is waning.

Last week, the initial jobs claims improved but the methodology changed somewhat and the only stat we really cared about was that the total number of people claiming benefits in all programs for the week ending August 15th was 29,224,546, an increase of 2,195,835 from the previous week.

European equities bounce, dollar fights back

What is the right multiple when the Fed is stoking inflation and says it will not withdraw accommodation? What price should stocks carry in a world of ZIRP and QE-4-ever? It’s very hard to say: the usual model for forming a judgment on how richly or poorly valued stocks should be – using interest rates and earnings – is becoming out of step with the reality of unlimited central bank support. How do you derive the right discount rate?

We have always assumed that central banks will withdraw accommodation as the economy gets hot and inflation picks up. Or in other words, it’s always been there to take away the punch bowl whenever the party got a little rowdy. Indeed, often it was too quick to turn the music off just as people started to dance.

Now the Fed says it won’t do that and the ECB and others are set to follow – where the Fed goes usually the rest of the world needs to follow. If it’s unlimited Fed support, who cares if the forward multiple on the S&P 500 is x25? If there is no hiking cycle on the horizon, then stocks could continue to rally from these already very stretched levels.

Vix points to uncertainty as US Presidential Election nears

Of course, as repeated nearly every day, near term I worry that this extended rally is ripe for a pullback as the US election approaches, and I am not alone. Whilst retail investors rich on stimulus cheques still think ‘stonks only go up’, there are signs investors are worried about how far this has gone.

Vix futures keep moving in an upwards trajectory that suggests investors are paying more for downside protection on the S&P 500. Vix futures settled above 28 and contracts expiring in Oct are north of 33, signalling a lot of uncertainty around the election. The race will be far closer than polls show. Our election tracker shows Trump narrowing the gap.

FTSE lags global stocks

Such concerns about stretched valuations and ever-higher multiples are not a concern for UK investors. The FTSE 100 has rather majestically shrugged off the rally in global stocks and serenely plunged to its weakest since May. A stronger pound undoubtedly took the wind out of the sails and a bit of a catchup trade was in play after the market was closed for the bank holiday on Monday, meaning it didn’t take part in the mild sell-off across Europe yesterday.

But the FTSE’s troubles are not a new phenomenon – a complete absence of tech and growth is a major problem. Dividend cuts have also vanquished income investors, albeit the yield of almost 4% doesn’t seem too bad today. Last night the FTSE 100 settled on the 38.2% retracement of the March to June rally which has offered near-term support for today’s bounce – dollar strength this morning is helping too.

Record closes for SPX and Nasdaq fuel rally in Europe

European stocks rallied in early trade on Wednesday, including the FTSE 100, after the S&P 500 and Nasdaq both hit fresh records. Apple rallied another 4%, seemingly unstoppable. Tesla declined 5% after it announced a $5bn stock sale, which though a bit of a surprise is not a complete shock given Tesla’s vast capex requirements and share price accretion – as it did in February, Tesla is taking advantage of favourable market conditions to raise fresh cash early on in the cycle.

Meanwhile, we are not getting much further on stimulus – US Treasury Secretary Steve Mnuchin rejected the Democrats’ latest $2.2tn coronavirus relief package, but we are set for more spending, more printing until inflation becomes a problem.

The dollar came back fighting with DXY back above 92.50 as both GBP and EUR retreated off key resistance levels. Could be a dead cat bounce for USD. GBPUSD made a run to 1.35 but failed this test and backed off further this morning to take a 1.33 handle.

Watch for the Bank of England’s Andrew Bailey, who will be giving oral evidence to the Treasury Committee in Parliament on the economic impact of coronavirus. Obviously it’s bad, but house prices have hit a record high so that is good if you own one, not so good if you don’t. Messrs Haldane (he of the V) and Broadbent are speaking later, too.

Euro struggles after strong US manufacturing data, US ADP jobs report in focus

The euro – has a line in the sand been drawn? EURUSD pushed up to have a run at 1.20 but got knocked back as the US ISM manufacturing came in better than expected at 56. This could be a line in the sand for the euro bears defending the roaring 20s? Eurozone inflation turned negative in August – a clear signal of the disinflationary pressures wrought by the pandemic.

Inflation fell to –0.2% from +0.4% in July. It lays bare the mountain the ECB needs to climb and simply tells us that the central bank will need to keep monetary policy exceptionally loose for a very long time. It’s worth noting that the much-hyped EU rescue deal has yet to be delivered. EURUSD pulled back under 1.19 in early trade on Wednesday as the dollar caught a bid.

Today, we are looking ahead to the ADP nonfarm employment report ahead of Thursday’s weekly claims count and Friday’s main nonfarm payrolls print. The ADP number is expected to show a gain of 1m jobs from a paltry 167k in July.

