Daily Markets Broadcast – 2018-10-15

2018-1-15

Wall Street suffers biggest weekly fall since March

US indices rebounded Friday but still faced hefty losses in the week. Buoyant earnings reports from some banks on Friday failed to prevent the weekly decline. Warnings from global finance chiefs on the fragile state of the global economy, specifically mentioning the trade war, at an IMF meeting at the weekend have set a gloomy tone to start the week.

US30USD Daily Chart

Source: Oanda fxTrade

  • The US30 index saw its biggest weekly decline in more than six months last week despite strong earnings from banks on Friday. More banks report this week
  • The index has regained a foothold above the 200-day moving average at 25,136, having failed to close below it on a daily basis since July 5. A weak start suggests this average may be tested again
  • US retail sales are expected to have risen 0.5% in September, a faster pace than August’s 0.1%. A stronger number could save the index from too much weakness

DE30EUR Weekly Chart

Source: Oanda fxTrade

  • The Germany30 index snapped a seven-day losing streak Friday, but weakness in Asia and US futures could imply a negative open for the index
  • The index tested, and bounced off, the 200-week moving average last week. That moving average has supported prices since July 2016
  • ECB’s Weidmann said on Friday that slower euro-area growth is not consequence of the trade war, but normalization of expansion

HK33HKD Weekly Chart

Source: Oanda fxTrade

  • The Hong Kong33 index looks poised to re-test multi-month lows at the open today. The index hit 25,081 Friday, lowest since May 2017
  • Technical support may be found at the 200-week moving average at 25,125. This moving average has supported prices since January 23, 2017
  • PBOC governor Yi Gang reiterated at the IMF meeting that the government won’t use its currency as a tool to deal with the trade conflict. He believes that the currency is at a “reasonable and equilibrium” level

Daily Markets Broadcast 2018-10-12

 

2018-10-12

Wall Street consolidates after heavy losses

US indices saw wild swings yesterday and struggled to gain any solid traction after recent losses. Both the US30 and NAS100 indices are attempting to regain the 200-day moving averages. Bonds rose due to rotation from stocks which pressured yields and the US dollar. US CPI data came in below forecast yesterday adding to the pressure on yields. Today we see Germany’s consumer price data.

 

NAS100USD

Source: Oanda fxTrade

  • The NAS100 index is seeing a mild rebound from 4-1/2 month lows following a 10.6% sell-off from the start of the month
  • The index has regained a foothold above the 200-day moving average at 7,054. Stochastics momentum indicator has turned bullish, crossing back above the oversold threshold
  • US Michigan consumer sentiment index is expected to rise to 110.4 in October, further confirming a strong US economy

 

DE30EUR

Source: Oanda fxTrade

  • The Germany30 index fell for a seventh straight day yesterday, touching the lowest since December 2016. ECB officials said tight labor markets and slow wage growth will eventually push up core rates
  • The 55-month moving average at 11,190 could be the next technical support point. The index has held above this moving average on a closing basis since Dec 2011
  • Germany’s September CPI data is due today and are seen rising at the same pace as August, 0.4% m/m and 2.3% y/y. Higher than expected numbers would be negative for sentiment as it may force the ECB to start hiking rates earlier than is currently forecast

 

XAUUSD

Source: Oanda fxTrade

  • Gold posted its biggest one-day gain in more than two years as it regained its safe-haven label amid a weakening US dollar
  • The commodity broke out of the 1,220 – 1,180 trading range that had been in place since August. The 100-day moving average at 1,228.99 could act as near-term resistance
  • The US dollar weakened as US yields eased off from recent highs following a strong 30-year auction and as investors rotating from stocks to bonds sought Treasuries

Muted response to PBOC’s liquidity easing move

PBOC slashes reserve ratio requirement for some banks

On Sunday the PBOC announced via its website that it was reducing some banks’ reserve ratio requirement by 100bps effective October 15, the fourth such move this year. The move is calculated to free up to 1.2 trillion yuan ($174 billion) for additional lending, and is seen as a precaution against the adverse growth impact of a full-blown US-China trade war.

