Trading with point and figure

- Array of natural disasters continue to cast a long shadow; busy run of
data has China/German Trade, downward revision to Japan GDP and Dudley
comments to digest ahead of UK Production, Trade and NIESR, and
Canada labour data; various central bank speakers also on hand

- China Trade: focus on continued strength in commodity imports, after a
weaker profile earlier in the year, oil traders likely to fret over
rapid pace of refined product exports

- German Trade data continue to underline strength of domestic demand,
initial indications imply net exports to drag modestly on Q3 GDp

- UK Industrial Production: survey data still rather better than official
data, swing factors again likely to be resource and auto sectors

- UK Trade Balance: marginal narrowing expected, but deficit remains large
and no signs of any boost from weaker GBP

- Charts: China Soybean Imports, German Trade and Labour Costs, CNY vs USD
and EUR

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

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

To end the week, a day which has a lot of economic data to digest from around the world, with the schedule heavily front loaded. On the to digest menu: revised Q2 Japan GDP, China and German Trade, Australian Housing Finance and French Industrial Production, while ahead lies the gamut of UK Trade, Industrial Production, Construction Output and the NIESR's latest GDP estimate, with Canadian labour data likely to be more market sensitive in the Americas session than either US final Wholesale Inventories or Consumer Credit. Central bank speakers are reasonably plentiful with RBA's Debelle overnight, and Liikanen, Nabiullina and Harker ahead, the latter following hot on the heels of NY Fed's Dudley offering a resolute defence of the Fed's rate trajectory in contrast to many of his colleagues. The run of natural disasters from Hurricanes Harvey and Irma through the century level of flooding in Asia and now the massive 8.0 Richter scale earthquake in Mexico will eminently be a further point of focus, a timely reminder of man's vulnerability to natural disasters. German Trade data were a tad softer than expected with Exports rising just 0.2% m/m against forecasts of 1.3% and June's -2.7%, while Imports rebounded by 2.2% m/m against a forecast of 2.8% and June's -4.4%, which suggests that Net Exports may again be a drag on Q3 GDP. However the accompanying news from BGA (German Trade Federation) that it has doubled its forecast for 2017 exports to 5.o% y/y is probably the more salient one, than the often noisy monthly data. As for the Canadian labour data, a more modest 15K pace of Employment growth is anticipated which would leave the Unemployment Rate unchanged at its 9-yr low of 6.3%. After Wednesday's unexpected BoC rate hike, markets are now expecting rates to remain on hold for the rest of 2017, but rate hikes to resume in Q1. While a better than expected outturn would perhaps raise speculation of a December, it is likely that Poloz & co probably had sight of this data when they met, and as such it is the trend in coming months that will be rather more material.

** U.K. - Industrial Production, Trade & Construction Output **
- Once again the jump in the latest Manufacturing PMI (56.9 vs. July 55.3) and indeed the strong Q3 EEF/BDO survey offers the hope that official data should post a reasonable gain, with the consensus looking for a 0.3% m/m rise in Manufacturing Output, and a headline rise of 0.4% m/m. But such hopes have been dashed on a regular basis, with the steep decline in Auto Output having been a major drag in recent months (June -3.6% m/m, May -2.3%). The wild card at the headline level will be oil, given that the strength seen in June Industrial Production (0.5%) was in no small part due to the lack of the usual seasonal oilfield maintenance shutdowns. The EEF/BDO survey noted particular strength in exports to the EU, but was with the manufacturing data, there has as yet been little sign of this in Trade data, and the consensus for a marginal m/m narrowing to £-12.0 Bn from June's £-12.72 Bln would appear to suggest that forecasters remain sceptical about any material improvement. Last but not least Construction Output is unsurprisingly expected to remain a drag on the economy, with a further 0.3% m/m fall, to eke out a fractional 0.2% y/y gain.

** China - Aug Trade Balance **
- In broad terms, the Chinese trade data were broadly in line with expectations posting a slightly weaker pace of Export growth at 5.5% y/y vs. a forecast of 6.0% and July's 7.2%, but still signalling a solid pace of expansion in Trade. But as has been the case for some time, markets will focus rather more closely on the Import side of the equation, with an acceleration to 13.3% y/y vs. expected 10.0% and July's 11.0%. This was once again paced by strong imports of commodities, particularly Soybeans, and industrial materials, though in the case of the latter these still remain down in y/y terms, even if the monthly data was strong. In terms of the oil sector balance, the weakness in crude imports was in part paced by so-called teapot refineries hit import quota buffers, with a number of shutting down output during the Juky and August for maintenance, the quotas have in the meantime been raised, and refining operations are set to resume in time for the peak demand period of September and October. However the oil trading fraternity will probably focus more closely on a further strong 24.0% y/y rise in refined product exports, which has been a thorn in the side of oil markets for well over a year. But perhaps the most notable news of the day was yet another sharp gain for the CNY vs. the USD, even though it is barely holding its ground vs. the EUR, and talk from official SAFE circles in the China Daily that the PBOC may reduce bank reserve requirements (currently 17.0%) in response to this CNY 'strength'.


from Marc Ostwald
 
Updated chart 9AM today.

2nkrhnk.jpg
 
This is a DAX long term chart over last 3 months. Trying to show all the highs and lows with the latest trends.
Its something to refer back to from time to time.

1o0xzl.jpg
 
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