US factory orders and crude oil inventories on tap this afternoon, expected to show a draw of –2m barrels. Later we also have the Fed’s Beige Book, while the Fed’s Williams and Mester are speaking.

Blonde Money ECB and EU Summit Preview

What can we expect from this week’s European Central Bank monetary policy decision? Blonde Money CEO and founder Helen Thomas takes a look at what could be in store for markets on the back of the latest announcements, and why the ECB will be watching the upcoming EU Summit as intently as the markets will.

Get the latest macroeconomic and political insight from Helen every week on XRay.

Stocks tread ranges ahead of FOMC, pound at 3-month high

Some of the biggest share price gains registered this week have been among companies that have filed for Chapter 11 bankruptcy protection – the likes of Hertz, JC Penney, Pier 1, Whiting Petroleum, as well as firms like Chesapeake Energy and California Resources which are about to file for bankruptcy. This is downright speculation, gambling by any other way of it looking at it.

Retail investors – many trading for free with Robinhood accounts – are snapping up penny stocks and driving up the shares of companies whose stock is essentially worthless. Most of these investors probably don’t realise that common stock comes precisely bottom of the pecking order in bankruptcy proceedings. Even if they don’t go bankrupt and restructure, shareholders get wiped out. It’s a sign of a frothy market – just make sure you are not the greater fool holding the stock when the music stops.

Europe opens higher, stock markets await clarity on recovery and policy support

Stocks took a breather yesterday with a decent pullback, though European bourses opened a little higher this morning ahead of the Federal Reserve statement this evening. Asian shares were mixed, with Tokyo a tad higher and Chinese shares a little weaker.

Chinese inflation figures were soft, with producer prices down 3.7%, the worst drop in 4 years, and consumer prices rising by 2.4%, down from 3.3% in April. Meanwhile data crossing this morning showed French industrial production declined 34% in April – but the market long ago chose to ignore any backward-looking data.

European stocks opened higher after yesterday’s selloff, now bouncing around ranges before there is more clarity on economic recovery and any further policy support.  On the former, there are concerns about two-consecutive days of record numbers of hospitalisations in Texas as lockdown restrictions lift, but broadly optimism about reopening is trumping doubts about second waves and a slow, lacklustre recovery.

It turns out pubs won’t reopen by Jun 22nd, but the bigger worry is how you get children back to school – that should be a priority. Meanwhile, I have grave doubts about the state of the UK employment market come the autumn as furlough schemes end and businesses have reopened to a big fall in demand. Such circumstance don’t bode well for civil order, which is already looking strained in places.

Markets await FOMC statement, Nasdaq above 10,000

On the latter, the FOMC statement is due later today (see yesterday’s note). There has been chatter about yield curve control and more dovish forward guidance, but the Fed may prefer to wait until September before it strikes. The recent recovery should give it time to think, albeit it will be keeping a close watch on longer-dated yields moving up, which may be a worry.

However, I think its focus is keeping a lid on the front end and allowing some steepening should not be a concern. I think I said a year ago that we should no longer pay any attention to the dots – they’re meaningless guesses. But there could be some optimists on the FOMC seeking to pencil in a hike in 2022. More broadly, I think the Fed will signal it accepts there will be no V-shaped recovery even if the recent data has been encouraging.

US stocks were weaker as the rally paused for breath with the S&P 500 down 0.78% at 3207. The Dow snapped a 6-day winning streak with a 1% fall. The Nasdaq was of course still higher and broke 10,000 for the first time ever. Boeing shares have been on a tear lately but tripped up with a 6% drop as it revealed it delivered just four jets in May and saw another 18 orders cancelled.  IATA says 2020 will be the worst year in the history of the aviation industry. Vroom went zoom with a 117% gain on the first day of trading to $47.90. Apple shares rose another 3% to a fresh all-time high on reports it would use its own chips in its devices, helping to drag the Nasdaq into record territory.

Dollar offered, cable hits fresh 3-month high

In FX the dollar is offered across the board with both risk proxies and the yen making gains. The pound has broken out to fresh 3-month highs with GBPUSD clearing 1.2760. EURUSD was higher around 1.1350, trying to take out the Jun 5th peak at 1.1382. The ECB’s Muller said PEPP needs to be temporary and should not be increased if at all possible. He also said low inflation expectations are a short term risk, so take what he says with a pinch of salt.

Expectations for a dovish Fed may be a factor but we are seeing this as part of an unwinding of the strong dollar pandemic trade that was built on USD liquidity squeeze. Nevertheless, the dollar index continues to make new lows and may well take 95 handle before long having broken down through the last Fib support. Key support is seen around the 94.50/60 area.

