Trading with point and figure

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- Very modest schedule to start very busy week for central banks and data,
digesting Japan Machinery Orders, France/Italy elections, efforts to
form UK government; Turkey GDP, India CPI, Industrial Production due

- Deluge of US, UK and China economic data frames busy week for central
bank meetings, politics continues to cast a shadow

- Fed: dot plot, inflation and unemployment forecasts in focus, as
markets continue to doubt further rate hike after this week

..........................................................................

********************
** EVENTS PREVIEW **
********************

While this will be a very busy week for central banks and economic data, today's agenda is at best modest, and for many the talking point will be Friday's sharp sell-off in the Nasdaq, contrasting sharply with a solid gain for the "defensives" of the Dow Industrials. There is probably little doubt that the sharp divergence reflected in part a combination of and exacerbated by typical Friday position squaring and the very obvious concentration risk in the FANG stocks. Be that as it may, there are a number of weekend and overnight developments to digest: what appears to be a landslide for Macron's En Marche in the National Assembly elections (second round June 25), though this was marred by a record low turnout of just 48.6%. In Italy, municipal elections saw a particularly poor showing for the 5 Star Movement, failing to make the second round in 5 of 6 major cities, with the centre right rather than PD appearing to be the main beneficiary. Overnight, weaker than expected Japan Machinery Orders will probably not deter the BoJ from upgrading its economic outlook when it meets this week, especially given that this month's fall follows three months of gains, and also disguised divergent trends in manufacturing, which saw a solid 2.6% m/m increase in orders, and a 5.0% m/m fall in Services Orders, due primairly to a drop in orders for IT equipment. Last but not least in the UK, PM's May struggle to form a minority government which has any prospect of being in power for more than the briefest of periods, was accompanied by further signs that consumers are struggling, with the Visa Consumer Spending posting a sharp 1.9% m/m fall, the first in four years. The rest of the day's agenda features items that will be of interest to local markets, such as Turkish Q1 GDP and India CPI and Industrial Production, but are unlikely to have a broader impact, as the market focuses on Wednesday's Fed meeting, above all on a) any changes in the 'dot plot', particularly given market doubts about a further 2017 Fed rate hike after the well discounted move on Wedensday, b) how the Fed tweaks its economic forecasts, above all its inflation forecasts and its long-term equilibrium Unemployment Rate, and c) any further updates on how and when it will start to reduce the size of its balance sheet, particularly as even the more dovish members wnat to see the 'wheels set in motion on this', perhaps mistakenly believing that it will have only a minimal impact long-term interest rates, at least in the short-term. It should be added that one key measure that the FOMC looks at is Financial Market Conditions, which have eased considerably in the past 3 months as bond yields haev fallen, credit spreads have tightened and equity markets rallied, this above all may prompt a less dovish tone than markets appears to be discounting.


RECAP - The Week Ahead - Bullet point highlights: 12 to 16 June 2017

- A very busy week for macro events, but the question is whether
markets can be jolted out of their financial repression torpor.

- A busier week for data sees US Retail Sales, PPI, CPI, Import Prices,
Industrial Production, Housing Starts, NY & Philly Fed Manufacturing
surveys, Business Inventories, NAHB Housing Market Index. China has
US Retail Sales, Industrial Production, Fixed Asset Investment and
monetary aggregates. The UK publishes CPI, RPI, PPI & ONS House Prices,
Unemployment, Average Earnings and Retail Sales. Japan offers Machinery
Orders, Q2 BSI, Germany final CPI and ZEW and Australia has Unemployment.

- A blockbuster week for central bank meetings is expected to see the Fed
hike rates a further 25 bps, the BoE, BoJ and SNB hold rates, while
Russia's Bank Rossi is expected to cut rates by a further 25bps. EM
rate decisions include Chile, Indonesia, Namibia, Turkey & Uganda,
with no changes expected. See also: https://www.ig.com/uk/market-insight-videos?bctid=5465663559001&bclid=3671160850001

- Politics: Sunday sees the first round of French National Assembly
elections, with the second round to be held on 25 June. Macron's En
Marche is projected to win the biggest landslide since de Gaulle in 1968.
All eyes will also be on the new UK Conservative minority government
and how PM May reshuffles her cabinet, while Eurozone Finance Ministers
hold yet another meeting to discuss the Greek bail-out review.

- Commodities/Energy: IEA and OPEC monthly Oil Market reports are
accompanied by the USDA biannual world coffee production report.

from Marc Ostwald
 
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