On cue, as if to counter all the doom-and-gloom scenarios, the Caixin services PMI jumped to 53.1 in September from 51.5 the previous month. That’s the highest in three months and halts a two-month falling streak. The main boost came from the new business sub-index though services companies shed workers for the first time in over two years.

Onshore China markets opened after a week-long break with a bit of a whimper, with the catch-up factor of a week’s inactivity lording over the perceived impact of the liquidity easing. Maybe we will see more of an impact when the funds flow into the market from October 15. The China50 index fell as much as 1.2% before consolidating at 11,335. The index is currently sitting just above the 50% retracement level of the September 11 to 28 rally at 11,283.

 

China50 Daily Chart

Source: Oanda fxTrade

 

USD/CNH has been attacking the 6.90 level for the past five sessions, but has so far failed to close above it. This morning’s up-move could not take out last Thursday’s high of 6.9175 which would then bring the August 15 high of 6.9587 in to play. The 55-day moving average is now at 6.8537 with the FX pair now at 6.9025 .

 

USD/CNH Daily Chart

Source: Oanda fxTrade

 

China stops US oil imports

Chinese press is reporting that China has fully stopped oil imports from the US as the trade war escalates. It was reported on September 24 that the Sinopec unit was considering shelving its plan to increase US supplies on hold amid the trade war. Now, they appear to have taken the decision one step further.

 

WTI Daily Chart

Source: Oanda fxTrade

 

Oil prices retreated for a third day, easing back from the heady near 4-year highs touched last week. WTI is currently down 0.77% at $73.873 and, as my colleague Stephen Innes pointed out in his analysis this morning, there are a number of increasing factors to watch out when it comes to oil prices.

 

Markets Yield to pressure?

 

Holiday-affected data calendar

After the hustle and bustle of Friday’s data releases, the US and Canada take a holiday today, so the data calendar is a bit sparse later in the day. Germany’s industrial production data for August will be the early highlight and is expected to rise 0.5% m/m after July’s 1.1% decline. Factory orders data for the same month beat forecasts when it was released on Friday, so this might suggest an upside surprise could come. Euro-zone Sentix consumer confidence is also due along with the UK’s September like-for-like retail sales data from the British Retail Consortium.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

Dollar weaker at the start of the week as G-20 comments on trade wars

Heightened fears of a switch to currency war rather than trade war

The US dollar continued its softer bias in Asian trading as investors mulled whether we are heading towards a currency war rather than a trade war. The yen benefitted the most, rising as much as 0.61% versus the greenback, closely followed by the Euro and the Kiwi. Currencies still took their cue from Trump’s Friday outrage that China and Europe were manipulating their currencies lower to the detriment of the US. The threat of a currency war on top of a trade war seems that much closer, even though Trump himself categorically said “no” when questioned about the prospects of a currency war. Treasury Secretary Mnuchin also chipped in to allay concerns.

It’s War – Trade and Currency

G-20 Communique warns risks to growth have increased

The statement released at the end of the weekend G-20 summit in Buenos Aires stated that global economic growth remains robust however it highlighted that short and medium term risks to growth have increased amid trade and geopolitical issues. It urged those involved to increase dialogue and actions to mitigate risks.

France’s Finance Minister admitted that a trade war had already started and, if the US imposes more tariffs, then the EU will have no choice but to retaliate. Adding that France is eager to work on a full renewal of the WTO, the European Commission will not make a formal proposal on trade talks until the US takes the first step by withdrawing steel and aluminium tariffs.

In a press interview after the summit, US Treasury Secretary Mnuchin commented that the US was ready to make a trade deal with China if it shows sincere willingness to make meaningful changes. He also commented that the US was closely monitoring Yuan weakness for signs of manipulation.

Japan yields firm up

There was some movement in the longer end of the Japan yield curve amid mounting speculation that the Bank of Japan may consider changes to its interest rate targets at the next meeting on July 31. 10-year yields rose 5bps to near 0.09% in the session and seemed to jolt the BOJ into action, holding its first fixed rate operation since February. The bank offered to buy unlimited amount of 10-year JGBs at 0.11%. It currently has a 1-year control curve target of 0%.

 

10-Year JGB Yield

Source: Bloomberg.com

 

 

You can access the full MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

 

Oanda Market Insigts