Oil steadies ahead of EIA inventories data after surprise API build

Crude oil (Aug) was steady a little above $38, about $2 off Monday’s highs, after API data yesterday showed a surprise build in US crude inventories that has reignited oversupply fears. US crude stocks climbed 8.4m barrels in the week to Jun 5th, vs expectations for a draw of 1.7m barrels. The EIA data today is forecast to show a draw of 1.8m barrels. But the forecasts have been way out for weeks, with an average consensus miss of about 5m barrels, so I wouldn’t be putting too much faith in the expectations.

Natural gas prices spiked aggressively lower overnight and though paring losses are still trading down by around 2% today after the IEA said 2020 would see the largest demand shock in the history of the market.

Equities head for strong finish, all eyes on the bond market, NFP jobs report

No V? The lack of a V-shaped recovery may not be worrying stock markets too much, but it is a source concern for consumers who lost confidence over the course of May. Perhaps this was due to the glacial pace of easing of lockdown restrictions and annoyance at the government; or perhaps it was economic – worries about job losses and a big drop in house prices finally sinking in and offsetting the novelty of being furloughed.

Whatever the cause, GfK’s UK consumer confidence index slipped to –36 in the second half of May, down from –34 in the first half and near the –39 printed in July 2008. Meanwhile, Japanese household spending fell even further in April, declining more than 11%. This was the fastest drop in spending since 2001 and built on a 6% drop in March.

Stock markets fell yesterday, pausing what’s been a robust risk-on rally in June, whilst bond yields snapped out of their funk. European stock markets suffered a broad decline. The Nasdaq hit a record intra-day high but ended down 0.7% on the day. The Dow eked a small gain, but the broad S&P 500 index declined 0.34%, though held the 3100 handle after dropping as low as 3090.

European stock markets rebound, eyes on bonds after ECB QE hike

Today, European stock markets rallied back to their highs of the week in the first half hour of trading, with the FTSE rising above 6400 and the DAX at 12,700. Both set to complete a very strong week of gains, with a German stimulus package and ECB bond buying helping to lift sentiment. The DAX’s breach of the 61.8% retracement was a very good bullish signal –  since then, in the last week it has cleared the 200-day line and advanced through the 78.6% level, up close to 10% since last Friday’s close. The FTSE is over 5% higher this week.

Eyes on the bond market again: after being somewhat subdued by central bank actions for many weeks US 10yr yields broke out to 0.85% even as stocks slipped up, whilst 2s couldn’t move beyond 0.2%. I think you have to look deeper into what the central banks are doing here as well as the amount of issuance. The Fed is reducing the pace of asset purchases, but investors think it will need to keep a lid on the front end of the curve for a long time by keeping its target rate at zero.

The move in US yields seemed to be a result of the ECB move to increase QE by a further €600bn. I’m not sure we can draw any immediate conclusions from this sharp move in US rates, but it will be very interesting to watch how the Fed responds to this development. Does it seek to influence the yield curve – yield curve control like the Bank of Japan, or does it let bond markets function?

If investors are dumping longer-dated bonds, and driving up yields, it may be that the inflation trade is on – given the tsunami of issuance and central bank intervention, it is logical enough to expect a bout of inflation coming round the bend, even if the immediate pressures from the pandemic are deflationary. Or it may just be a signal that the bond market thinks the worst of the crisis is over and we can chill out a bit – the move up in yields and drop in the Vix under 25, combined with the rally in equities should all be telling us that things are hunky dory.

When you look at the economic data, however, it’s hard to be to very optimistic. One to watch.

US nonfarm payrolls report on tap

The US nonfarm payrolls print is the last big risk event of the week, and seen at –8m, albeit Wednesday’s ADP number was just –2.76m vs –9m expected. Last month showed a massive –20m drop, but it only really told us what we already knew after several weeks of dreadful weekly initial claims numbers. Yesterday, US initial jobless claims fell to 1.9m but the continuing claims number rose 650k from last week to 21.5, ahead of expectations.

The fact that this number is rising is a worry that either businesses are not rehiring very fast, or worse, workers laid off simply don’t want to go back to work because they earn more now being unemployed thanks to the expanded benefit package. One report indicated about 40% of US workers are better off not working.

WTI oil, Brent oil near highs as OPEC again suggests moving meeting

Oil was near the highs with WTI (Aug) above $38 and Brent (Aug) above $40.50 as OPEC brings its off-again, on-again meeting forward from June 9th to June 6th (tomorrow) – at least that is the current understanding.

At various stages this week it’s been taking place yesterday, next week and not at all. Russia and Saudi Arabia want to get this extension over the line before the start of the new trading week. The meeting taking place on a Saturday does raise the prospect of a gap open on Sunday night.

Dollar unwind continues, euro higher on ECB stimulus

In FX, the dollar continues to get hit in an unwind of the pandemic trade that pushed it aggressively higher. EURUSD has advanced with the ECB stimulus which is going to give the politicians a better chance of agreeing to fiscal stimulus as per the EC’s budget proposals.

EURUSD broke above 1.1350 to trade around 1.1370 – eyes on the 1.1450 target still. GBPUSD is up around 1.2640, near to breaching the 200-day moving average, despite worries about Brexit talks going nowhere and the British parliament rejecting any extension of the transition period. The break by the pound above the twin peaks of the April highs opens up the path back to 1.28 and then 1.31, but the 200-day line offers a big test first.

Candlestick price chart for the pound sterling to US dollar FX pair

Stocks weaker as US continuing claims rise, ECB goes big

European shares held losses and Wall Street opened lower as the June rally in stocks paused for a wee breather, with tensions around Hong Kong resurfacing and US jobs data indicating a lacklustre recovery in the labour force.

The ECB seems to have passed the test today but we are still unsure on OPEC’s moves and the ensuing effects on oil prices, which could affect other risk assets. Meanwhile US jobs numbers were disappointing.

US initial jobless claims fell to 1.9m but the key continuing claims number rose 650k from last week to 21.5m, which was ahead of expectations. It’s a worry that we are not seeing this number coming down as it suggests employers are not calling their staff back as quickly as had been hoped.

Tomorrow is nonfarm payrolls day, of course, with expectations for the headline print to come in at –8m jobs but we note the ADP number yesterday was just –2.76m vs –9m expected.

Meanwhile risk sentiment looked to be a little weaker as scuffles were reported in Hong Kong as protestors try to mark the Tiananmen Square anniversary. The situation in Hong Kong and related US-China tensions remain a significant, under-appreciated tail risk for equity markets.

The S&P 500 opened about a third of one percent lower but held 3100 even as the Vix declined to take a 25 handle. After the ECB meeting the DAX tested lows of the day at 12,321 before recovering to the 12,400 support.

The ECB surprised with a slightly bigger expansion of its Pandemic Emergency Purchase Programme (PEPP) than was expected, perhaps as it saw this as a good opportunity to front load the scheme rather trying to top up later down the line as limits approach. This does provide it ample room for the rest of the year without the market chatter resurfacing about whether and when it needs to do more.

The ECB took three steps: the PEPP envelope is being widened by an additional €600bn to €1.35bn, the scheme will last at least until June 2021 and it will reinvest proceeds at least until the end of 2022. This is emergency QE forever – or at least we are in a situation where the ECB has no option but to be on a war footing just to keep the show on the road. What price peace?

Staff projections were interesting – inflation is now seen at just 0.3% in 2020 vs 1.1% expected in March before magically picking up over the next two years. May showed outright deflation in 12 of the 19 countries using the euro and the weakest HICP inflation in four years. Growth is seen –8.7% under the ECB’s baseline scenario.

Christine Lagarde said she expects a rebound in Q3 and the staff projections indicate growth bouncing back to 5.2% in 2021. But she cautioned that weaker demand will exert a longer-lasting pressure on inflation. Inflation for 2022 is seen at just 1.3%, down from 1.5%, despite this massive amount of stimulus.

This is already well short of the 2% target and of course the ECB is very good at missing its target when the stimulus as ever has decreasing marginal effects. What’s clear is that we are at the limits of monetary policy efficacy.

More interesting perhaps for the future of the EZ – Finland has just said it cannot accept the EC’s recovery package as it stands – it will be a long slog getting this budget and bailout fund approved by all members.

German bund yields reversed their earlier fall to trade flat, whilst the euro pared some of its gains after spiking through the important Fibonacci level at 1.1230, with EURUSD last at 1.1350. GBPUSD was off its lows having bounced off the 1.2510 support to move back to 1.2540.

Equities pause after strong gains, FTSE reshuffle confirmed, ECB meeting ahead

Corporate PR is not something that worries traders regularly. Sometimes bad press is bad for the stock – look at Facebook and Cambridge Analytica. Sometimes the optics are just a bit galling for some of us. Take HSBC, which saw fit to promote overtly anti-Brexit propaganda with its ‘We Are Not an Island’ ad campaign.

Now, along with Standard Chartered, it is backing controversial national security in Hong Kong that will destroy freedom in the territory supposedly enshrined by the 1984 Sino-British joint declaration. It’s in tough spot of course – most of its revenues come from Greater China. It needs Beijing on side, but equally it should probably take a moment to put its political views in context next time. Shares are down a third YTD and have halved in the last two years.

Stimulus supports global stock markets – more PEPP from the ECB today?

Meanwhile stimulus everywhere is supporting equity market gains. Germany has agreed a €130bn stimulus package to reinvigorate its economy, while Australia has unveiled its fourth, A$680m programme, aimed at boosting the construction sector. The European Central Bank (ECB) will today likely stretch its pandemic asset purchase programme by another €500bn.

Stocks roared higher on Wednesday, with all the major indices marking another day of progress, but the rally has paused and stocks are off slight ahead of the ECB meeting and US jobless numbers today. The FTSE 100 closed above 6380 as bulls drive it back to the Marc 6th close at 6462. The DAX moved aggressively off its 200-day moving average and has support at 12,400 despite a slight pullback today.

The S&P 500 rose 1.4% to clear 3100 and moved close to the 78.6% retracement level. It now trades with a forward PE of 22.60. The Dow rallied another 500 points, or 2%, before running into resistance on the 200-day moving average around 23,365 on the futures after the cash close. The Nasdaq is only a few points from its all-time high.

Although we are seeing a mild pullback at the European open this morning, the dislocation between markets and the real economy is frankly unsustainable. On that front we have the weekly US jobs number today – we’re looking at continuing claims as the more important number as a gauge of how swiftly the US economy is getting going again. Continuing claims are seen at 20m, down from 21m last week. Hiring should be exceeding firing now, but it will be a long slog back to where things were. Riots and curfews in big metropolitan areas don’t help.

ECB economic projections to detail the Covid-19 hit in Europe

The ECB meeting today will also help guide our view of how bad things are in Europe as we focus on the new staff projections. The ECB has detailed three scenarios for GDP in 2020 relating to the damage wrought by the pandemic: mild -5%, medium –8% and severe –12%.

Christine Lagarde said last week that the “economic contraction likely between medium and severe scenarios”, adding: “It is very hard to forecast how badly the economy has been affected.” Indeed there is actually no way of really know how badly Q2 went. We have various sources estimating pretty seismic falls; INSEE says French GDP will contract by 20% in the second quarter. Estimates for Germany suggest a roughly 10% decline.

The inflation projections will also be closely watched after HICP inflation in May slipped to its weakest in 4 years and outright deflation was recorded in 12 of the 19 members of the euro. Markets will also be keen to see what the ECB Governing Council makes of this development three years after Draghi declared the war on deflation won. Aside from the economy and inflation, the market is happily expecting an increase to PEPP of €500bn.

FTSE quarterly rebalancing confirmed

The FTSE quarterly rebalancing has been confirmed with Avast, GVC Holdings, Homeserve and Kingfisher entering the FTSE 100, and Carnival, Centrica, EasyJet and Meggitt dropping into the FTSE 250. EasyJet and Carnival have really taken a beating since the pandemic hit and longer term their business models are a problem if people don’t go on cruises, or if you enforce social distancing on planes.

Centrica has had a rough old time of things as its UK customer base has shrunk drastically, whilst earlier this year the company booked a number of one-off impairment charges relating to its oil & gas assets and nuclear power plant stake – a process it has since put on hold. Its main appeal of course was a steady income from a traditionally iron-cast dividend, which it has suspended.

Entering the FTSE 250

888 Holdings

AO World

BB Healthcare Trust

Calisen

Carnival

Centrica

Civitas Social Housing

EasyJet

JLEN Environmental Assets Group

Liontrust Asset Management

Meggitt

Oxford Biomedica

Scottish American Investment

Exiting the FTSE 250

Avast (promoted)

Bakkavor Group

Elementis

Forterra

GVC Holdings (promoted)

Homeserve (promoted)

Hyve Group

JPMorgan Indian Inv Trust

Kingfisher (promoted)

Marstons

Mccarthy & Stone

Senior

Stagecoach Group

In FX, the dollar has regained a little ground against major peers. GBPUSD failed to make the move stick above 1.26 to take out the Apr double top level and is now looking to test support around the 1.25 round number and the 23.6% retracement at 1.2510. EURUSD has eased off the 3-month highs struck yesterday but looks well supported for the time being at 1.12 – the ECB meeting today will deliver the usual volatility so watch out.

Oil has pulled back amid uncertainty over the OPEC+ meeting. Price dropped sharply yesterday before paring losses as it looked like the meeting would not take place today because of a dispute over compliance. Now we understand Russia and Saudi Arabia have agreed between themselves to extend the deepest level of cuts by another month, meaning the tapering from 9.7m bpd to 7.7m bpd will take place in August.

But they want non-compliant countries to play ball this time and over-comply going forward to make up for it. Whilst I think OPEC and Russia can just about keep the cuts on track, there are clear signs that this deal is a huge ask for many within OPEC and may unravel over the summer if prices hold up. Russian energy minister Novak was on the wires this morning saying oversupply was down to 7m bpd in May and could move to deficit of 3-5m bpd in July.

Chart: Dow runs into 200-day simple moving average

Candlestick chart of Dow Jones Industrial Average Index

Week Ahead: Central banks on tap, NFP faces massive Covid hit

The economic calendar is packed full of top-tier releases this week, starting with manufacturing PMIs from China and the US. The RBA, BOC, and ECB all announce their latest policy decisions – and, in the case of the ECB, potentially ruffle a few more feathers in Germany. And, of course, we have the latest US nonfarm payrolls report to round off the week. 

China Caixin Manufacturing PMI – does the headline reflect the story?

China’s Caixin Manufacturing PMI slipped back into negative territory in April, missing market expectations of another print just above the 50 mark. A look at the sub-indexes painted a rather more messy picture than the headline number. 

New orders slumped for a third month and export orders dropped the most since December 2008. Order backlogs rose, while supplier delivery times improved and input costs fell on the collapsing oil prices, pushing the headline number higher. 

May’s reading is expected to hold just below 50 – but once again, the vastly different performance of those sub-indexes is likely where the true story will lie. It looks like Chinese industry has a lot further to go yet before growth returns properly. 

US ISM PMIs to stabilise

US manufacturing collapsed last month, with the index diving to 41.5 from 49.1 in March. Despite being the worst drop since April 2009, the reading was still better than market expectations of 36.9, although this was because of a surge in supplier delivery times. While usually a sign of a strong economy, deliveries were held up by supply shortages due to the Covid-19 pandemic. 

Things are expected to have stabilised in May, but getting back into growth territory (a reading above 50) could take a while; Oxford Economics doesn’t expect output losses to be recouped until 2021. 

The decline in non-manufacturing is expected to moderate slightly, with the index forecast to tick higher to 44.2 from 41.8. 

RBA, BOC, ECB interest rate decisions

The Reserve Bank of Australia is the first of three central banks to hold monetary policy meetings this week. Rates are already at a record low 0.25%, which is effectively zero, and the board has no appetite for taking them negative. 

ASX 30 Day Interbank Cash Rate Futures for June show markets are pricing in nearly 50-50 odds of a cut to zero, but many analysts think the RBA has done all it will do, and that rates will remain unchanged for two or three years. 

This week’s Bank of Canada rate announcement coincides with the start of Tiff Macklem’s tenure as governor. Senior deputy governor Carolyn Wilkins said recently that the BOC could look at adjusting its asset purchasing programme with the aim of stimulating the economy, rather than just enhancing the liquidity of financial markets, although policymakers may not be ready for such a move just yet.  

The European Central Bank is expected to leave rates unchanged, although the pandemic emergency purchase programme (PEPP) is likely to be extended and expanded. Christine Lagarde will face questions about Germany’s ruling on the ECB’s quantitative easing programme during the post-meeting presser. Read our full preview on the ECB monetary policy meeting here.

Last week Isabel Schnabel, a member of the ECB board who joined in January, shrugged off the ruling, suggesting it was for the Bundesbank and Germany’s government to resolve the issue. 

“I’m sure there is going to be communication between the Bundesbank and the German parliament and the German government, and one will have to find a solution,” Schnabel told the Financial Times last week. “If the ECB can be constructive in supporting that process, we will of course do so.” 

Australia quarterly GDP: the end of three decades of growth

First-quarter economic data is expected to show that the Australian economy contracted -0.8% on the quarter and -1.2% on the year. Australia is expected to fall into recession for the first time in three decades this year, with GDP dropping -10%. 

Last week, Prime Minister Scott Morrison outlined the government’s plans to help revive the economy, but he also warned that any recovery was likely to take between three and five years. 

Eurozone retail sales and Germany factory orders

The collapse in Eurozone retail sales is expected to have worsened at the start of Q2. Analysts are forecasting a month-on-month decline of -18.6% during April, after a -11.2% drop in March. Year-on-year sales are predicted to have cratered -24%. 

Germany’s April factory orders data will likely reveal some similarly painful numbers. Orders fell -15.6% in March and economists are expecting a -21.3% drop when the April data is published on Friday.  

US NFP – jobless rate to hit 20%?

After tanking -20.5 million last month in the worst drop on record, this week’s US nonfarm payrolls report is expected to show another decline in employment of up to -5 million. The jobless rate, which leapt to nearly 15% in April, is likely to print just shy of 20%. Economists expect unemployment will peak around 25%, although Goldman Sachs analysts have suggested it could climb higher. 

Join Markets.com chief market analyst Neil Wilson for live analysis of the market reaction to the US nonfarm payrolls report with our free webinar.

Heads-Up on Earnings 

The following companies are set to publish their quarterly earnings reports this week:

After-Market 02-Jun Zoom Video Communications – Q1 2021
Pre-Market 03-Jun Campbell Soup – Q3 2020
After-Market 04-Jun Broadcom – Q2 2020
After-Market 04-Jun Slack – Q1 2021
05-Jun Toshiba Corp – Q4 2019

Highlights on XRay this Week 

Read the full schedule of financial market analysis and training.

07.15 UTC Daily European Morning Call
From 15.30 UTC 02-June Gold, Silver, and Oil Weekly Forecasts
12.50 UTC 03-June Asset of the Day: Indices Insights
19.30 UTC 04-June Daily FX Recap and Looking Forward
10.00 UTC 05-June Supply & Demand – Approach to Trading

Key Economic Events

Watch out for the biggest events on the economic calendar this week:

01.45 UTC 01-Jun China Caixin Manufacturing PMI
14.00 UTC 01-Jun US ISM Manufacturing PMI
01.30 UTC 02-Jun Australia Company Operating Profits (Q/Q)
05.30 UTC 02-Jun RBA Interest Rate Decision
07.15 – 08.00 UTC 02-Jun Eurozone Member State Finalised Manufacturing PMIs
08.30 UTC 02-Jun UK Finalised Manufacturing PMI
01.30 UTC 03-Jun Australia GDP (Q/Q)
01.45 UTC 03-Jun China Caixin Services PMI
07.15 – 08.00 UTC 03-Jun Eurozone Member State Finalised Services PMIs
08.30 UTC 03-Jun UK Finalised Services PMI
14.00 UTC 03-Jun Bank of Canada Interest Rate Decision
14.00 UTC 03-Jun US ISM Non-Manufacturing PMI
14.30 UTC 03-Jun US EIA Crude Oil Inventories
01.30 UTC 04-Jun Australia Retail Sales / Trade Balance
09.00 UTC 04-Jun Eurozone Retail Sales
11.45 UTC 04-Jun ECB Interest Rate Decision
12.30 UTC 04-Jun ECB Press Conference
14.30 UTC 04-Jun US EIA Natural Gas Storage
06.00 UTC 05-Jun Germany Factory Orders
12.30 UTC 05-Jun US Nonfarm Payrolls

ECB preview: Welcome to Japan?

The European Central Bank (ECB) convenes next week (June 4th) and is expected to increase emergency asset purchases as it continues to show it will ‘do whatever it takes’. With the scope of the Covid damage becoming a little clearer and deflation rearing its ugly head again, the ECB will stick to the old playbook of more QE to fight it. As ever the market will wonder whether this is ‘enough’, and as ever the answer will come back in the negative.

ECB monetary policy outlook: Japanification?

Eurozone inflation sank to its weakest in 4 years in May, data on Friday showed, only making further expansion by the ECB all the more certain. HICP inflation declined to 0.1% for the euro area, but outright deflation was recorded in 12 of the 19 countries using the single currency. Things have changed a lot since Mario Draghi declared victory over deflation in March 2017.

Nevertheless, core HICP inflation remains stable at 0.9%, which will give some comfort to policymakers. The decline in the oil price passed through to petrol pumps, with energy –12% year-on-year.

Recovery in oil prices should boost the headline reading going forward but the core reading may not be able to withstand the pressures of demand destruction and mass unemployment. The reading today only means the ECB will keep its foot to the floor with increased asset purchases.

However, in reality, given the ECB is already at the absolute limits of monetary policy efficacy, it cannot actually do much about this and only hope that consumer confidence comes back and for energy prices rise – and for global money printing efforts by central bank peers to stoke a round of inflation, which some think will be the outcome post Covid-19.

The concern of course is that Europe, like Japan, has driven itself into a vicious cycle of deflationary tendencies and negative interest rates that will be very hard to escape, particularly as it contends with long-term, perhaps permanent, damage to productivity and economic activity due to the pandemic.

Eurozone economic projections

There will be a lot of focus on the staff macroeconomic projections, although the extreme uncertainty around the extent of damage to the Q2 readings and speed of recovery forecast for Q3/4 means a lot of this remains guesswork.

The ECB has detailed three scenarios for GDP in 2020 relating to the damage wrought by the pandemic: mild -5%, medium –8% and severe –12%. Various comments indicate we can now rule out the mild scenario. Christine Lagarde said this week that the “economic contraction likely between medium and severe scenarios”, adding: “It is very hard to forecast how badly the economy has been affected.”

There is no way of really know how badly Q2 went. We have various sources estimating pretty seismic falls; INSEE says French GDP will contract by 20% in the second quarter. Estimates for Germany suggest a roughly 10% decline.

We know that tough lockdown measures that started to be introduced across Europe in March produced a noticeable impact on Q1. Whilst economic activity is emerging from the cold again as June begins, there is little doubt that April and May saw considerable declines in output.

More PEPP announced after the ECB monetary policy meeting?

The ECB seems all but certain to increase the size of its Pandemic Emergency Purchase Programme (PEPP). The €750bn limit looks likely to run out by the autumn and the ECB will want to push the envelope by a further €500bn.

Germany’s Constitutional Court ruling has obvious repercussions for the Bundesbank, but that ruling relates to ‘normal’ QE and not PEPP, which would tend to argue in favour of expanding this programme now during the emergency, rather than trying to top up later on.  Moreover, the ECB wants to make sure that the ‘whatever it takes’ message gets through to the markets to avoid dislocations in bond markets.

Finally, whilst our focus is on the ECB in the coming days, the most important thing for the EZ and the euro is not Ms Lagarde and co, but the frugal four and the EU’s rescue fund. The European Commission’s 7-year budget including the €750bn rescue fund were only published this week so a final decision is not expected any time soon.

Budget talks look set to be long and arduous – the numbers of budget contributors highlight that Sweden, Denmark, Austria and the Netherlands pay their fare share and some: all contribute more than 3% of GDP vs 2.2% by France and 3.9% by Germany. Which is why Germany throwing its weight behind the bailout grants (as opposed to loans) is so crucial. Ultimate the EU will work out a fudge to keep the frugal four on board- the question is whether it can somehow achieve debt mutualisation and make its ‘Hamiltonian’ moment real.

EURUSD chart analysis

The dollar was offered on Friday with DXY sinking to its weakest since mid-March and test the 61.8% retracement of the Covid-inspired rally at the 98 round number support.

This helped push EURUSD higher as the pair cemented the breach of the 200-day simple moving average on the upside. Bulls looking to take out the late March swing high at 1.1150, which could open up a pathway to the 50% long-term retracement at 1.1450.

CySEC (أوروبا)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • تعويضات صندوق تعويضات المستثمر FSCS تصل إلى 20000 جنيه إسترليني
  • حماية الرصيد السلبي

المنتجات

  • CFD
  • تعاملات الأسهم
  • Quantranks

Markets.com، التي تتولى تشغيلها شركة Safecap للاستثمارات المحدودة ("Safecap”) مرخصة من قبل مفوضية قبرص للسندات والتداول (CySec) بموجب الترخيص رقم 092/08 ومن قبل هيئة سلوكيات القطاع المالي ("FSCA") بموجب الترخيص رقم 43906.

FSC (العالمية)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • التحقق الإلكتروني
  • حماية الرصيد السلبي

المنتجات

  • CFD

Markets.com، التي تتولى تشغيلها Tradetech Markets (جزر العذراء البريطانية) ذ.م.م. المحدودة ("TTMBVI”) مرخصة من قبل لجنة الخدمات المالية في جزر العذراء البريطانية ("FSC") بموجب الترخيص رقم SIBA/L/14/1067.

FCA (المملكة المتحدة)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • تعويضات صندوق تعويضات الخدمات المالية تصل إلى 85000 جنيه إسترليني *بحسب المعايير والأهلية
  • حماية الرصيد السلبي

المنتجات

  • CFD
  • المراهنة على الهامش

Markets.com، التي تتولى تشغيلها TradeTech Alpha المحدودة ("TTA”) مرخصة من قبل هيئة السلوك المالي ("TTA") بموجب الترخيص رقم 607305.

ASIC (أستراليا)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • التحقق الإلكتروني
  • حماية الرصيد السلبي

المنتجات

  • CFD

Markets.com، التي تتولى تشغيلها Tradetech Markets (أستراليا) ذ.م.م. المحدودة ("TTMAU”) تحمل ترخيص هيئة الخدمات المالية الأسترالية رقم 424008، وهي مرخصة لتقديم الخدمات المالية من قبل هيئة الأوراق المالية والاستثمار الأسترالية ("ASIC”).

FSCA (إفريقيا)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • حماية الرصيد السلبي

المنتجات

  • CFD

Markets.com، التي تتولى تشغيلها TradeTech Markets (جنوب إفريقيا) (ذ.م.م.) المحدودة ("TTMSA”) مرخصة من قبل هيئة سلوكيات القطاع المالي ("FSCA") بموجب الترخيص رقم 46860.

سيؤدي تحديد إحدى هذه الجهات التنظيمية إلى عرض المعلومات المتوافقة على نطاق الموقع الإلكتروني بأكمله. لمزيد من المعلومات انقر هنا